Adam Małyszko, CEO of the Association of Car Recycling (FORS) in Poland, provides Auto Recycling World with his opinion of the car recycling industry over the past twelve months and where the industry is headed in 2023.
A year ago, I pointed out that at the end of 2022, entrepreneurs will have much worse financial results compared to 2021. Has this forecast come true? Anyone who runs a vehicle recycling business should answer this question and analyse the company’s financial situation. In Poland, these predictions came true -100%. Was your country similar to Poland? If you could share your knowledge, please email me at email@example.com.
What will 2023 be like?
Forecasts indicate that 2023 will be similar to the fourth quarter of 2022. In many countries, in January, companies received new higher energy bills, as well as having had increased the remuneration of their employees. And, of course, general business costs have gone up. However, it should be noted that in the recycling industry, we cannot count on raising prices for used parts too much because the value of these parts would approach the prices of new parts – then the repair of the vehicle would become unprofitable.
The first quarter of this year will show how inflation has affected the recycling industry. 2023 will be a test for many companies. There is the probability that those who are not professionally prepared to run such a business will have the biggest problems and may give up. With a reduced number of vehicles to be dismantled, the competition will be fierce. Professional entrepreneurs with up-to-date knowledge of the used parts market shall have the best chance to survive. Prices for vehicles handed over for disassembly will be high, thus margins may be lower than expected. There is no doubt that we will have to spend much more time analyzing what we are disassembling, whether we will sell the part and at what price. Having experts in this field can guarantee the success of the company.
Is inflation the only problem?
No, inflation is not the only problem. There is no denying that we are increasingly feeling the manufacturer’s influence on our industry. The best example is the increasingly frequent electronic blocking of the possibility of reusing parts, which has become a real problem. We dismantle more and more modern cars, so we need to update our knowledge in this area and train our employees. The number of brands, types and models that are now being dismantled is so large that if we do not enter international markets, we may not find a customer for the dismantled parts that we have in our warehouses.
Delivering used parts to another country is another challenge, as most European countries have lots of obligations for those bringing goods in packaging. The sale of packed used parts to an individual is associated with many obligations resulting from the regulations in force in the country where we send the goods. This is extremely important because, in the event of a violation of these regulations, very high penalties may be imposed on the seller. In my opinion, international cooperation and integration of the recycling industry are some of the biggest challenges for 2023.
For example, a great cooperation might be to have a large number of common, cheap base parts available to customers around the world, but there is a question: will anyone take on such a challenge? I believe the answer is ‘yes’.
What possible surprises in 2023?
The end of the war in Ukraine in 2023 – Regardless of the outcome, this will cause another confusion on the market, especially in terms of metal prices – i.e. the prices of basic raw materials obtained from vehicle wrecks. A stable high price of raw materials can have a beneficial effect on the industry.
The high demand for used car parts may also surprise you. The production costs increase for new parts and cars as well, which is a great opportunity for the vehicle recycling industry. So I hope most recycling companies will take advantage of it.