by MAURA KELLER
Americans scrap 10 to 12 million vehicles per year, fueling a $20 billion-plus industry in recycled automotive steel, copper, plastic, glass and rubber.
As such, automotive recycling companies are an important source of salvaged car parts for consumers, providing them with a significantly more affordable alternative to new parts. Likewise, selling scrap metal from junk cars has historically been a big business. But today’s lower scrap prices have spurred reduced scrap volume, slowing the junk car recycling business and forcing companies to hold onto their junk cars, waiting for a better deal. While the slowdown in junk car salvage continues, consumers are utilizing more innovative ways to sell or dispose of their junk cars than in years past.
According to Jordan Perch, researcher with DMV.com, an online information hub for all motor-vehicle-related topics, the main changes to the method of selling junk cars over the years have to do with the way consumers advertise their cars. In the past, consumers mostly used newspapers or magazines to advertise the cars they wanted to sell, so print media advertising used to be the prevailing method.
But how consumers sell their end-of-life vehicles (ELV) greatly impacts auto recyclers. Nowadays with the widespread adoption of the internet, most consumers sell their junk cars online. Notably, the advances in technology and the increased use of the internet to sell and buy used cars, has helped the auto recycling industry. Online avenues, including Craigslist and eBay are helping automotive recyclers locate and acquire junk cars more easily.
“The internet is being used because it only takes a couple of minutes to post an ad, and it’s a great way to reach a lot of prospective buyers,” Perch said. “There are plenty of companies buying and selling junk cars, and people who need to sell their car only have to do a little research online and find the websites of the companies located in their area.” That’s where auto recyclers come in. Utilizing an effective website that clearly states your company buys junk cars, your locations, etc. is paramount in getting consumers to recognize your company.”
Today’s recycling companies also are utilizing the internet to purchase junk vehicles in creative ways. For example, Sims Metal Management lists 270 locations on their website that will take junk vehicles and pay cash. Many websites allow consumers, insurance companies and others to request a quote for recycling their junk car.
At the same time, scrap yards and automobile recyclers compete for ELVs offered on Craigslist, eBay or directly from junk car owners. In doing so, recyclers need to ensure they are equipped with latest technologies in the industry and maintain standards of auto recycling practices specified by Automobile Recyclers Association (ARA).
According to the ARA, several challenges remain for professional automotive recyclers as consumers find alternative ways to sell their junk cars, including:
•Increased competition from unregulated and unlicensed buyers at salvage auctions, leading to inflated prices for vehicles and decreased stock;
•Lack of oversight and uniform standards for online internet auctions of salvage vehicles;
•Lack of uniform vehicle titling within the U.S.;
•Lack of consumer education on the value and usage of recycled auto parts; and an
•Increasing number of vehicles being exported out of the country by international buyers.
ARA supports the acquisition, sale and dismantling of salvage or ELVs and oversees these activities are performed and conducted by licensed businesses qualified and equipped to purchase ELVs in accordance with federal, state and local laws and regulations.
So how are the methods of selling junk cars affecting the auto recycling industry? Perch says that whatever method junk car owners choose to get rid of their vehicles, they often end up at auto recycling companies.
“Even though many consumers choose to sell their junk cars to private buyers, the recycling car business is only going to get bigger in the following years, based on recent statistics that show constant increase of the number of vehicles recycled in the U.S.,” Perch said.
Exportation and the Effect on the Industry
While many U.S. consumers sell their junk vehicles to U.S. entities, others are finding that selling junk vehicles abroad can earn them a higher price for their vehicle. In recent years, the exportation of junk cars has changed and is having a significant impact on the auto recycling industry in the U.S.
According to Dmitriy Shibarshin, marketing director at West Coast Shipping, in the past, consumers would either donate their cars to charity or sell them to local junkyards to be parted for pennies on the dollar. However, now that the market has gone global, buyers from developing nations scour the U.S. for junk cars, giving U.S. consumers an alternative option of disposal. Depending on the make and model, consumers can get better value by selling to overseas buyers.
As Perch explained, automotive recyclers do feel the impact of the increased number of junk cars being sold overseas. “They face a lot of problems caused by the fact that more and more salvage vehicles are leaving the U.S., reducing the number of vehicles that recyclers can acquire,” Perch said. “The fact that there are fewer salvage vehicles available for purchase by recyclers increases the price of the ones that are left in the U.S. market, which reduces recyclers’ revenues greatly.”
Shibarshin deals with the shipping of many cars to locales outside of the U.S. He said that cars from the states continue to be one of the most popular exports, despite restrictions on their import to certain countries.
“Generally, these cars are purchased at salvage car auctions by overseas buyers,” Shibarshin said. “They are then either exported in containers overseas—up to five cars per container—or taken apart piece by piece in the states and exported as parts. The cars are then fixed up by shops overseas and the parts are sold.”
Africa and the Middle East tend to be the most popular destinations. Previously, Kyrgyzstan was a big importer until they joined the Russian union and drastically increased their import taxes.
The internet has certainly made it easier to export junk cars to buyers across the globe. “Consumers can now reach a worldwide audience when selling their junk cars. They typically post them on sites such as eBay and Craigslist, which tend to attract end buyers and re-sellers overseas,” Shibarshin said. Some utilize licensed auto dealers to help them sell their cars at salvage car auctions. And there are also a growing number of U.S. dealers who buy junk cars and fix them to a drivable condition and market them to overseas buyers.
“It hurts the recycling industry because it extends the life of cars,” Shibarshin said. “Instead of being recycled, they continue to drive in developing countries around the world.”
Down the Road
As far as the future of junk car acquisitions is concerned, based on recent developments in this industry, auto recyclers are expected to fight against regulations allowing buyers from other countries to acquire junk cars so easily, requiring stricter rules as to who and how one can buy a salvage car at auctions in the U.S.
According to the American Recyclers Association, one of the largest salvage auction companies in the U.S. now sells their junk cars to buyers in more than 100 different countries. As a result, one of the most serious challenges facing the professional automotive recycling industry is the threat of unlicensed and unregulated buyers participating in salvage vehicle auctions. And many of these unregulated buyers may have ties to the international market.
“The future of the industry will largely depend on how lawmakers respond to appeals by auto recycling companies to do something to prevent such a large number of American junk cars from being sold to international buyers,” Perch said.
Professional auto recycling facilities are licensed businesses qualified and equipped to safely process salvage and end-of-life vehicles, as well as hazardous materials and other vehicle fluids, in accordance with federal, state and local oversight and regulation. Opening salvage auctions to unlicensed and unregulated international buyers not only has dangerous environmental implications, but may help perpetuate fraud, tax evasion, and other illicit activities that put automotive consumers and the general public at risk.
While the majority of used cars exported from the U.S. find new lives in Mexico, United Arab Emirates, and Nigeria, many also end up across Europe. In response to the concerns surrounding end-of-life vehicle disposal and the influx of used vehicles, the European Union passed the End-of-Life Vehicle Directive, which aims at making dismantling and recycling of ELVs more environmentally friendly. It sets clear quantified targets for reuse, recycling and recovery of the ELVs and their components. Following suit, the national Mexican government also released their National End of Life Vehicle Management Plan, which maps out future designs for processing ELVs in Mexico. Other countries, including India, Russia and Australia also recognize that, as professional automotive recycling activities become more global, similar regulations will be required on a global scale.
Published in the July 2016 Edition of American Recycler News