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What will the automotive recycling business look like in the future?

Scott Robertson, President of the Automotive Recyclers Association (ARA) in the US, provides his thoughts on where he sees the future of the auto recycling industry is headed.

 

What will the automotive recycling business look like in the future? p
Scott Robertson

Presently, post the initial Covid scare, we have seen a dramatic increase in the demand for used auto parts and scrap that we sell. Unfortunately, we have seen the same demand for the product we purchase and a scarcity of people to fill our employee count. Eventually all good things come to an end, how long can we ride this wave and what will cause us to fall off the board.

Let’s start with the obstacles to success … and there are the usual’s and some new. There still exist OEM repair procedures and the restrictive legislation that disallows the use of ROE in vehicle repairs. This is a daily fight and we must protect the consumer’s ability to make repairs with their choice of parts. Single use part design is being more utilized not only in our industry, but throughout the electronics industry. The equipment needed to correctly repair a vehicle is very costly and often restricted to preferred shops, the same shops that tend to follow OEM repair procedures and in some cases required to follow those procedures to gain access to repair equipment and software. The lack of the consumer’s awareness of the choice of ROE parts in repairs. We must take responsibility in promoting our industry, we can only blame ourselves for the misconceptions and everyone needs to do more…never stop the awareness movement of our industries benefits. Restrictive information on the parts we sell from the OEMs. They withhold critical information that is freely shared with other industries…are we really that much of a threat?

Here are the new obstacles to success…and it starts with employees, or rather the lack of available employees. It seems like all of us are struggling with hiring and retaining employees, but we are not alone, I see help wanted signs on every storefront. Uncle Sam needs to stop handing out money and start giving incentives to get back to work. Most of us received handouts (PPP money) and I believe that it was well needed in keeping us out of a global meltdown, but we are well past the time for people to get back to work. The cost of employees is going up with Duncan Donuts offering $15.00 per hour to pour coffee, it puts pressure on auto recyclers to pay more for our workforce. It doesn’t stop entry positions, it seems like everyone is looking for a “bump” in pay.

Inflation is a nasty word that no one in the government wants to utter, but it’s here regardless. For auto recyclers, inflation is a love/hate relationship. Parts and scrap increases…but so does the cost of our product, labor and many every day products. We have always done well during inflationary times, just stay on your toes and watch your costs.

The introduction of electric vehicles into our product stream will be an obstacle to many, but those who prepare will find success and profits. We will need to adapt our facilities and train our employees in handling these cars, while at the same time fight for our ability to process them. We might find competition in selling EV batteries for reuse as many believe that they should go directly to shred. This fight might end up with the state or potentially federal legislators. Presently there isn’t enough raw material to manufacture the amount of EVs mandated by the governments around the world, so pressure will be put on direct to shred as well as “leakage” of raw material exported. It could get a little ugly.

The OEMs desire to handle the product they manufacture from cradle to grave is a huge threat to our industry, but has limitations to future products and will not be an immediate impact on our industry. Mercedes Benz is allocating 45 billion into EV research and development while decreasing R&D for their internal combustion engine cars by 80%…that’s a huge shift in resources. I wonder when they will abandon manufacturing replacement parts for the ICE cars in an effort to meet objectives for EV new sale projections. Just imagine all the calls we’ll be getting when that happens! Don’t hold your breath, the OEMs are smart…and that leads me to consolidation and competition within our industry. I believe that there will be some major companies entering into our industry to capture end of life EVs as well as others that will enter to capture end of life ICE vehicles. ROE parts will become the new rave…we are carbon negative and the world is all about global warming. We have just scratched the surface in the awareness of our industry, and people…and companies are looking to reduce their carbon footprint.

Keep reading industry news, attend trade shows, stay relevant and prosper.

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