David Nolan, Executive Director of the Auto Recyclers Association of Australia, provides his opinion on the shifting landscape of automotive recycling. The decade, from 2025 to 2035, is set to bring unprecedented change to the automotive recycling industry, marking a departure from the sector’s most prosperous years between 1955 and 2005. With rising EV adoption, increased regulatory challenges, and the global shift toward corporatized recycling operations, traditional small-scale auto recyclers face an uncertain future. David explores these transformations, highlighting why today’s automotive recycling landscape may no longer provide the opportunities it once did for family-owned businesses.
The Halcyon Years – 1955 to 2005
I start from 1955 because there is little evidence of an identifiable “automotive recycling industry” during the preceding 30 years.
Those 30 years saw the birth of the automobile industry (and the creation of the Hollander Interchange). But those years were impacted by a decade of post-war recovery from WW1, economic Depression (and recovery), another World War, and another decade of post-WW2 recovery.
The automotive recycling industry really started to take shape in the mid-1950s. Many current family businesses will point to having been started during the 1950s, 1960s, and 1970s.
The industry grew exponentially during the five decades from the mid-1950s. It was an industry fueled across the globe by thousands of entrepreneurial, independent local businessmen. There were no corporates, and there were limited numbers of multi-site owners.
The industry relied heavily on cooperation between competitors. Parts brokering was key to the success of many businesses.
Inventory management systems emerged in the 1980s as “green screen” DOS systems with a local database. There was no digital networking, and communication between multiple recyclers was typically through Voice Hotlines.
For the decades through to 2005, the industry was substantially focused on small businesses serving local communities.
From the mid-1990s, some rationalization of businesses started to occur as improved management systems, new technologies, and vastly improved logistics systems facilitated a more national approach to second-hand Parts sales.
Industry profitability remained very good. Most significantly, the land on which yards operated was appreciating substantially, such that retirees were increasingly likely to close the business and enjoy the benefits of their years of endeavour.
The Less Good Years – 2005 to 2025
The last 20 years have seen an explosion in the volume of salvage vehicles and Parts being exported from industrialized countries (UK, Europe, Japan, Australia) to the Middle East and Asia.
The experience in Australia has shown how difficult it is for this industry to be government-regulated (or for regulations to be enforced). The solution adopted in many countries is for industry self-regulation through “certification” programs, but this still requires a level of government support for or recognition of such programs.
Scrapping and export yards can appear like “pop-up shops.” All that is needed is to find some vacant industrial land, install a portable “office” and a container-attached “dome”, and begin advertising “Cash for Cars” on Google.
The two essential criteria are being better at social media advertising than your competitors and having family or friends in Middle Eastern or Asian duty-free trading hubs who can receive your exported containers.
Vehicles and Parts are exported either as whole vehicles, half cuts, drivetrains (engines & transmissions) or crates of steering assemblies, alternators, starter motors, axles, etc.
Regulatory authorities find it difficult to enforce compliance with environmental and workplace safety laws, and if they press too hard, the business will shut down and move elsewhere.
The impact on traditional automotive dismantling businesses has made salvage more expensive, thereby reducing profitability.
The Tough Years Ahead – 2025 to 2035
The following comments are based on observations and perceptions. They are not based on hard data, but there are “data aggregators” in our industry who will increasingly have access to data proving or disproving these perceptions.
The biggest contributor to the growth of the automotive recycling industry over the past 70 years has been the consistently increasing cost of new motor vehicles, which has been equal to or above the rate of inflation.
This steady growth in the price of new vehicles has underpinned the value of second-hand vehicles. The steady relative value of second-hand vehicles has enabled the auto recycling industry to sell second-hand parts at a profitable margin. It has been economically worthwhile for a car owner to use second-hand Parts to keep their existing vehicle on the road.
But I suspect the glory days of the past 70 years are over. I suspect the EV revolution will bring them to an end.
There are already signs that second-hand electric vehicles will not hold their value to the same extent the second-hand ICE vehicles have historically retained value.
Chinese EVs are already significantly undercutting the pricing of Japanese, European and US EV brands, and this is flowing through to reduced value of second-hand EVs.
In an era of increasing international trading pacts, price protection through tariffs can only go so far. We are yet to see the real impact of the USA tariffs on the auto recycling industry there, but one would expect to see some initial uptick in second-hand parts sales as new cars are made more expensive.
As the shift to EVs continues, I expect however to see the profitability of traditional auto recycling businesses steadily decline.
There are already signs of recyclers shying away from buying salvage EVs – they are dangerous for those without the proper tools, training and information, and the profitability for scrapping is not assured.
The above does not mean that the processing of end-of-life electric vehicles will not be profitable, but it does mean that traditional small local automotive recycling businesses will find it difficult to survive in the new EV era.
For a start, the value of second-hand engines and transmissions will steadily decline as the transition rate to electric vehicles increases. We are still some way off from seeing a significant decline in the market for second-hand engines and transmissions, but as EV sales and mandates surge, that change will be coming.
Automotive recycling businesses typically earn most of their revenue from selling engines and transmissions. They then try to earn as much as possible from selling other parts. Finally, they earn a modest return from the sale of the body shell for scrap.
If the sale of engines and transmissions is taken out of the equation, it is questionable whether the return from parts sales and scrapping of a shell would cover the cost of buying and dismantling an EV.
Of course, automotive recyclers will be compensated for recovering EV batteries, but the financial return compared with the cost of dismantling, handling, and storing such batteries is not assured.
In most countries, there are no restrictions on the sale of second-hand EV batteries. There is often a lively market for reuse in EVs or for use in non-automotive electrical storage.
In the longer term, however, revenue achievable from the sale of second-hand batteries is very problematic. We don’t know what policies OEMs will adopt in terms of the recovery and recycling of EV batteries of their brand, or what regulations governments will put in place.
The most likely scenario is that end-of-life electric vehicles will be managed through more “corporatized” automotive dismantling businesses and networks. Such businesses will be better able to safely and economically manage the EV battery dismantling, handling, storage and transport operations.
Independent auto recyclers will either need to find a niche to exploit or join more progressive networks or organizations. They will increasingly need to take good environmental care of their property, as polluted land may be significantly devalued.
As noted previously, the above is based mostly on observations and perceptions rather than hard data. Nonetheless, it suggests that the future for small family-operated local automotive recycling businesses is not as assured as it has been over the past 70 years.
To contact David, please email him at drnolan@autorecycle.com.au
