The car recycling industry in Poland has enjoyed steady development over the past two decades, withstanding global disruptions such as the 2020 pandemic and the raw material market shocks in 2022. According to Adam Małyszko, CEO of the Association of Car Recycling (FORS), the sector has proven its resilience and adaptability. However, while the first 25 years of the 21st century have been marked by stability, the years ahead are expected to bring significant transformation.
Surprisingly, the pace of development has not been slowed down by the 2020 pandemic, nor by the unprecedented surge in raw material prices in 2022, followed by an equally sudden decline in these prices, primarily related to the armed conflict in Ukraine.
Summarising the first 25 years of the 21st century, we can say that during this period, the industry experienced stable and positive development. Will the years that follow be similar? In my opinion, NO. The first months of this year have already shown that major changes are coming to the world in all sectors of the economy. The customs policies of the US, Europe, and China, as well as the sanctions related to the war in Ukraine, concerning, among others, the automotive industry, will also impact the further development of car recycling.
This year, electric cars will no longer be the most frequently mentioned challenge in the industry. In most countries, problems with battery management have been solved. Entrepreneurs have also realized that dismantling electric cars is not really more complicated than combustion cars. Those running dismantling stations have also learned to utilize components from electric cars, such as batteries, as energy storage devices.
Of course, the problem of manufacturers using technologies that prevent the reuse of parts remains. For years, dismantling newer generation combustion vehicles has been a struggle, but in the case of electric cars, this problem takes on a new meaning and scale.
I hope that, following recent media discussions about the possibility of remotely immobilising F-35 aircraft, decision-makers will recognise the need to introduce a ban on such practices, not only in the production of aircraft but also in other modes of transportation, including the most popular cars.
There will be many challenges for those running dismantling stations in the coming years. The most important of them are:
- Chinese-made cars
- Rising costs of dismantling parts
- Environmental, fire protection and occupational safety requirements
- Difficulties in obtaining permits to run car dismantling stations
- Market consolidation and takeovers of dismantling stations
These challenges will be faced mainly by entrepreneurs from Europe.
Chinese-made cars
The expansion of cheaper Chinese-made cars will impact the financial results of companies that dismantle cars. Although cheaper cars do not always mean cheaper parts, in the case of Chinese cars, the demand for these parts may be negligible, resulting in lower prices. A cheaper car means cheaper parts, which means a smaller margin with rising dismantling costs. A cheaper alternative to well-known brands means limiting the purchase of used cars by less affluent people. Fewer older cars on the roads means a smaller market for parts. Personally, I have no practical knowledge about the technical lifespan of Chinese cars and the degree of wear of parts after significant mileage, but I am convinced that the number of parts suitable for reuse from such cars will be smaller.
Rising costs of dismantling parts
The biggest cost in the car recycling industry is the employee dismantling the parts – they cannot be replaced by a robot or artificial intelligence.
The rampant inflation in recent years has led to significant wage increases, and the tightened migration policy has led to a restriction on the acquisition of cheaper labour. The problem is particularly prevalent in Europe, but is also becoming increasingly evident in the US. In addition, the fiscal burdens on legally employed workers mean that some companies are giving up legal employment and moving into the grey zone.
Environmental, fire protection and occupational safety requirements
Environmental policy worldwide, especially in the EU, has introduced the obligation to use a number of expensive solutions. In addition to extensive reporting, there are expensive requirements to protect soil and water from pollution, as well as an obligation to achieve high recovery and recycling levels. For example, in Poland, the responsibility for achieving recovery and recycling levels lies not with the manufacturer, but with the dismantling station. The EU has also introduced an obligation to monitor the carbon footprint (ESG). All this makes dismantling stations in the EU less competitive than in other countries worldwide, especially after President Trump’s announcements about abandoning the Green Deal policy, which is well-known in Europe.
Difficulties in obtaining permits to run a car dismantling station
In each country, the conditions for obtaining a permit to operate a car dismantling station vary – in some countries, it is relatively easy, while in others, it is more complicated. In some countries, you must wait a few weeks for a decision, while in others, it may take a few months. However, there are also countries where entrepreneurs may apply for permits for years.
I personally waited 5 years to change the permits I already had! If the policy of tightening regulations is a priority for countries, especially the European Union, then in the near future, the market will be divided into two parts: one part will be dominated by large corporations, and the rest will be dominated by the grey zone. Interpreting the regulations is also a big problem. For several months, officials of the European Commission have been trying to determine whether car dismantling is physical and chemical processing or other activities. Due to this dispute, some dismantling stations in Poland will be forced to suspend their operations as of December 31. There are similar problems in many countries – most likely, these are lobbying activities of large corporations, which in this way eliminate the competition.
Market consolidation and takeovers of dismantling stations
Recently, we have observed a growing interest in acquiring smaller companies, particularly dismantling stations, in Scandinavia and Central Europe. In Poland, paradoxically, due to the complex regulations for conducting business in our country, interest in acquiring dismantling stations is negligible. Nevertheless, in the future, we should expect a similar trend, which is already affecting manufacturers and dealers of new cars. It is possible that, due to the expansion of Chinese car production and distribution, Chinese capital may also become interested in the recycling industry in the USA or Europe, especially since, apart from parts for reuse, vehicles are also a source of valuable raw materials.
In the near future, the car recycling market is expected to undergo significant changes. In order to stay on the market and keep up with strong competition, we will devote more and more time to analyzing the market and the changes taking place using artificial intelligence, but not forgetting our own experiences.
