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BIR 2024

The automotive recycling market in São Paulo, Brazil

André de Pieri Pimentel, Janaína Maldonado, Luana Motta and Anna Clara Pereira Soares collaborate, offering their findings on the automotive recycling market in São Paulo, Brazil.

 

The automotive recycling market in São Paulo, Brazil p
L-R: André de Pieri Pimentel, Janaína Maldonado, Luana Motta and Anna Clara Pereira Soares

In 2020, only in the São Paulo metropolitan region, the largest city in Brazil, 47,000 vehicles were stolen (armed robbery and theft). Since 2003, with the progressive increase in car theft rates, the regulation of automotive recycling has become a public issue. Being the main destination for stolen cars, automotive recycling is a historically stigmatized activity in Brazil. This image of “illegal car dismantling” is even stronger in the state of São Paulo, which concentrates 30% of the national vehicle fleet and about 45% of vehicle thefts and robberies in the country.

Figure 1. Graph of theft and armed robbery of vehicles. Rate per hundred thousand inhabitants (2013–2018).

The automotive recycling market in São Paulo, Brazil fi one
Source: The authors, based on data from Data Unodc, and the Brazilian Public Security Forum. The number of Brazilian records corresponds to the sum of thefts and armed robberies.

Ten years after many debates and different proposals, the regulation of the chain of sale, disassembly, commercialization and traceability of auto parts was made effective in 2014. And in this year, the so-called “Dismantling Law” was implemented – State Law No. 12.977/2014. The Law’s proposal was to focus on the problem of car theft by controlling the entire market chain that leads to the yards of car dismantling and resale shops, where a large part of the cars stolen in São Paulo find their destination. The logic was simple: by inhibiting the reception and circulation of stolen parts in dismantling shops and auto parts shops, theft and robbery would no longer be profitable; consequently, violent crimes linked to this circuit would decrease.

But why does automotive recycling occupy such an important share of the Brazilian automotive market? In 2020, it was estimated that more than 38 million cars were circulated in Brazil. However, buying a new vehicle in the country is still very expensive for the majority of the population. The cheapest car on the market costs around 54 minimum wages. Not by chance, the Brazilian car fleet has an average age of 10 years. New spare parts follow the same logic and have very high prices. This scenario drives the consumption of cars and used parts.

Automotive recycling in São Paulo thus represents an option for the consumption of auto parts at lower prices. A spare part from an auto recycling shop can cost up to six times less than a new part from a dealership. But at the same time, a used part from an illegal car can be sold three times cheaper than one formally dismantled. Thus, the scenario that fuels the consumption of second-hand cars and parts also boosts car theft.

This is why among some other rules, the “Dismantling Law” established that only establishments registered within the São Paulo State Traffic Department (DETRAN-SP) can dismantle cars, and also that only cars officially classified as “end-of-life”, legally bought at auctions or from private individuals, can be dismantled by such establishments.  When a car arrives at an auto recycling workshop, its details must be registered in the Traffic Department’s online system.

The central point of the Dismantling Law was its technical innovation. After the car is dismantled and registered in the DETRAN-SP system, some of its parts must be labelled. What does this mean? Traceability labels were the technology chosen to regulate the parts that come from legal origin. Made of destructible vinyl material, the labels have a QR Code that stores the vehicle’s origin data. The QR Code can be read by anyone with a mobile phone. Regarding the law, a passenger car with more than 10,000 parts must have 49 of its parts (those with the highest economic value) labelled. And only after that, it can be resold.

Figure 2. The traceability labels of the Transit Department of São Paulo

The automotive recycling market in São Paulo, Brazil fi two
Source: www.abcar.org

Although the law formalized the activity of car recycling, it did not necessarily include those who were already in the business. Between the payment of fees, compliance with bureaucratic procedures and the execution of infrastructural adaptations, large investments were necessary to comply with the parameters required for regularization by the Traffic Department. Many recycling shops did not adapt to the requirements due to a lack of technical and/or financial capital. Some became irregular, others completely illegal, others went bankrupt.

For those companies that resisted the changes and costs imposed by the new law, another recent change is taking place: the widespread use of online sales platforms. On the one hand, this process has made the market even more stratified: again, entrepreneurs with large financial and technical capital have found it quicker and easier to adapt to the use of these tools. On the other hand, the digitalisation of the market poses a challenge to the regulation of illegal practices, as sellers are able to sell through Brazil’s main online platform without being registered with the Traffic Department. While entrepreneurs describe it as an opportunity for growth, they also complain about unfair competition from informal sellers and stolen parts.

Figure 3. A car dismantling store in São Paulo, Brazil

The automotive recycling market in São Paulo, Brazil fi three
Credit: Apoena Mano

Undoubtedly, this is not the latest episode in Brazil’s profitable recycling industry transformations. Automotive recycling is a transnational market, and one with much potential for expansion, so many disputes over regulation and surveillance are ongoing. Certainly, the effects of these conflicts deserve our attention, as well as the new controversies that will arise.

About the research and the team

The information, data, and reflections presented in this text is embedded in a collective research, Regulation of (i)legal markets: mechanisms for the reproduction of inequalities and violence, developed between 2013(?) and 2020 and coordinated by professor Gabriel Feltran. This research was attached to the Center for Metropolitan Studies (CEM) and funded by São Paulo Research Foundation – FAPESP (process n. 2013/07616-7). The findings of this research were published in the book Stolen Cars: a journey through São Paulo’s urban conflict. Currently, this research agenda is being developed more deeply through another collective research, Global cars: a transnational urban research on vehicle informal economies (Europe, Africa and South America). This research is coordinated by professor Bianca Freire-Medeiros and has been being developed since 2021. It is attached to the Brazilian Center of Analysis and Planning (CEBRAP) and is also funded by FAPESP in a cooperation agreement with ANR/France (process n. 2020/07160-7).

André de Pieri Pimentel is a PhD candidate in Social Sciences at UNICAMP (Brazil) and FAPESP doctoral fellow (process n. 2020/12310-8). Currently, he is working on his PhD research on the recent displacements of the automotive recycling market in São Paulo, Brazil. Email: andre.pierip@gmail.com.

Janaína Maldonado is a PhD candidate at the LFF Graduate School “Democratizing security in turbulent times” at the University of Hamburg (Germany) and a Doctoral researcher at ILAS/GIGA – German Institute of Global and Area Studies. Currently, she is working on her PhD research on the co-production of security logics between different regimes of action in peripheral neighbourhoods in São Paulo and Rio de Janeiro, Brazil. Email: janamaldonado40@gmail.com.

Luana Motta is a professor at the Sociology Department of UFSCar (Brazil) and coordinator of the research group NaMargem – Center of Urban Ethnographies. She has experience with research on urban conflict, state management of poverty, youth and violence. Currently, she is developing a research internship at the University of Chicago. Email: luanadiasmotta@ufscar.br.

Anna Clara Pereira Soares is a Graduate student in Social Sciences at USP (Brazil), and FAPESP scientific initiation fellow (process n. 2022/00300-3) – fellowship attached to the collective research Global cars: a transnational urban research on vehicle informal economies (Europe, Africa and South America). Currently, she is working on a research project on the transnational connections between legal and illegal markets in the port of Santos, Brazil, and she is also carrying out fieldwork visits in car dismantling stores in São Paulo. Email: anna.p.s@usp.br.

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