How carmakers are turning circular manufacturing into a business

For decades, carmakers have optimised their production systems to assemble vehicles as efficiently as possible. Now, they are exploring the potential of reversing that process. Volkswagen, Toyota and Stellantis are investing in facilities where end-of-life vehicles are dismantled, components are remanufactured and valuable materials are recovered.

The motivation goes beyond improving environmental performance. Manufacturers want to develop additional revenue streams and capture value that has traditionally remained with independent dismantlers, recyclers and aftermarket suppliers.

The timing is significant. With margins under pressure, transformation costs remaining high and some plants operating below capacity, circular manufacturing could provide several benefits at once: additional revenue, lower material costs and new activities for existing sites. But can vehicle dismantling and remanufacturing become a profitable industrial business?

Volkswagen establishes vehicle dismantling at Zwickau

Volkswagen opened an industrial dismantling line at its Zwickau plant in late October 2026. Initially designed to process pre-series vehicles, the facility will eventually handle end-of-life vehicles as part of a new circular economy business.

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Built in nine months, the line consists of eight dismantling stations. From 2027, Volkswagen plans to process around 4,100 vehicles annually in two-shift operation, with capacity expected to increase to as many as 15,000 vehicles by 2030.

The manufacturer intends to invest up to €90m, supported by up to €10.7m in funding from the German state of Saxony. Initially, 100 employees have been trained for the new activities. In the longer term, Volkswagen believes its circular economy operations could support up to 1,000 jobs.

The investment also reflects the changing role of Zwickau within Volkswagen's production network. The plant was extensively converted to electric vehicle production but now faces pressure from weaker demand and the group's wider manufacturing restructuring. As AMS recently reported, Volkswagen is reviewing the future of several German plants, including alternative industrial activities at existing sites.

At Zwickau, the focus extends beyond recovering metals. Doors, bumpers, engines and transmissions will be inspected and, where appropriate, prepared for resale as used original parts. Volkswagen entered this aftermarket business in July 2026. Steel, aluminium and plastics are also intended to be recovered for reuse in vehicle production.

The economic model combines revenue from used components with potential savings on raw materials and additional employment at an established manufacturing site.

Vehicle dismantling itself is not new. Independent operators have been working in this market for decades. What distinguishes Volkswagen's approach is the intention to industrialise these activities and integrate them into the manufacturer's existing value chain.

Stellantis develops a second business at Mirafiori

Stellantis is already further advanced. In 2023, the group established its Circular Economy Hub at the historic Mirafiori plant in Turin, investing approximately €40m. The operation occupies around 73,000 sq m, including 55,000 sq m of repurposed industrial space. Further dismantling facilities have since opened in Brazil and Morocco.

The business is based on four activities: remanufacturing, repair, reuse and recycling. Engines, transmissions and batteries are remanufactured, defective components repaired, usable parts resold and materials recovered for recycling.

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An exclusive AMS report from Mirafiori showed how Stellantis has integrated these activities into an industrial operation that combines component processing, quality inspection, logistics and aftermarket sales.

The commercial potential is particularly apparent in the replacement parts business. For a 12-year-old Opel Corsa with a defective engine, installing a new unit costing around €6,000 would rarely make financial sense. A remanufactured engine costing less than €1,500, including a warranty, could make the repair viable.

According to figures provided in connection with the project, remanufactured components are often 30% to 50% cheaper than equivalent new parts. Reused original parts can cost up to 70% less.

This allows Stellantis to reach customers who would otherwise turn to independent suppliers or decide against repairing their vehicles.

Remanufacturing also preserves considerably more of a component's original value than conventional recycling. A rebuilt engine or transmission retains much of the manufacturing work already invested in it, rather than recovering only the value of its constituent materials.

However, the business presents a potential conflict. Lower-priced remanufactured parts could replace sales of more profitable new components. The question for Stellantis is whether it can attract additional customers or simply shift revenue within its existing aftermarket business.

Toyota applies production principles to dismantling

Toyota is taking a systematic approach to industrialising vehicle dismantling. At its Burnaston plant in the UK, the manufacturer has operated a Circular Factory since August 2025, applying principles from the Toyota Production System to end-of-life vehicles.

The dismantling process consists of eight standardised stages with defined cycle times and takes approximately three hours per vehicle.

The facility is intended to process 10,000 vehicles annually, recovering around 120,000 reusable components, 300 tonnes of high-quality plastics and 8,200 tonnes of steel and other metals.

Toyota is also planning a second Circular Factory in Wałbrzych, Poland, with capacity for up to 20,000 vehicles per year. As AMS reported on the expansion of Toyota's circular manufacturing operations, the company aims to apply its production expertise to material recovery and eventually feed recovered resources back into its manufacturing processes.

The concept appears straightforward: standardised procedures, efficient material handling and continuous improvement should make dismantling more productive.

However, dismantling differs substantially from vehicle assembly. While production lines process largely identical vehicles under controlled conditions, end-of-life vehicles arrive in different conditions, with varying levels of wear, damage and previous repairs. This makes standardisation more difficult.

Toyota also has to source vehicles, including through auctions, creating additional purchase and logistics costs before dismantling can begin. Whether enough buyers can be found for the recovered components and materials is another important factor.

The manufacturer expects that the profitability of its British pilot operation can only be reliably assessed after at least three years.

BMW focuses on design for circularity

While Toyota is industrialising dismantling, BMW is looking further upstream. The manufacturer is examining how vehicles can be designed from the outset to make component recovery and high-quality recycling easier.

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Through its Car2Car research project, BMW investigated methods of recovering materials from end-of-life vehicles in a quality suitable for reuse in automotive manufacturing.

Under research conditions, the proportion of high-quality material recovery increased from 6% to 51%. For steel, the figure rose from 1% to 81%, while aluminium improved from 23% to 52% and copper from 48% to 68%.

These figures refer to the material streams examined in the project, rather than the overall recycling rate of a vehicle. BMW has already manufactured and installed more than 100,000 series-production components made from recovered steel at its Leipzig plant.

The research addresses a persistent problem: recycling does not automatically create a closed material loop. Steel recovered from vehicles is often used for less demanding applications, while mixed plastics and additives can complicate their reuse in new automotive components.

BMW is therefore pursuing a Design for Circularity approach, considering material selection, joining technologies and component separation during vehicle development. Headlights and rear lights are among the components being examined for improved recyclability.

As outlined in a June 2026 AMS analysis of advanced manufacturing and sustainability, BMW's strategy increasingly links product design with material recovery and the use of secondary raw materials.

In February 2026, BMW also announced a partnership with recycling company PreZero to develop a business model for end-of-life vehicle processing, including the recovery of steel, aluminium, plastics and battery materials.

For manufacturers, this means that the economics of vehicle recycling are increasingly influenced by decisions made years earlier in engineering and material selection. The challenge is to improve future recyclability without compromising production costs, quality or safety.

Circularity offers significant economic potential

The broader economic potential is substantial. A Boston Consulting Group study commissioned by the Federation of German Industries (BDI) estimates that annual circular gross value added in Germany could double from around €60bn to as much as €120bn by 2045.

The study calculates cumulative value creation potential of up to €880bn, with the mobility industry accounting for up to €4.8bn in additional annual value added.

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For automotive manufacturers, the opportunity extends beyond aftermarket revenue. Recovering steel, aluminium, copper and plastics could reduce the need for virgin raw materials. Electrification adds further importance to recovering battery materials that are currently dependent on international supply chains.

However, sufficient quantities of suitable materials must be available. According to the BDI study, around 25% of deregistered vehicles are currently exported outside the EU, meaning their components and raw materials are no longer available for European recycling operations.

The study estimates that approximately €20bn in investment will be required across industries for circular infrastructure, including digital solutions.

Regulation is adding further pressure. European requirements for end-of-life vehicle processing and recycled material content are pushing manufacturers to improve recovery rates and material traceability. The practical challenges of establishing closed material loops in automotive production were also highlighted in a recent AMS analysis of recycling strategies and supplier agreements.

For Volkswagen, Stellantis, Toyota and BMW, the next challenge is therefore less about demonstrating that vehicles and components can be recovered. It is about whether these processes can operate economically at industrial scale, with sufficient volumes, reliable quality and demand for the materials and parts they produce.