Targeting 100 Billion Markets Volvo Launches China Remanufacturing Business

Sitting on a brand new Volvo car, you don't think there are some new and shiny parts on this car from the Volvo Group's remanufacturing center.

Alexander Pajari, director of product support for Volvo Construction Equipment in China, told reporters that this is not surprising. Many people do not know about Volvo's remanufacturing business, nor do they know the old components that have undergone a "re-manufacturing" process in their vehicles. Because in many cases "their performance is not lost, even better, ordinary people do not notice at all."

The "remanufacturing" business is a novelty to the Chinese market, although it has existed abroad for decades. In the domestic public's impression, "remanufacturing" and major repairs and renovations seem to be indistinguishable from each other. It is nothing more than a change in a tall sense.

In response, Pajari seriously rectified: "'Remanufacturing' and refurbishment are two different things. Take Volvo as an example, we began to consider the recycling of parts from the source of design, and have very strict standards when selecting old parts. The technology of cleaning and refurbishing is also at the forefront.” He particularly emphasized that remanufacturing is a complete industrialized manufacturing process and must be mass-produced; while refurbishment is more focused on the individual processing of a certain component, and does not require industrial mass production. .

Targeting 100 billion market

What is "remanufacturing" and how does it differ from ordinary renovation?

To put it simply, component remanufacturing is a means of recovering the use of a series of technologies after preliminary inspection and performance analysis of used auto parts. The technical requirements for remanufactured parts are very high. Old parts that have been “remanufactured” must not only look like new parts, but also have performance and service life that are close to or even exceed the original.

"Remanufacturing" in foreign markets is not new. According to the data from Forward Web, the remanufacturing industry has been developing in Europe and the United States for more than 50 years, forming a very mature industrial chain with a global industry scale of over 140 billion US dollars. In the past year alone, the U.S. remanufacturing industry reached 100 billion U.S. dollars. There are nearly 75,000 remanufacturing enterprises, and the number of employees in the industry is about 500,000.

The reason why the international giants of course did not choose to introduce the remanufacturing business into the Chinese market has been considered.

Take Volvo as an example, Pajari said that the company’s decision is based on “seeing the capacity of the market and the potential demand of the market”.

“First, Volvo Investment is based on the total amount of machines in this market. After determining the investment, we will also determine whether the old parts recovered in this market can satisfy the development of our remanufacturing business. We hope that the business can have a good cycle."

It now appears that the Chinese market has been able to meet this standard. According to statistics, currently 80% of China's in-service machinery exceeds the warranty period, and more than 3 million old traditional machine tools have been used for more than 10 years, and about 5 million used cars are used. Some industry insiders estimate that even if only 10% of them are remanufactured, the output value scale will exceed 100 billion yuan and the potential is huge.

In 2005, construction machinery giant Caterpillar pioneered the establishment of Caterpillar Remanufacturing Industry (Shanghai) Co., Ltd. in Lingang, Shanghai, with current annual sales of more than 20 million yuan. Compared to the company’s $4 billion in global sales of remanufacturing business in 2012, revenue in China is only a fraction of a cent, but Caterpillar is clearly more focused on the growth of the remanufacturing business in the Chinese market.

At the end of 2013, Volvo set up its first remanufacturing center in China. At present, the group has eight remanufacturing plants in the world, and the number of remanufactured products produced in 2011 exceeded 1.2 million.

Pajari said that the strategic position of the remanufacturing business in the entire Volvo Group is extremely important. "We are confident that China's remanufacturing business will promote the growth of Volvo Construction Equipment's global business."

Strict management process

Although the growth of the remanufacturing business looks very tempting, its technical difficulty is beyond imagination. As Pajari said, remanufacturing is not just about the recycling of old parts. "It started in the design period of components and it runs through the entire product life cycle."

He explained that nearly 70 years of remanufacturing experience have allowed Volvo to do this, preparing for the end of the remanufacturing business at the initial design stage.

“Many old parts were repaired by adding a new coating to the original material, but we have considered this for the reason at the design stage, so there is no need to add or subtract from the original material. For example, we design the phase The range of tolerances is taken into consideration. When parts are remanufactured after wear, parts with this wear removed are still within reasonable technical standards."

After the recycling of old parts, Volvo also needs to realize a series of links such as dismantling, cleaning, inspection, machining repair, assembly and testing, each of which has strict process requirements.

For example, in determining whether a structure can enter the remanufacturing process, Volvo will measure it, determine the worn condition of the old component based on the tolerance limits, the highest and lowest limit values, and finally determine whether it can be used continuously. The “dismantling” link is not simply a reverse assembly. Volvo has a very detailed operation guide inside. The operator also needs to measure the size of the old part to determine whether it meets the dimensional specifications and tolerance requirements. Only then can we enter the next process of remanufacturing.

Volvo provides a one-year quality assurance period for its remanufactured parts, because “we have enough confidence in our entire operation process, testing process and production process”.

“Ordinary repairs do not have process controls and technical controls. Volvo remanufactures dismantles all components and inspects each one, so the understanding of the components themselves is very deep.”

Because of this, to a certain extent, remanufactured parts are not only cheaper than new parts, they are delivered faster, and their risks are relatively small.

It now appears that “everything is ready” Volvo may only owe a single wind, which is the recognition of the Chinese market, and the latter is the biggest problem in this newly-emerging emerging market.

Pajari told reporters that "remanufacturing" is a brand-new concept for the Chinese market, and the level of understanding of remanufacturing by customers and distributors still needs time to improve. "But from our current production situation, the number of agents reordering parts is gradually increasing, and the market acceptance is also increasing."

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