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ARA Home > Automotive Recycling Magazine > September-October 2012 >Report On End-of-Life Vehicles Worldwide
 
Report On End-of-Life Vehicles Worldwide
Automotive recycling leaders from around the globe share their views on the State of the Industry.
"All industries move along a similar path as they develop and mature,” says Steve Fletcher, Managing Director, Automotive Recyclers of Canada. “Different countries are on different parts of that path. There are a series of potential outcomes that depend on the choices made today (or made on your behalf) that will affect your future. By looking at how other countries deal with their industry, you are actually peering into the future. So you can choose some parts of the path that are desirable and try to avoid some of the paths that are unpleasant.”

This effectively introduces this compilation of articles written by industry leaders and auto recyclers from around the world, highlighting common challenges of auto recyclers, differences in methodology of governments, and the resilience of spirit of the industry to rise above the noise, to work toward positive and viable solutions.
— Caryn Smith, Editor

International Automotive Recycling:
A Global Awareness of Significant Issues Ahead
United States


Michael E. Wilson, CEO • Automotive Recyclers Association (ARA) • E-mail: michael@a-r-a.org


The professional automotive recycling industry is becoming more global with each passing day. As in other sectors, technological advances are eliminating past barriers to foster robust international commerce. One needs to look no further than the brisk, worldwide commerce taking place at salvage auctions to see evidence of this growth over the past decade.

In recent literature, one of the big U.S. salvage auction companies indicated that it now sells vehicles to buyers in more than 100 different countries. The company further notes that the focus on international buyer marketing and services has resulted in a 205% growth in their global buyer base.

With further development in emerging countries around the world, the importance of and opportunities for the automotive recycling industry will grow exponentially. Just consider the following statistics. According to the auto industry research company, Ward’s, the global car population topped the 1 billion mark in 2010 (see chart). In 2011, the International Transport Forum estimated a global vehicle fleet of 2.5 billion by 2050. And in 2012, for the first time in history, over 60 million passenger cars will be produced globally in a single year (or 165,000 new cars produced every day). Indeed the expanding global commerce of vehicles and parts provides multiple opportunities for professional automotive recyclers to grow their business – the challenge is now ours to take advantage of this very large market sector.

Those entities which support the automotive recycling industry are quickly positioning themselves to effectively move into this global commerce. In May of this year, for example, opportunities in the international automotive recycling community were one of the reasons cited for the Solera Holdings, Inc. acquisition of Actual Systems. Tony Aquila, Solera’s founder, Chairman, and Chief Executive Officer stated that their “[Actual Systems] acquisition provides us with additional opportunities to create value for our clients and increase revenue per transaction for Solera operating entities outside of North America, especially as more countries embrace green parts recycling alternatives and engage in cross-border parts trading.” Actual Systems has now successfully grown beyond North America and entered the marketplace in Australia, the United Kingdom, the Netherlands, Ireland and Spain.

Another major act of global penetration was taken earlier this year in China, which changed the recycling landscape worldwide. In February, Insurance Auto Auctions announced an agreement with Chen Jia, a wholly-owned subsidiary of Jiangsu Chenlong Resource Recycling Development Co. Limited. Chenlong Recycling was one of the first companies to obtain a recycling permit from the Chinese government that allows the importation of salvage vehicles for the purpose of recycling.

Until recently, Chinese law prohibited salvage vehicle imports into mainland China from the United States. In the announcement, Tom O’Brien, IAA chief executive officer, said: “This agreement helps us achieve our growth strategy by expanding our global buyer base in a region with a fast-growing need for scrap metal.” O’Brien went on to state that, “We are pleased that our long relationship with Chen Jia has added tangible value for vehicle sellers at our auctions. Their initial purchases at our locations along the West Coast have already created increased competition for vehicles and may eventually expand throughout the greater United States.”

In addition to expansions in Europe, vehicle recycling markets are being redefined in countries such as Russia, Mexico and India. In July, Russia decided to introduce a vehicle recycling tax that could set the stage for the development of a modern car scrapping industry in the country. A recent Pricewaterhouse-
Coopers report estimates that an investment of at least $2 Billion (USD) by the Russian government will be required to install efficient vehicle disposal infrastructure, including stations for collecting retired cars, disassembly facilities and shredders.

The national Mexican government also released in May 2012 their National End of Life Vehicle (ELV) Management Plan which maps out future designs for processing ELVs in Mexico. While not widely distributed at this point, this important document will serve as the country’s blueprint for handling ELVs.

In India, the country’s Ministry of Heavy Industry - under the guide of the National Automotive Testing and R & D Infrastructure Project (NATRIP) at the Global Automotive Research Centre (GARC) in Chennai has set up a recycling and dismantling demonstration center. The center seeks to develop recycling processes which employ manual labor to the greatest extent, and particularly procedures for dealing with India’s two-wheelers, which account for about 80% by number and 40% by weight of the population. According to the Society of Indian Automobile Manufacturers (SIAM), India’s annual car sales climbed at a rate of 30% in 2010-2011 to a level of 2.5 million vehicles.

Amidst all of this growth and expansion, as the international association of the automotive recycling industry, ARA is making contacts with international business and government leaders, as well as providing background and educational material to countries around the world that are seeking to develop their own automotive recycling infrastructure. ARA has also developed a Green Recycled Parts® marketing program that can assist automotive recyclers in those countries enhance the public’s perception of the automotive recycling industry. The initiative provides ARA member companies marketing material to help brand recycled automotive parts as an economical, safe, green alternative to new original equipment manufacturer (OEM) parts. In fact, ARA has trademark registration activity for Green Recycled Parts® occurring in over 35 countries around the globe.

These are great first steps, but ARA leadership knows that much more needs to be done. As a result, the issue of ARA’s position in the global commerce of automotive recycling will be discussed at the ARA’s upcoming strategic planning session early next year. Please let us know your thoughts on how you think the industry can position itself worldwide so that our future discussions can be informed by your experiences.



The State of Automotive Recycling in Australia: A Period of Dramatic Change

By David Nolan, Executive Director • Auto Recyclers Association of Australia Limited • E-mail: admin@autorecycle.com.au

The auto recycling industry in Australia is going through a period of dramatic change. Factors influencing that change include:

Lack of effective industry regulation. The Australian auto recycling industry is largely unregulated. There is no national regulation that has any impact on the operation of the industry. While each state has some form of regulation there is little or no enforcement of the regulations that do exist.

•  Increasing impact of “illegitimate” operators in the ELV sector. As a consequence of the lack of effective regulation, there has been a dramatic rise in the number of “illegitimate” businesses operating in the auto recycling industry. These businesses operate outside the law – they do not comply with Taxation, Occupational Health and Safety or Environmental laws. Their operating costs are much lower than those of “legitimate” businesses, and they compete for stock on an unequal basis. Their operation is having a significant impact on the “legitimate” businesses.

•  Internationalization of the vehicle salvage industry. Major structural changes are occurring in the vehicle salvage industry with increasingly larger volumes of salvage vehicles being exported (either whole or broken up).

•  Changes in Written-off Vehicle Laws. One state (New South Wales) has “gone it alone” in requiring that all written-off vehicles are “statutory write-offs” – the vehicle can never be re-registered. This change has had a generally negative effect on the auto recycling industry in New South Wales. Other states have not gone as far as NSW, but they are introducing new laws relating to “economic write-offs” – vehicles that can be repaired but must pass stringent tests to be re-registered. The effect of these new laws will be to increase the number of statutory write-offs by about 30%. This is likely to have a negative impact on the auto recycling industry nationally.

•  Increasing divide between “parts sales” businesses and “scrap metal” businesses. In years past an auto recycling business was first and foremost a second-hand parts business that also made money from scrap metal. Changing technology of vehicles, changing customer needs, advances in business management systems and increasing “internationalization” of the scrap metal industry are now leading to a situation where businesses are much more specialized – they are principally a parts sales business or principally a scrap metal business;

•  Changing customer needs and expectations. Body repairers and mechanical repairers have the option of using new OE parts, new after-market parts or second-hand parts.
They will often choose new parts because:
    Sourcing the part is easier;
  •  The purchasing process is easier (there is less risk of a wrong part being delivered or of the part’s condition not being as described to them); and
  •  The warranty is often better. In the event of a failure, the repairer in many cases is covered for their installation time as well as replacement of the part.

At present, only about 5% of parts used in crash repairs are recycled parts. If auto recyclers are to sell more parts to these businesses, they must change their business practices to meet the needs of this market.

•   The power of the Internet. The internet has already dramatically changed the way the second-hand parts industry operates, and this process of change will continue. Whether for parts sourcing or ELV disposal, consumers are increasingly using the internet to find a supplier.

•  Generational change. First generation businesses owners are reaching retirement age. They may or may not have family members who wish to take over the business. If not, they have to find a buyer and that can be tough.

•  Businesses are becoming increasingly hard to sell. Often persons wanting to “get into auto recycling” will only be offering bargain basement prices for an existing business because there are few barriers for them to start from scratch in a new location;

•  Increasing value of inner city land. The rising value of land on which first generation businesses operate means it is often better for the owner to shut the business rather than sell it is a growing concern (the land being worth significantly more than the existing business value).

What Needs to be Done

The solution to some of the challenges outlined here does not lie within the control of individual auto recycler businesses (or their industry association). For example, changing land values, family succession, scrap metal prices, and the marketability of auto recycling businesses are not factors readily able to be controlled by any business owner.

But, for parts sales businesses, solutions to some of the challenges are within the control of management. These include:

•  Adoption of a modern electronic inventory management system will be central to the future survival of any second-hand parts sales business. Both trade customers and the general public will require higher standards of customer service that will only be able to be delivered by businesses operating an electronic inventory system.

•  Addressing customer relationships. Taking all possible steps to make the “product” as accessible as possible to a potential customer, looking after the customer, and ensuring that a mechanical repairer or crash repairer can make a better margin using a second-hand part than they can from a new part.

•  Embracing the Internet. Having your business visible on the Internet, promoting the features that differentiate you from others and using resources, such as eBay, are all factors that will affect the competitiveness of a parts sales business.

The Biggest Challenge

Lack of effective regulation is the biggest impediment to “cleaning up” the auto recycling industry in Australia. End-of-Life motor vehicles are a significant and environmentally damaging waste stream.

This is recognized by governments in most of the developed world, and those governments have acted. In all European Union countries, and in Japan, Korea and China, the national governments have enacted regulations aimed at minimizing the detrimental environmental impact of ELVs.

Government action in Australia has been largely invisible. Only the National Motor Theft Reduction Council, a joint Government and Industry Council, has shown clear leadership in addressing the deficiencies in the ELV management system in Australia.

Despite overwhelming evidence of their negative environmental impact, the federal government has not even listed ELVs as a priority waste stream. Most of the authority for implementing and enforcing environmental regulations rests with state governments, but they don’t have resources to address the problem.

Effective regulation is difficult to achieve because there are many parties who are part of, or whose actions impact, the end-of-life vehicle processing “industry.” These parties include:

•  Vehicle manufacturers
•  Insurers
•  Auction houses
•  Auto recyclers
•  Shredders
•  Landfill operators
•  Scrap metal dealers
•  Exporters of whole vehicles and vehicle parts

Product Stewardship – A Platform for Change

One avenue for potentially “shifting the ground” lies in the Product Stewardship Act passed by the Federal Parliament in May 2011.

The Auto Recyclers Association of Australia has been engaged in consultations with all Australian manufacturers, and with the Federal Department of Environment, to explore means by which a Voluntary Product Stewardship Scheme covering ELVs might be introduced under the umbrella of the above legislation.

The best prospect for change in Australia will come from governments, vehicle manufacturers and auto recyclers working together in a co-operative way. We must collectively find a solution that provides benefits to each party and at the same does not impose new costs or administrative burdens. Voluntary Product Stewardship offers the best opportunity for development of such a scheme in Australia.“

“Working Together,” the theme for a major international conference – the 5th Asian Automotive Environmental Forum – will be held on the Gold Coast, Australia, from November 29 to December 1, 2012. Visit www.autoenvironment.asia for details.

Auto Recycling – a Global Perspective in Australia

By Mike Third, Managing Director • Total Auto Recyclers • Melbourne, Australia

In recent years, there has been an increased number of international conferences held around the world that have fostered opportunities for the auto recycling fraternity to meet and exchange views.

Having attended many of these events I find it intriguing to learn just how much we all have in common and how many of the issues we face are, in fact, global issues. One of these issues is the role auto recyclers have in managing the impact of end of life motor vehicles (ELVs) on our environment.

Many countries have developed, or are in the process of developing, strategies to manage the environmental impact of ELVs. These are culminating in a range of national or regional policies which have not necessarily been developed with any global collaboration in mind. It is only very recently that the United Nations has been considering some kind of international protocol for ELVs. Indications are that this will need to be a very loose set of guidelines because it will need to accommodate all those countries that have already commenced their own individual programs. Regardless of the design of the program, in all countries the auto recycling industry is saddled with the principal role.

Those of us who attend the conferences have been hearing reports of how different countries are progressing with their end-of-life vehicle programs. Some have been in place for nearly ten years now and we are learning a great deal about the successes and failures of the different strategies.

Exposure to the full gamut of reports serves to increase the collective state of knowledge amongst those who attend many of these conferences. Most of these regular attendees are those representing the auto recycling industry itself. It is from this group that a very well-informed common view on the ELV issue is developing. It is conceivable that before too long, our representative bodies and associations will be able to take a unilateral position on behalf of the auto recycling industry worldwide.

This would mean that the auto recycling industry is in a position to assist national and state authorities to develop effective ELV regulations, which would be harmonized with a global industry policy.   

The industry will be able to put forward a global position statement based on the highest state of expert knowledge and experience available at the time. Initially this position statement may only outline some fundamental principals that are clearly practical and appropriate as a starting point, though eventually it would address more complex aspects of a global ELV policy.

A commendable goal for our industry associations would be to initiate this global consensus statement at the next auto recyclers International Roundtable meeting scheduled to coincide with the ARA conference in Arizona in 2013.

Crucial to the success of any ELV policy is its ability to ensure that the vast majority of ELV’s are captured by the approved system. Clearly there is no benefit in having a system that can’t guarantee most of the cars are dealt with in accordance with the rules. To date this is where almost all the existing plans fall short.

Since the implementation of these schemes, bona fide auto recyclers have been required to bear the cost of meeting tough new regulatory criteria on the basis that they would benefit from gaining access to more vehicles as non-compliant operators fell by the wayside.

Unfortunately, this has not generally occurred. In some places recyclers report receiving half the vehicles they did before regulations were enacted. There is systemic “leakage” of vehicles in most jurisdictions due to a lack of real incentives for vehicles to end up at the right place. It has become more lucrative to divert vehicles from the sanctioned ELV recycling chain to alternative options including the export market, where they eventually become an environmental problem in some developing country.

Allowing the environmental impact of ELVs to become some other country’s problem is just as irresponsible as allowing the export of any other hazardous waste.  

Diversion of ELVs to the export market is a phenomenon threatening the viability of recyclers in several countries – particularly Europe, the United States, and Japan where hundreds of recyclers have been forced to close their gates over the past year due to a lack of ELVs.

Most ELV regulations have been enacted or modeled on schemes in place pre-GFC, when a bullish scrap metal market was seen to underwrite the ability of the auto recycling industry to bear the cost of compliance with any regulations. At the time, car manufacturers promoted the view that the inherent value of ELVs was so lucrative that the recycling industry could afford to bear the cost.

Well, things have changed. Relying on the scrap metal market to underwrite any environmental sustainability program is unsustainable, to say the least. What happens when the scrap value drops to a point that it doesn’t cover the cost of compliance and processing? Nobody except the illegal operators could afford to handle ELVs.

Arguably, it is already not economically viable in some places to legally process many older makes and models of small cars unless overall volumes are increased significantly. Only informal (non-conforming) operations with their low overhead costs can still afford to handle these cars.

The economic viability of a scheme should not depend on the scrap price, nor should it be underwritten by an unpredictable second-hand parts market. As societies prosper, the need for second-hand parts diminishes and you can’t sell parts that anybody wants.

The welfare of our planet and our society should not be dependent on whether or not auto recyclers are having a good year.

The environment is everyone’s responsibility, not just recyclers, not the car manufacturers, but everyone who benefits from the existence of motor vehicles.

Logically this should be a shared responsibility engaging all parties, including consumer auto owners. We need a more balanced approach that spreads the burden amongst all stakeholders. It’s important to create incentives for the various stakeholder groups to “buy in” and want to see a scheme succeed. It is a fundamental fact of human nature that “the carrot is more powerful than the stick.” Often, if the carrot is big enough, you don’t need a stick.

The countries that have been most successful in addressing the “leakage” issue are those that have adopted a funded system to ensure that most ELVs end up being accounted for. ELVs need to have an inherit value, which can only be realized when taken to the authorized recycling facility.

How this can be achieved is a topic for another article, but in the meantime, what say we start to think about the first of the fundamental principals of an “Auto Recycling Industry’s ‘Global Position Statement on ELV Policy.’”

Perhaps we could begin with the idea that;
“Managing the environmental impact of ELVs is everybody’s responsibility, not the duty of any one stakeholder such as the auto recycling industry. The auto recycling industry worldwide will support an end-of-life vehicle directive that provides adequate incentives to ensure that a critical mass of ELVs is captured by the system.

“The critical mass being the percentage of ELVs that are captured by the approved system in order to ensure ongoing viability for those authorized to provide proper treatment and recycling processes without whom measurable benefits to the environment can not be sustained.”

Our role is vital to our communities and if we didn’t exist ... they would have to invent us!

Peering into the Future Canada

Steve Fletcher, Managing Director • Automotive Recyclers of Canada (ARC) • E-mail: steve@autorecyclers.ca

The Automotive Recyclers of Canada (ARC) association has been very active lately creating programs and information for recyclers across Canada and increasingly around the world.

ARC began in 1995 as an entity to share information across provincial boundaries. In Canada, almost all legislation and regulations relating to vehicles exists at the provincial level. ARC’s role was to promote the cross-border sharing of information – both successes and challenges – between its provincial association members. It has rapidly grown in recent years and has some very bright prospects ahead of it.

There are approximately 1.6 million end-of-life vehicles generated every year in Canada. It is estimated that there are approximately 1,800 legitimate or at least somewhat permanent businesses actively processing these vehicles. Unfortunately, as with other countries around the globe, there are probably two to three times that many illegitimate and/or ill-equipped individuals and businesses also dabbling in the field of auto recycling. And that has been creating extraordinary stresses on the legitimate industry.

While there are many laws, regulations and rules that legitimate recyclers must adhere to, enforcement of these laws – even knowing that these laws are being broken by the underground economy – is very slack. So for all intents and purposes the auto recycling industry is virtually an unregulated marketplace. Consumers, dealers, governments – even the industry itself does not know who is a legitimate business capable of properly recycling today’s complex vehicles.

Several years ago, ARC was commissioned by Environment Canada to create and deploy a Code of Practice for the industry, ostensibly to support the National Vehicle Scrappage Program – Retire Your Ride. ARC used this opportunity to codify the minimum compliance obligations of the industry and add in the best management practices to extend the regulations and make it relevant and useful to auto recyclers. We developed the Code, found and trained Auditors to visit every participating recycler, and trained over 300 recyclers to the Code. The auto recyclers’ immediate reward was to obtain vehicles through Retire Your Ride.

We were fortunate in that several auto manufacturers also stepped up with their own incentives to further drive volume to their dealerships and the vehicles all came to certified ARC Members. By this time, not only was the Code of Practice helping to improve the performance and profitability of the industry, but vehicles were a much welcomed reward – they became the inventory that our profitable parts business is based on.

When Retire Your Ride ended in March 2011, Environment Canada had the vision to ensure the Code of Practice lived on as a legacy of the scrappage program, and the Code was updated and rebranded as CAREC – the Canadian Auto Recyclers’ Environmental Code. Ownership of CAREC was officially transferred to ARC in the Summer of 2012 and ARC is now in possession of the processing standard that would become the basis of our future.

The ARC Board of Directors had learned a very valuable lesson early on – if you demonstrate that you are a responsible industry, then good things will eventually flow to you. You need to move beyond talking about what a great business or industry you are – you need to physically demonstrate it every day. That is what CAREC has done for us. It shows what our members represent, and it is a lot easier to begin to point to the businesses that don’t meet CAREC and the consequences of a lack of enforcement of the rules.

Another turning point for ARC was our relationship with the auto manufacturers – both with OEMs directly and with their industry associations. In Canada they are the Canadian Vehicle Manufacturers Association (CVMA) and the Association of International Auto Manufacturers of Canada (AIAMC). With these two organizations (plus the Canadian Automobile Association and some influential environmental groups) we formed a coalition to advocate for a standards-based license that would lead to industry stewardship.

This is where ARC’s forays into the international world of auto recycling began to pay off. We have been able to look at a number of different legislative options around the world and make recommendations to our government(s) about a revolutionary way to regulate the industry. Recyclers working with auto manufacturers on industry stewardship (as opposed to the simpler concept of extended producer responsibility) with an industry self-managed oversight body to ensure all vehicles are processed by licensed auto recyclers.

ARC proactively submitted a White Paper on Auto Recycling to the Canadian Council of Minister’s of the Environ-ment (CCME); led the two-day Forum on the Future of Auto Recycling; and we are actively engaging a variety of provincial governments to work through the implementation issues of our Industry Stewardship proposal. While we have much work to do, we have a strong path forward and we are continuing to develop and nurture the basic building blocks of a successful campaign.

Much of ARC’s work on a standards-based license deals with the acquisition of vehicles to build our inventories. But we are also working on trying to sell more parts.

CAREC helps on the parts side as well as providing a base to market the industry and for individual members to market themselves. We have also been working through our Quebec and Ontario associations to promote Green Recycled Parts™ as a branded, copy-written way to sell more parts from end-of-life vehicles. ARC is working with ARA now to extend Green Recycled Parts™ across the world. This initiative helps us all – it demonstrates to our increasingly global partners – repairers, insurers, manufacturers, that the auto recycling industry is also global.

The International Roundtable on Auto Recycling (IRT) has played a big role here. The IRT is an informal gathering of professional auto recyclers. They meet every 14-18 months, hosted by a different national auto recycling association. We just completed the 6th edition in Liverpool, England. ARC had the opportunity to host the 5th IRT in Quebec City in 2010, and the benefits were enormous. We were provided the chance to promote the industry within Canada on a global scale, and we got the chance to meet with our global auto recycling partners to share stories, data, challenges and opportunities.

The IRTs are an opportunity for anyone with an international vision or perspective to participate – front-line auto recyclers mingling with national association heads. Suppliers from different countries comparing and sharing their products. The results can be extraordinary. The next IRT will be held in Phoenix, Arizona, in 2013, in conjunction with the ARA Convention. ARC will be there and we hope you are too.

As the national voice of the automotive recycling industry, ARC provides a forum for the channelling of information and addressing Canada-wide concerns.  Member Associations:  Automotive Recyclers Association of Atlantic Canada (ARAAC), Alberta Automotive Recyclers and Dismantlers Association (AARDA), Automotive Recyclers of Manitoba (ARM), Association des Recycleurs de Pièces d'Autos et de Camions (ARPAC), British Columbia Automotive Recyclers (B-CAR), Ontario Automotive Recyclers Association (OARA), Saskatchewan Automotive Recyclers Association (SARA).

New Kid on the Block in Automotive Recycling India

By Captain N.S. Mohan Ram, Indian Navy (retd),
Chairman of Recycling Group • Society of Indian Automotive Manufacturers


Automobile manufacturing is among India’s fastest growing industries.  Rising income levels, low levels of penetration, demographic factors and rapid increase in gross domestic product have contributed to the growth.

India currently ranks sixth in the world in production of cars and second in the production of two wheelers. Over the last two decades, vehicle populations have increased fivefold and production tenfold.

This growth will be sustained in the foreseeable future. Unlike the United States and Europe, where gradual growth occurred over a large number of years, production of automobiles took off in the early 1990s in India at an exponential rate. India follows the European model in regulations governing design, construction, safety, and emissions. However, India currently has no norms covering recycling of automobiles. 

In the U.S. and Europe, recycling infrastructure developed in tandem along with production of vehicles. Presently, volumes of end-of-life vehicles are low in India. Low-tech units in the informal sector deal with the disposal of old vehicles. The numbers are expected to increase dramatically in the near future, way beyond the capacity and capability of these units. India needs to set up a modern recycling infrastructure drawing from the experience of advanced countries, to avoid a major pileup of derelict automobiles.

Informal Sector

Automotive recycling is currently carried out by small units in the informal sector in India, using primitive methods, polluting the air and ground water, with poor yields. The units initially showed up in the outskirts of cities. Rapid urban growth has brought them into the heart of the cities in crowded residential areas. Mayapuri in Delhi, a thickly-populated residential area, houses Asia’s largest automobile recycling complex employing over thirty thousand people. Similarly recycling takes place in Pudupet, in the heart of Chennai, Shivaji Market in Bangalore and crowded areas in Mumbai, Kolkata, and elsewhere. In all, well over 100,000 families are employed in dismantling old cars and motorcycles, and recovering parts for sale. 

These units are currently rendering a useful service. However, the methods they use are primitive and result in drainage of oils and fluids to the ground. Copper is recovered by burning of insulation releasing dioxins into the atmosphere. The risk of heavy metal contamination is totally ignored. The unhygienic methods used endanger the health of the workers. Some units also make use of child labor for some tasks. 

With the surge in automobile production in the mid-1990s, sudden increases are expected in the number of end-of-life vehicles. These units have neither the capacity nor the capability to deal with the surge. They are also not equipped to handle systems like airbags, seat restraints, and other incendiary systems. 

There is an urgent need to relocate these units to less crowded areas, retrain the personnel and orient them towards using modern methods, proper equipment, as well as to compliance with standards of safety and hygiene. This is not just a technical issue, but a problem with socio-economic dimensions, as it involves relocating and retraining a large number of people with marginal incomes.

Initiatives Under Way

Awareness of ecological issues and the degradation of the environment came to India relatively late. Add to this the imperative need for rapid economic development and providing a better life to large numbers below poverty line, and the issue poses a delicate balance between development and ecological concerns. 

The systems for dealing with insurance and recovery of vehicles damaged in accidents in India are cumbersome and inefficient. There is great scope for modernizing the systems, in line with advanced countries.

The automobile industry association, the Society of Indian Automotive Manufacturers (SIAM), has taken a proactive approach and focused its attention to the issue. It has established a special group to deal with recycling of end-of-life vehicles. The group has participated in international seminars and visited facilities worldwide to get a full understanding of the problems and challenges. Teams and officers have visited facilities in the U.S., Canada, England, German, Hungary, China, and Japan and attended conferences in Budapest, Hong Kong, and Liverpool.

SIAM has also organized a number of international seminars on aspects of recycling, such as regulations and infrastructure. It has collected the opinions and gathered the experience of experts all over the world to arrive at solutions tailor-made for India. It is also working with government to develop regulations for recycling ELVs in India. 

Recycling Demonstration Center

The importance of automotive recycling has been realized and a paper on the subject is one of the documents referred to in “Prime Minister’s Action Plan on Global Warming,” an important policy document of Government of India.

Recycling in India has to take into account unique local factors – the availability of a large pool of relatively cheap labor and the need to deal with a large population of two-wheelers, which amount to over 75% of vehicles by number and about a third by weight. As too many players were involved and no one was coming forward in setting up the industry, it was realized that the government was in the best position to set up a demonstration center.

The center has been set up near Chennai by the Ministry of Heavy Industry, with active support of the automobile industry, which donated know-how, layouts, and an initial supply of 25 cars and 60 two-wheelers free of cost. The center aims to develop methods suited to India, using maximum manual labor, develop systems for two wheelers, and help train and upgrade units in the informal sector. There are plans to start similar centers in other parts of the country. 

India offers a great opportunity for setting up a modern and efficient recycling system, drawing from the experience of other countries. It will be a win-win for society, creating employment, conserving energy, saving raw material resources and improving the environment, by reducing global warming. n

Automotive Recycling UK

By Charles Ambrose, Chairman 2011-2013, Motor Vehicle Dismantlers’ Association (MVDA) • E-mail: chas.ambrose@gmail.com

The main issues affecting professional vehicle recyclers in the UK have remained much the same for many years, but seem to have intensified in recent years.  They relate primarily to:

1. Leakage in the flow of vehicles from last owners to vehicle recyclers (ineffective regulation, the responsibility of the UK vehicle licensing authority, DVLA);

2. Ineffective regulation of vehicle & metal recyclers (the responsibility of the Environment Agency); and

3. Sale of used parts. In view of points 1 & 2, there is lack of confidence in the source of parts (stolen/illegally dismantled vehicles). There is no common quality assurance/standards program, so there is no consistency in the quality (or warranty) of used parts supplied to consumers. The lack of a widespread used-parts IT database system means there is no mechanism by which the consumer can access real-time stock via a simple entry portal.

Finally, there is a lack of pro-activity in the industry about tackling both the practical & image issues.

These issues have continued to be very important as a result of the continued high value of scrap metal, and the rise in used parts sales since the economic crisis of 2007-08 (which has focused the consumers mind on cost saving), and the large-scale acceptance of shopping online.

It’s always been very difficult to assess the state of the vehicle recycling industry in the UK because there has never been an accurate vehicle tracking system – many vehicles simply go missing and the number that finally reach end-of-life has always been a guessing game. Also, there hasn’t been any coordinated regulation of the vehicle recycling and scrap metal industry, so it’s not clear how many players there are (both legal & illegal) and how many vehicles they handle. This has resulted in very wide variations in operating standards and enforcement activities, both locally & nationally.

It is clear that a huge number of vehicles are treated illegally, by both legal & illegal operators. It is currently suspected that up to 40% of UK ELVs are treated illegally. The large shredder operators are almost certainly one of the major problems. They don’t routinely depollute vehicles they receive directly; they hide vehicle purchases under assumed metal grades; they don’t record IDs of vehicle handled; and, they accept vehicles from third parties without exercising their “duty of care” (particularly with regard to purchases from itinerant operators, much the same issue as metal thefts).

Despite representations to authorities, pointing out the potential regulatory advantages of concentrating their efforts on just 40 or so sites, to date they have failed to grasp this nettle. There has been a clear disengagement by regulators with the industry over the years, which has resulted in the bureaucratic belief that it can be regulated from the office. Clearly this doesn’t work in reality. The industry needs to become much more effective in lobbying, and in being generally pro-active, but it is difficult to do this when its trade association – the route by which this could most easily be achieved – represents perhaps only 5% of operators, and is seen to offer little to non-members (who never-the-less benefit from its activities) and consequently is limited financially in what it can do.

Fifteen years ago, it was estimated that there were in excess of 3,500 vehicle dismantlers, on the basis of the numbers advertising in the local press. Currently there are about 2,000 officially-licensed vehicle dismantlers, plus those operating under small-scale license exemptions, plus those operating illegally.  Judging by the number of parts sellers on e-Bay, the number of illegal operators (including small garages that are not licensed to dismantle) and private individuals, and the number of operators advertising on the Internet for scrap cars, there is evidence that this sector has experienced an expansion in the last 10 years.

Legal compliance for the professional auto recycler is a major issue in the UK due to the high cost to meet the large number of regulations, and the fact that so many illegal operators are avoiding these costs while reaping the benefit of a marketplace expanded dramatically by the rise of the Internet. Sadly, from an auto recyclers viewpoint, the European Union ELV Directive has spectacularly failed to deliver on much of its potential.

As far as used parts are concerned, the industry has not (as yet) really risen to the challenge of providing the required level of service to customers, both private and commercial. And from the consumer’s perspective, there is no clear distinction between any of the operators. In the past, the most forward thinking aspects of the industry have largely been focused on the “easy money” to be made from repairable salvage or scrap metal. However, the tide seems to be turning, with much more attention being focused on parts sales, driven by a combination of the success of e-Bay, the recent acquisition of EuroCarParts by LKQ and Actual Systems (Pinnacle) by Solera Holdings, the intense competition for scrap metal, as well as the continued decline in the financial attractiveness of insurance company salvage contracts.

However, the general standard of operation by many vehicle recyclers remains traditional. The key to delivering a long-term sustainable used parts industry at an elevated level and encompassing customers that historically have not considered used parts as part of their vehicle repair/maintenance program are laid out in point 3 at the beginning of this article.

The UK industry has relatively little contact with European vehicle recyclers, although the MVDA re-
mains a member of European Group of Automotive Recycling Associations (EGARA). However, the MVDA has a good working relationship with relevant Executive Committee personnel, and is able to feed information directly. There is almost certainly a more productive relationship with ARA, but this is predominantly through a number of the UK industries’ more longstanding and proactive operators. Indeed, there is a school of thought that the MVDA needs to reflect much more the role and activities of the ARA.

The MVDA could play a key role in the future direction of the industry. But probably the single biggest factor that will affect the UK auto recycling industry as it stands at present has not even been recognized by the majority of existing players – the entry of LKQ into the UK used parts market.

Russia Juggles Vehicle Imports, Duties, WTO and Recycling

By Delanne Bernier • ARA Director of Policy and Political Affairs

Automotive recycling is at various stages of maturity around the globe, but even fledgling recycling programs might be gaining momentum for reasons other than consumer needs and/or the environment.

For example, it was recently announced that Russia will be imposing an automotive vehicle recycling tax that essentially pits foreign car imports against its domestically manufactured automobiles which account for approximately 2.5 percent of the total Russian gross domestic product (2009 data). To avoid the tax, domestic automobile manufacturers will have to guarantee that they will recycle end-of-life vehicles. 

The expected tax rate of between Rbs20,000 to Rbs45,000 ($612 to $1,375), depending on engine size, will be imposed on vehicle imports as of September 1, 2012. Some in the international press, however, are speculating that this recycling tax was engineered to bolster Russia’s domestic industry – an industry that will be negatively impacted by lower import duties necessitated by Russia’s imminent entry into the World Trade Organization (WTO).

Regardless of the real intent of this tax, Russian automotive recycling is an industry clearly in its infancy. According to steelonthenet.com in 2009, there were ... “only about five small capacity [scrap] facilities which recycle old cars; these recycling centres generally have poor press technology and use practices that lead to high contamination of the resulting scrap.”ARA Regional Director Bob Phelps (Central Auto Recyclers, Concord, New Hampshire) visited Moscow 5 years ago and commented on the dichotomy of the very affluent and their luxury cars versus the extreme age of the cars owned and operated by those who are not part of the elite class. He noted that owners would do everything in their power to keep their cars running. 

In direct contrast to this societal thought, and most likely in an effort to aid the Russian economy, in 2010 the country had a “cash for clunkers” program which provided a rebate for the purchase of new domestically-produced vehicles if owners traded in their older models.

Concurrently and not surprisingly, in that same year, Russia’s car production increased by a staggering 92.6% over 2009 levels to yield 1.15 million cars, according to the Russian Trade and Industry Ministry. What is not known is what happened to the cars retired under the cash for clunkers program. Certain events, however indicate that Russia needed assistance from other nations to address this issue.

By the end of 2011, Russia was aided by the Dutch to help formulate a more comprehensive automotive recycling system. The Dutch car registration body, RDW, and other Dutch organizations partnered with the Russian University of Nizhny Novgorod to institute reuse and recycling systems and solutions. (Nizhny Novgorod is the largest automotive producing region in Russia.) The international recycling population looks forward to learning more about these systems and solutions and welcomes Russia to the world stage of automotive recycling.

Click to download the full September/October issue in PDF format

 
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