Competitive advantage for Europe’s manufacturers or new problems?

The right to repair is intended to protect consumers and could make “Made in Europe” a seal of quality again. However, the unclear implementation of the new EU law poses huge risks of competitive disadvantage for European companies, says Dominik Leisinger, CEO of Kearney.

How long should a dryer last? What about a smartphone? The question of product life is not new to manufacturers, but the massive increase in complex electronic products has complicated this question. Many countries have enacted legislation on this issue in recent years, but the European Union is setting the strictest standards yet with its new Right to Repair Directive.

The directive, passed in February this year, covers so-called white goods, mainly household appliances and typical everyday technical products such as smartphones, tablets, monitors, washing machines, dishwashers, computer servers and many things from the hardware store. The scope is likely to expand in the future as new consumer trends emerge, such as e-bike batteries. “The goal is to reduce CO2 emissions by 18 million tons over a 15-year period,” explains Dominik Leisinger, Partner and CEO of Kearney.

In addition to the positive environmental aspects, the directive will also be beneficial for consumers in terms of costs. According to European Commission forecasts, it will save around €176 million over a 15-year period as the lifespan of electronic products will be extended. European countries now have two years to pass legislation at national level. However, it is not yet clear how the EU will measure and enforce compliance with the law – especially for products originating from outside the EU. While he sees the law as good and necessary progress, Leisinger warns: “German and European companies could find themselves at a huge competitive disadvantage if imports from China and other non-EU countries are not properly controlled and sanctioned in the short term.” In consumer goods industry, two to three years is often a complete life cycle of a product production, a cost disadvantage of a few percentage points – based on the right to repair – can be too much for some products and force them out of the market. .

A win for companies, but could be difficult for SMEs

Dominik Leisinger, Partner and Managing Director of Kearney
Dominik Leisinger is a Partner and Managing Director of Kearny

But it’s not just cheap, non-compliant products from abroad, competition within Germany and Europe could also push some companies to their limits. While major players such as Philips and BSH have long invested time and resources in strategic planning, medium-sized and smaller manufacturers will face greater problems in implementing all the provisions of the EU directive. panic when they realize they don’t have sufficient skill and expertise,” explains Leisinger. Many different areas are affected, such as product design, access to spare parts, replacement during repairs and additional transparency for customers. In all of these areas, companies must conduct thorough analysis based on both industry standards and competitor developments.

Mandatory repairs lead to new business models

The policy includes clear provisions for repair, reuse and recycling of materials. “Companies face reduced revenue from replacement purchases as consumers are encouraged to repair existing products.

This means that entire sales forecasts have to be reassessed,” says Leisinger. Research and development costs will have to be reallocated and, in many cases, production processes and equipment will need to be redesigned. Ensuring affordable parts adds even more expense, although this can be partially offset by the increased revenue from selling them. Developing products to be easily and inexpensively repaired incurs costs, but also serves as a catalyst for design innovations that can bring economic benefits in the medium and long term. By offering more repairable products and satisfying the desire for sustainability, companies are also increasing customer satisfaction and deepening brand loyalty through additional touchpoints.

Home appliance manufacturer Miele, for example, not only provides spare parts, but also offers them for free 3D printer-Part designs that consumers can use to print accessories. Devices “Made in Germany” could become a new standard of quality compared to products from China or the USA. Leisinger also sees the right to repair as an opportunity: “The fact that many products are becoming easier to repair due to the new requirements also creates new opportunities for business models repair networks, in which associations in medium-sized enterprises will play a greater role or will arise big players who will fully take on the issue of repair. In addition, the market for remanufactured products, i.e. used products, will grow rapidly in Europe in various product categories.

The main aspects of the legislation and the timetable

Manufacturing electronics is extremely resource intensive, and many of the elements it requires, such as collision minerals, are expected to run out within the next 100 years. “Given the large quantities of such materials already contained in existing products, extending their lifetime is an important factor in the global resource equation,” explains Leisinger. In addition, sourcing individual components from critical areas or scarce raw materials is much more difficult than in the past. This increases the importance for manufacturers of the repairability of their products.

An essential trend, because it is estimated that only 15 to 20 percent of e-waste is recycled worldwide, while in the EU it is only less than 40 percent. “The December 2023 ecodesign regulation states that products must be manufactured in such a way that they can be disassembled and repaired using common tools,” says Leisinger. The directive also requires companies to extend the warranty for an additional 12 months for products repaired under the original warranty. Companies are also required to offer spare parts at a reasonable price. The EU reached a preliminary agreement on the right to repair in February 2024, with formal approval expected by June 2024. After the two-year period for national adoption, the policy will come into force in 2026. “Given that many products scheduled to be released on the market right now are already in the development phase, immediate action on the part of companies is urgently needed,” Leisinger concluded. It remains to be hoped that the enforcement of the law by the EU and the federal states will be clarified immediately, in order to avoid a competitive disadvantage and give companies the necessary design certainty.

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