podcast

Remaking the future of the car

The circular economy has huge potential for the car industry. In this podcast of the Intesa Sanpaolo Talks programme, we visit Italian automotive remanufacturing company Sermec to learn more about Italian way to a circular economy

12/11/2019

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In 1939, Giovanni Ricci’s grandfather reworked a broken gearbox to provide a cheaper part for a customer’s car – a long time before the term circular economy existed. At the time, he was making the best of something he knew still had the potential to work well, given a bit of smart thinking and skilled workmanship.

Today his company Sermec, now in the hands of his grandson, continues his work, making new parts from old. They match the quality and durability of brand new ones, while being cheaper for the end customer. Ricci and his workforce take a component at the end of its “first life” and give it a new life, retaining 95 per cent of the original materials. The cost is 30 per cent that of buying new.

For Ricci, whose business mostly serves large-scale public transport companies and commercial fleets, the benefits of the circular economy are clear: savings for the customer, protecting natural energy resources that would otherwise be burdened by the production of new parts and job creation. “You need to analyse with your eyes, you need to control with your hands, you need to use your brain to come to the solution,” says Ricci of the work he and his team do.

Quentin Drewell, head of circular economy at Accenture Strategy UK, works directly with Intesa Sanpaolo on implementing the circular economy and believes Sermec is setting an example to the automotive industry, which is only just beginning to explore the potential of reworking old car components.

“Everybody expects financial support from a bank, but Intesa Sanpaolo takes care of the development of the culture of remanufacturing in the circular economy. This is what we need to be doing worldwide, to convince people that it is much better to reuse and save materials”
Giovanni Ricci, CEO at Sermec

“There’s a huge amount of capacity that’s being wasted… In the automotive sector, we believe there’s between $400 billion and $600 billion worth of revenue opportunity,” says Drewell, who adds that profitability in the industry could increase by 14 per cent by adopting circular economy models.

As well as the remanufacture of components, Drewell notes the industry is also adapting to changing consumer behaviour. Car sharing or renting schemes such as DriveNow mean that fewer people are choosing to own a car. But, as Drewell and Ricci both highlight, the principles of the circular economy are still largely ignored in the everyday business of large automotive manufacturers, who continue to work mostly with traditional linear economy methods.

Fady Al Halabi, relationship manager for Intesa Sanpaolo working with Sermec, is grateful to the company. Sermec, he believes, shows other companies that he works with how to make the circular economy work for their business. He also notes just how the circular economy can help to tackle the environmental challenges we face today.

The phrase “circular economy” was far from being invented when Sermec began reworking old parts rather than throwing them away. Today its work marks a smart way of doing business in the automotive sector and highlights the value of remanufacture – for customers, for profits and for the planet.

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