by MAURA KELLER
Each year, approximately 20 million automobiles reach the end of their useful life – most of which are an average of 10 years or older.
As such, many components and valuable parts of these vehicles are subsequently removed and recycled. This is the role of automotive recyclers around the world. As Arnold Bowers, business solutions director at ENGIE Impact explained, automotive recyclers help to optimize recovery of vehicles, save consumers money by offering parts for reuse, and protect the environment by maximizing the resources contained in each car. As such, automotive vehicles are some of the most recycled items in the U.S.; more than 95 percent of vehicles in the U.S. are being recycled at the end of their life.
“Automotive recycling is evolving into a mature marketplace and technology-driven industry that constantly changes to keep abreast of inno-vations in automotive technology and manufacturing techniques,” Bowers said.
Amanda Richards, vice president of operations at Junk Cars New England said the auto recycling industry has evolved drastically over the past decade or two, mainly because of the rapid increase of the internet and technology. Prior to this, vehicles would be smashed in their entirety or with only a few parts being pulled out to sell. Nowadays, recyclers are pulling more parts and components in order to optimize the value of the vehicle. Used parts sales have skyrocketed due to the capability of auto recyclers being able to sell used parts online through sites such as eBay and Amazon.
“Where small shops were only able to sell to local customers that called or came by the store, now they are able to reach and ship to consumers all over the world,” Richards said.
David Morris, chief merchandising officer at Carparts.com said the automotive recycling industry has evolved in the determination of what can be used and removed from a vehicle and what should be sold as a core or scrapped.
“I have noticed in the last few years that many yards have reduced the items removed from a wrecked vehicle for resale, and I have seen many companies better their labor and man hours between what to take off and stock or what to keep on the vehicle,” Morris said. “The advent of Hollander/eBay collaboration and online cataloging also has helped many yards get inventory listed online and correctly cataloged. Along with better cataloging and better inventory control, I have also seen transparency help the industry tremendously. From auctions all being online and virtual, most of the top yards in the U.S. have full online inventory, including images of the parts and the vehicles the parts are coming off of.”
Changes aside, the automotive recycling industry is also facing a plethora of challenges. According to Bowers, there are challenges that add to the complexity. As Bowers understands, there is a shortage of trained employees to work in the auto salvage business. “This is not a glamorous, easy or necessarily safe business to work in, so attracting new talent to enter the industry is difficult for sure,” Bowers said. In addition, the business requires a vast amount of reasonably priced salvage vehicles to ensure the recycling pipeline remains robust. And today many salvage vehicles are exported, causing a shortage of “raw material” for the process.
Another challenge is the onset of COVID-19. As Richards explained, in March 2020, businesses began allowing employees to work from home or closed down altogether, greatly decreasing the amount of individual’s commuting to and from work on a daily basis.
“With the decrease in traffic came a reduction in the number of accidents, thus greatly decreasing the supply of vehicles for auto recyclers to obtain at the auctions,” Richards said. Also, due to the fact that many people are losing wages, they are holding onto cars longer and repairing them, when previously they would junk them and just buy another new or used vehicle. Also, tariffs overseas on metal caused metal prices to plummet, greatly affecting the profit for auto recyclers throughout the U.S.
“Hybrid and electric vehicles are becoming increasingly popular,” Richards said. “One issue that auto recyclers have with these vehicles is being able to properly dispose of their unique type of batteries.”
Manufacturers’ Efforts
Bowers believes that recycling of automobiles has always been important to manufacturers, but today they seem to think more about it at every stage of the design and building process. Just a few years ago, for example, Ford switched from steel to aluminum for their top-selling U.S. vehicle, the F-150 pickup truck.
“I recall reading at the time that this would raise the recycling rate of this vehicle substantially,” Bowers said. “If auto manufacturers are willing to make this type of change to their top-selling vehicles and arguably their most profitable ones, then they most certainly are focused on the type of materials they’re using and what the long-term lifecycle of these materials looks like.”
However, Morris has not seen many changes in the industry coming from the OEMs. With the addition of electric cars, he has not seen the long-term recyclability of these vehicles being discussed. Morris said fuel economy and emissions are still the top priorities for OEMs, and the recycling long-term message has not been a priority over the last few years. Even the battery systems have been ignored as a selling opportunity by recyclers.
“In the U.S. right now, hybrid and electric vehicle recycling has been tackled by the traditional parts suppliers,” Morris said. “While this could have been a great focused opportunity for salvage yards to take on, this finished goods opportunity was ignored, as yards remain fixated on core sales. Yards need to close the gap on these product opportunities to grow the sellable number of SKUs for the overall industry.”
Planning For the Future
The wide variety of plastics used in automobiles today presents a challenge for recyclers – they need to focus on one stream of material at a time. “If they begin mixing various types of plastics together, then the value of these ‘mixed bales’ will have less value in the marketplace,” Bowers said. “Due to these issues, I believe auto manufacturers will focus on streamlined materials for their products, and try not to mix material types among components.”
Bowers also sees the automotive industry moving to lighter and stronger plastics both in the short and long term. This will have an impact on both the secondary, salvage-for-parts market and the end-of-life recycling market values. The fact that more EVs are coming to market from various manufacturers will also increase the number of lithium-ion batteries that can be recycled.
“I believe the largest auto recycling markets will extend beyond the U.S. in the next 10 years,” Bowers said. “Most likely, China will lead the world in the number of vehicles in need of recycling.” This will lead to new technologies around separating the types of plastic, metal (steel and aluminum) and rubber from these vehicles. The recycling rates will most likely climb past the current mid-90s to very high 90s or virtually 100 percent of autos being recycled in some way.
The onset of more iPad-like entertainment and vehicle control systems also will lower the number of components like buttons and knobs inside autos. “The lion’s share of larger plastic components from the interiors and these single piece electronic systems that can be pulled in an integrated way will streamline the ‘breakdown’ of modern autos,” Bowers said. “I see the influence of our circular economy thought process impacting the end of life of autos because how they will be disassembled at the end of their life will be built into the initial design of the auto.”
Richards said the future of auto recycling will become similar to what we see with small shops versus large chain stores. “The number of junkyards will most likely decrease,” Richards said. “Auto recycling facilities that have the capabilities to take in a larger volume of vehicles and that have the equipment necessary to pull out and process the various parts of the vehicle will flourish. In order for a yard to be able to do this, a great deal of money needs to be invested. This is why many of the existing junkyards that have not evolved with the times and technology will be forced to go out of business, because it simply will not be profitable for them any longer.”
Morris believes the industry will continue to consolidate as recycling and supply chain costs continue to decrease the gap between used and new parts.
Consolidation also will organize the industry and allow the industry to maintain national quality standards through groups of suppliers. “Body shop business consolidation is inevitable as insurance drives down costs. And with large customer bases growing at the yards, I believe this will also continue to drive yard consolidation,” Morris said.
As vehicle technology and accidents over time continue to decrease with better safety and accident avoidance, Morris said the ability to find inventory will continue to be an issue in the used industry. “With large consolidators trying to contractually gobble up wrecked vehicles, and with the evolution of online auctions, the competition at auctions is larger than it has ever been,” Morris said. “This continues to drive the wrecked car price higher at the salvage yard level.”
The key to success will be in the technology advancements and recyclers embracing that technology. Aftermarket technology has been improving at record speeds, allowing fully computerized and digital reproduction at a fraction of the cost 20 years ago, and this technology will not slow down.
“Salvage yards need to answer the question for their customers: Who is paying for any extra handling of a used part? Is that problem answered with customers? If the problem has been voiced multiple times by the industry, then yards need to figure out how to answer the call,” Morris said. “Those in the industry who adapt and develop new technology to make the sale and profit on used parts equal to the new counterpart will ultimately win.”
Published in the November 2020 Edition
