In recent years, Japanese auto dismantlers have encountered significant challenges that have had a profound impact on their operations. One pressing issue revolves around the scarcity of end-of-life vehicles (ELVs) reaching their yards. To shed light on this matter, Dr Kenichi Togawa, a Professor at Kumamoto University in Japan, joined forces with Yoko Yoshida from Metal Solution Provider Co., Ltd to share their perspectives with Auto Recycling World.
In 2021 and 2022, the number of end-of-life vehicles (ELVs) dismantled by Japanese authorized treatment facilities (ATFs) remained stable at approximately 3 million units. The informal sector did not pose a significant problem in Japan as the numbers involved are very limited.
While the prevalence of illegal operations in the informal sector is relatively low in Japan, it is worth noting that in 2023, many Japanese ATF managers have expressed concerns about a significant decline in purchasing volume. These managers have reported that their procurement has dropped to half or even less compared to previous periods.
Prof. Togawa suggests that the reason for this may be the entrance of foreign-owned ATFs with substantial capital into the Japanese ELV market. For instance, business owners from Pakistan and Afghanistan who were previously active in the Middle East, such as Dubai, have started purchasing directly from Japan, and they are able to offer higher prices for ELVs at used car auctions.
Japanese used cars and used parts are in high demand globally, and these traders are well-versed in the market. In other words, the market has changed. The consumers of Japanese used cars and parts have shifted from Japan’s stagnant economy to fast-growing developing countries. Foreign-owned ATFs are keeping up with these changes happening in overseas markets.
In February 2023, Prof. Togawa visited the ATF cluster area around New Tokyo International Airport. According to a survey conducted by the Japan ELV Recycling Organization, more than half of the ATFs in this region are operated by non-Japanese investors. Many of the local Japanese ATFs had only a small number of old vehicles, while one of the leading foreign-owned ATFs in this area has established a large and well-organized recycling yard, which has been sublet to another foreign company, where more ELVs are collected.
On a visit to ATFs around Tokyo New international airport
Interestingly, the roof of this major foreign-owned yard is covered by solar panels, and excess ELVs are sometimes stacked on these panels when there is an overstock.
The local governments grant permission relatively easily if certain equipment is installed. Consequently, in recent years, foreign buyers have been able to qualify as legal ATFs. Incidentally, according to a survey by the Japan ELV Recycling Organization, approximately 25% of all ATFs in Japan are already owned by overseas individuals.
Responding to this change and surviving in a shrinking domestic market is a major challenge for Japanese auto recyclers in 2023, Prof. Togawa said, “Japanese ATFs should either build partnerships with foreign ATFs in Japan or go abroad by themselves to find partners in Africa and other regions where future market growth is expected.”