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VDA Remanufacturing Definition Analyses & Thoughts on the Chinese Market

Duxes 7th China Remanufacturing Summit 2017

June 28-29, 2017 · Crowne Plaza Beijing Chaoyang U-Town, China

Many non-renewable natural resources are limited. Social development and the well-being of future generations are both reliant on such resources. Therefore efficient use of non-renewable resources is an important issue. The automotive industry, as a large energy consumer, has made great strides in resource efficiency. In the early stages, used vehicle parts were reprocessed for re-use in vehicles. Nowadays, remanufacturing, as an emerging energy-saving technology, has been introduced into the market.

Recently, through the article “Position Remanufacturing”, the VDA clearly stated the importance of remanufacturing, and the benefits that it provides the auto industry. However, the remanufacturing industry still needs consistent standards to reach a certain level, and thereby facilitate the circulation of remanufactured products in the global market. Currently, the remanufacturing industry in China is still in its early stage. This market still needs to absorb a great deal of complementary information in order to establish a market framework. Based on industry standards proposed by VDA and the status of the current Chinese market, we can also determine the gap between VDA industry standards and the situation in the Chinese market.

Definition of “remanufacturing” in VDA

According to the VDA cited definition for remanufacturing, Reman can be defined as:

  • A remanufactured part fulfills a function which is at least equivalent compared to the original part.
  • It is restored from an existing part (core), using standardized industrial processes in line with specific technical specifications.
  • A remanufactured part is given the same warranty as a new part and it clearly identifies the part as a remanufactured part and the remanufacturer.
  • A remanufactured part is different from a reused, repaired, rebuilt, refurbished, reworked or reconditioned part.

From the above definitions, it is clear that remanufacturing is a method enabling the automotive industry to extend vehicle service life, and in doing so ensuring the availability of spare parts. Due to the raw materials and production process of remanufacturing, we can conclude that “remanufactured products” offer the following advantages: 1. Economic advantages, 2. Environmental advantages, 3.Safety advantages.

Advantages of remanufacturing industry

According to the VDA (Verband Der Automobilindustries) article, remanufacturing has certain positive implications for:

Environmental

  • A savings of 400 kT of CO2 (only in EU 28) in comparison with manufacturing a new product.
  • Resource conservation: a savings of up to 85% on raw materials; the process uses only 55% of the energy than that required for a new product

Safety

  • Remanufactured parts are as safe as genuine spare parts; they fully meet the same quality standards and enjoy the same warranty terms

Economic

  • A remanufactured part offers end consumers the best value for money

According to these three factors, we can see that the remanufacturing industry is a win-win scenario for consumers, the environment, and remanufacturers themselves. Facilitating the development of the remanufacturing sector will place auto parts in a central role for a resource-conserving and environmentally-conscious society. Many countries have listed remanufacturing as an important element of their respective national manufacturing industries.

Remanufacturing is currently taken into account in designing maintenance and repair concepts during vehicle and component development, in many countries. This is positive development for the industry. By being incorporated into vehicle design, remanufacturing can become a fundamental aspect of the vehicle manufacturing industry. This move can in essence resolve production requirements, and serve as a reference for the Chinese remanufacturing industry.

Nonetheless, the legal status of remanufacturing is contradictory and obstructive to progress. At present, non-working parts (core etc.) are still treated as scrap or waste parts in some countries (China). Due to the danger of foreign waste importation, the unrestricted trading of non-working parts across borders may be difficult or even impossible in such countries. Some countries may even prohibit the import or export of non-working parts. This should be regarded as a serious obstacle to remanufacturing development.

Proposal from VDA

In order to take advantage of the economic and ecological benefits offered by the circular economy, the VDA has proposed that industrial remanufacturing standards must be improved and codified in legislation.

To ensure that remanufactured parts meet the same functional quality standards as new parts, the VDA has made the following proposals:

1.Non-working parts must not be regarded as waste

2.Remanufactured parts must be regarded as being of the same quality as original parts.

3.There must be no restriction on the international trade in cores and remanufactured parts.

4.Using remanufactured parts in the event of warranty claims must be universally permitted.

Conditions in China

Currently, the Chinese remanufacturing industry is in an embarrassing situation. The government and society at large are receptive to developing remanufacturing to ease the economic and environmental pressures associated with the vehicle industry. However, due to various reasons (social acceptance, legalization, etc.) the remanufacturing industry remains in an early stage of development. The current Chinese remanufacturing industry cannot satisfy any of the conditions stipulated by the VDA.

Consumers in China perceive “non-working” parts to mean “second-hand” parts. This term can be quite confusing in Chinese, as it normally encompasses “low quality, wasted, useless or non-reusable” parts. To facilitate the development of the remanufacturing industry, the notion that “the value of non-working parts is not as second-hand material, but instead as remanufacturing raw material” has to be promoted to the public. Otherwise, the import and export of non-working parts is not feasible. The FTZ (Free Trade Zone) in Lingang Shanghai has permitted firms in the FTZ to import cores and export remanufactured products. This development can be regarded as the initial relaxing of such restrictions.

Consumers in the Chinese market have quite low recognition and acceptance for remanufactured products. This makes it difficult for them to regard remanufactured products as being identity in quality to original parts. As remanufactured products are new to the market, consumers still need time to get used to them. According to inside information, the Chinese Government will propose reforms in the first half of 2017: AQSIQ will assume the role of quality supervision and authorize qualified third party inspection centers to conduct checks regarding the production process, conditions, and product quality. Reman companies and inspection centers will in turn publicize the level achieved in production. If the government implements this oversight system, the credibility of products should improve. In addition to issues of product credibility, the supply in Chinese market is insufficient. Hence, the primary goals for the Chinese remanufacturing industry are to promote product credibility and product supply.

Legalization is always an important issue for the development of the remanufacturing industry. According to term 24, chapter 5, FGBHZ No. 191, remanufactured products shall not be applied in assembling new products, or repair and replacement during the warranty period. All of these activities are forbidden. However, the Government strongly encourages the application of remanufactured products in repair and replacement outside of the warranty period. An important reason that the Government prohibits applying remanufacturing is the quality of remanufactured products on the market. Currently, the quality of products is difficult to control.. If subpar remanufactured products were applied during the warranty, customers’ interests might be damaged.

Reference for Chinese market

In general, the VDA’s proposal for the remanufacturing industry can help facilitate its development, assuming that the conditions can all be met. This is because the business model in the EU is quite similar to the mainstream business model in China. Both the EU and Chinese remanufacturing markets conform to the OEM-dominant business model. Some relevant market general parameters shall be fine examples for Chinese market. Chinese remanufacturing, as an emerging industry, still needs complementary information for establishing its market framework.

Contact Information:
Ms. Cindy Cui
Tel.: +86 21 5258 8005 Ext. 8253
E-mail: cindy.cui@duxes.cn
Website: http://www.duxes-events.com/remancn

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