Auto Recycling Industry SnapshotAuto recyclers are facing some tough challenges ahead of them thanks to changes in factors that they didn’t have to face just a few years ago.

Amount of Automobiles

One factor that has changed is the amount of recyclable automobiles. Just a few years ago, there were plenty of recyclable cars and trucks available to auto recyclers. Today, that supply is starting to dwindle.

There are several reasons why the supply of recyclable automobiles is dwindling. One reason is that auto recyclers are facing increased foreign competition. It used to be that auto recycling was a very controlled business that was highly regulated in the United States and one had to be a licensed recycler in the country in order to participate in auctions for totaled cars and trucks. Now, auto salvagers from China, Africa, and Mexico can participate in American salvage auctions and this diminishes the number of cars available to auto recyclers based in the United States.

Salvage Auctions

Another reason for the dwindling supply is that insurance companies are starting to push for auto salvage auctions to be open to unlicensed and unregulated individuals. This means that a number of homegrown auto salvage operations have sprung up in recent years. These small operations are able to buy recyclable automobiles for very little money and make quite a hefty profit by selling the parts on online auction sites like Ebay. What this means is that large scale auto recyclers are being outbid by smaller operations and larger recyclers are losing out on valuable vehicles that they wouldn’t have missed out on in the past.

In addition to the challenges coming from foreign buyers, auto recyclers are facing challenges from the auto manufacturing companies. One thing that is proving to be a challenge for auto recyclers that is reducing the number of recyclable cars is collision avoidance systems. As more and more auto makers are equipping their cars and trucks with systems designed to avoid accidents, auto salvagers are seeing fewer and fewer vehicles available on the recycling market. This means that the supply has dwindled and the price has risen for the cars that are available. It is estimated that due to collision avoidance systems, there are as many as 20 percent fewer recyclable vehicles available now than there were just five years ago.

A future challenge that could cause even more of a crunch in the numbers of cars and trucks available for auto salvagers is the development of vehicle-to-infrastructure or V2I communications. These systems are designed to work in conjunction with traffic signals, work zones, toll booths and other infrastructure features to reduce traffic congestion. As this technology begins to be used in the coming years, it could drastically reduce the number of accidents and thus further constrict the numbers of vehicles available to recyclers. All in all, it remains to be seen what the impacts of this newly developed technology will be, but auto salvagers need to prepare for fewer automobiles being available for recycling for the foreseeable future.

With the challenges presented by small unregulated operations and other factors reducing the supply of vehicles available for recycling, auto salvagers face a complex market that is unlike anything they ever faced in the past. To be successful in this new marketplace, auto recyclers will have to be more innovative than ever before and will have to quickly learn how to compete in this new open market environment. Those that do that will find that there are still significant profits to be made in the auto salvage business.