A plea for greater transparency between remanufacturers was among the key messages from the APRA Europe Symposium 2018. Adam Hill reports from Budapest.
Legal issues, disruption on the horizon, and a request for more data sharing between remanufacturers - these were among the highlights of APRA Europe’s Symposium 2018. Encory - the joint venture (JV) between BMW Group and ALBA Group – sent ripples of interest through the reman sector when it was announced a couple of years back. Hanno Grosseschmidt, Encory managing director, began the day by making the APRA audience laugh – admitting that he had to Google ‘remanufacturing’ when he started out. But he soon saw the potential, Grosseschmidt insisted. His business has three elements: reman consulting, logistics and sorting, and used parts. The latter is a means of increasing customer retention of the older car segments of BMW’s business and the reman business aimed to build a wider portfolio of parts for BMW dealers. When it came to reman consulting, he confided that the company was “still harvesting the low-hanging fruit”, such as turbochargers, starters, alternators and so on, but that the plan might be to expand gradually to move onto more complex reman projects such as electronics.
The JV’s reman strategy involved an expansion of the exchange parts portfolio, setting up competitive charges to ensure core return, and a market-oriented pricing strategy for exchange parts. “Encory is not doing it alone but with a network of suppliers,” he said. This co-operation allowed suppliers to grow their OEM reman business, he continued, typically with five-year contracts. Encory is positioning itself as a conduit between independent remanufacturers (“typically they don’t have the structures to work with complex businesses”) and OEMs. Quality was assured in audits by Encory and BMW, he explained – but he said more discussion was needed before the venture moved into safety-critical products. “Then it gets more complicated,” he concluded, and there was a decision to be made over whether the risks were worth it.
Taking the floor, Daniel Koehler, chairman of APRA Europe, outlined his new vision for the organisation (see APRA Europe moves to the next level, p28), which revolves around more attention to local representation in particular. “We have to work on customer visibility,” he said, admitting that the organisation had perhaps fallen behind when it came to communication on social media such as LinkedIn. “It is new for APRA, not new for the world,” he said. Volunteers would work in their own countries – such as France or Czech Republic – translating documents for members and increasing APRA’s presence outside of its traditional strongholds of Germany and the UK. This was welcomed by APRA members at the Budapest meeting, one of whom commented: “It’s been a long time coming.” It was pointed out that imports from the Far East, particularly China, are putting added pressure on European remanufacturers. “Reman will have to get used to more complex products, not commodities,” Koehler added.
This theme was picked up in another presentation at APRA’s meeting. Professor Marcello Colledani, from the Department of Mechanical Engineering Polytechnic University of Milan, asked delegates that if starters, alternators, turbos, calipers and engines are to vanish, then what will you remanufacture next? He warned delegates that electric vehicles (EVs) are predicted to begin outselling those with internal combustion engines (ICE) in 2038. There are also estimated to be about 600 million EVs in circulation by 2040, with US, China and Europe among the main markets. Another shift will happen even earlier than that, Colledani said: “EVs will take off from the second half of the 2020s, when electric cars become cheaper to own than ICE models.” That is not long to wait – and remanufacturers need to be aware of the change this will bring to their existing business model.
Battery packs – something that remanufacturers are far less used to dealing with – would therefore become vital for future success. “If we only attract the drivetrain as remanufacturers we will only have 20% of the value of EVs,” he went on. Carbon fibre reinforced polymer (CFRP) lightweight parts, for instance, “would be more in your comfort zone”, he suggested.
But there is a real diversity in the battery cells used by OEMs, and this can present opportunities for reman too. Is remanufacturing viable? “Yes,” he insisted. “The way these cells are assembled is not rocket science – it’s quite simple. These are quite common technologies, they are not so innovative.” Having said that, there are issues over the lowering price of battery technology, and over the competition that remanufacturers will face from the recycling industry. “You may experience barriers to reman in mechatronics and power electrics,” Colledani warned. But there was some light on the horizon: “The lifetime of engines will be higher than that of the car itself – so there will be opportunities for remanufacturers.”
Understandably, APRA delegates wanted to know when he thought starters, alternators, calipers and so on would be around to remanufacturer. “That’s difficult to answer,” Colledani thought. “ICE vehicles will not disappear right away. By 2030 they will still be the most widely sold type of vehicle. But definitely we should start talking about a transition sooner rather than later.” But he pointed out that there was currently no protocol for saying whether cells from battery packs were reusable or not.
In his presentation, Thijs Jasink of Alec Electronics made a request for more data sharing between remanufacturers – especially when it came to issues such as safety-critical components. APRA is the perfect organisation to help the industry do that, he insisted. “Now is the time to share the knowledge and help each other,” he said. “Let’s stay connected.” This could be particularly useful when trying to engage in lobbying for the industry – for instance with European policy makers. Sharing data with the EU might enable reman to push, as a responsible partner, for the other things which the industry needs from legislators. One thing is for sure, he concluded: “If we stand still, if we are reactive rather than proactive, we will fail.”
His main focus was on new developments such as autonomous vehicles (AV) and the issues which they threw up. “Safety-critical components are going to be more and more important,” he went on. But who has the ultimate responsibility? “If we remanufacture a safety-critical component in an AV which then has a crash – who is responsible?” he asks. Also, with data becoming ever-more pervasive, do remanufacturers understand all the information which is stored and what to do with it? “If you connect a phone to the AV, all your personal data will be stored.” Are remanufacturers allowed to delete it? “We need to make sure we prepare ourselves.” Software will become more critical, which creates more complications for the aftermarket. “The independent garage will disappear,” he predicted. “This is because the OEM is so heavily involved. The car market is shrinking – and an independent garage can’t even touch a Tesla: there will be no market share for them.”
Shifting the tone of the meeting, industry veteran Clemens Ortgies talked about a different kind of opportunity – this time from the development of the Chinese market. His company, YC-Europe is the European sales organisation of Guangxi Yuchai Machinery Co. Ortgies pointed to five reasons to enter the European market with engines built in China - namely that companies could generate “reasonable sales” in the EU within five years; it would offer the chance to learn from “difficult” market requirements; firms could gather know-how in technology, marketing and structure; acquire partners for expanding their business; and finally, it would help European customers expand to China.
Yuchai (which owns YC) already operates a huge engine remanufacturing plant in Suzhou, China, and he predicted that the next five years will reveal more changes in the global heavy duty diesel and gas engine business. At present this is dominated by the eight biggest companies, a limited number of which will survive as independent companies in the future. Smaller engine manufacturers are forced to co-operate due to the high cost of R&D for new technologies and emission standards. The number of different engine types will decrease due to the complexity of technology and exhaust gas treatment – and meanwhile, some engine manufacturers will leave some segments due to the lack of volume production and high emission standards, he said. Remanufacturers need to be aware of all these issues.
APRA’s meeting in Budapest allowed reman industry figures to get together to debate new ideas, and examine ways of meeting future threats – and to network. Above all, the diverse presentations highlighted the fact that the industry is changing radically in numerous ways. But perhaps the strongest message came from Thijs Jasink of Alec, who suggested that the challenges brought by the worlds of new technology and Big Data could be met by sharing experience.