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The Effect of Plummeting Used Car Prices on the Vehicle Recycling Industry

Used Car Prices are falling

As soon as prices of new cars start to come down, the vehicle recycling industry feels the knock-on effect. After several years of over-inflated used car values driven by the fallout of the pandemic, prices are slowly normalising. That typically means vehicles at the bottom of the food chain, those with low residual value, head to a scrapyard, as opposed to a car auction.

So what kicked this all off? In a bid to stimulate the market between January and new car registration time in April, dealers have been offering attractive discounts on brand new cars, to incentivise consumes to part with their hard-earned cash. Consumers, tempted by these discounts, have been trading in their cars for months now, and this in turn, has saturated the used car market with high mileage and low residual value vehicles. What do I mean by high mileage and low residual? Vehicles that pre-pandemic, would typically have been retired, were retained by motorists, prolonging ownership in a bid to ride-out the consequences of COVID e.g. new car supply chain issues, record high prices for used cars and EV uncertainty.

Consequently, there are now over 20 million cars on Uk roads that are at least ten years old. That's up on last year's figure by a staggering 3 million. The saturation of the UK used car market with high mileage low residual cars (sub £2000) is becoming untenable - consumers don't want them and therefore car dealers send them straight to scrap.

Industry Data 2024

At first glance, this may sound like an overall positive for the vehicle recycling industry but processing never-ending volumes of these low-value cars does come with a cautionary tale. We are now hearing stories from dismantlers that are so busy they are struggling to keep pace with depollution, forced to store ELVs for prolonged periods in yards. We have learned of bottlenecks that have led some breakers running out of storage space, unable to receive vehicles in. More so, these scrapping volumes are set to continue, for years to come as the number of vehicles on our roads increase year on year and we continue to move away from the dominance of the internal combustion engine.

Those within the vehicle recycling industry who are experience these difficulties, need to get on top of this problem, and quickly! Monitoring existing stock and controlling intake of "straight to scrap" vehicles needs careful planning, especially if space is a premium on-site. High mileage low-value cars need to be processed swiftly for such businesses to remain profitable. If these vehicles sit on site waiting to be processed for too long, they take up valuable space and adversely impact other productivity. Ideally, ELVs should be immediately graded and then those vehicles that are destined to go straight for recycling of their raw materials, should then be prioritised for depollution, bailing and/or shredding. This guarantees that their footprint is small and their time onsite, is kept to the minimum.

Cars waiting to be processed at an ATF

Businesses may need to consider limiting the number of low value scrap vehicles on site at any one time. Offsetting the intake of these cars against vehicles that retain higher value and more profit, is essential for the bottom line. That said, there is always a balance to be struck. Another consideration is that higher value vehicles graded for green parts spend more time and space on site being dismantling and stripped.

As much as the vehicle recycling is a sector that typically reacts to what is occurring within the car industry, that doesn't mean we will never have to plan ahead and anticipate what the future holds. Simply continuing to do what has worked in the past, may not be the solution that ensures a business remains fit for the future. Whether its is the integration of EVs, hybrids or coordinating how to safely manage huge uplifts in vehicle scrappage, it all requires planning, coordinating, reengineering and support from industry experts. No one size fits all in this sector. Thankfully there's a wealth of tried and tested best practice that has been adopted by the vehicle recycling community, as we continue to collaborate and overcome industry challenges. This adopted best practice underpins all the services ELV Training provides to the sector.

Ensure your business is following the industry recognised occupational standard for vehicle dismantling. Only when a business trains staff and adheres to this standard, can it benchmark its performance against the wider industry, as well as implement performance and quality measures that drive future productivity.

If your business is already experiencing any of the issues highlighted in this article, it is already time to consider what needs to change to improve processes and raise capacity. If you want to know more about our strategies that will help your business meet demand, now and in the future, then speak to elvtraining today...



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