Chris Daglis shares his thoughts on the future growth and profitability for vehicle recyclers.
The automotive landscape is changing quickly and now is the time for auto recyclers to be thinking about future growth and profitability. I have previously written about Recycled Parts Beyond 2020 (link) and some of the threats and opportunities that vehicle technology is presenting.
As I’m a glass half full type of fellow, I like to focus on the opportunities. However, we cannot ignore the threats that auto recyclers are facing. They are real and we need to identify them and mitigate the associated risks as much as possible. Taking action is not optional. You MUST do something and by reading on, you will be taking the first step to dealing with these changes.
Last month I was given the opportunity to speak at the International Round Table on Auto Recycling held in Norfolk UK. The audience included members of automotive recycling associations from the UK, Australia, USA, Japan, Canada, Malaysia and many more. My focus was on growing profitably beyond 2025 and what I’ve identified as the six pillars to a successful future. I’ve expanded on two key points of the session below.
- Embrace New Sales Channels Online Platforms
I do a lot of work in the UK with the likes of eBay. They are investing heavily in promoting high quality recyclers and their parts. This has exposed me to some pretty amazing trends in consumer behaviour and in so doing made me ask some really interesting questions:
- How will the consumer buy products and services in 2025?
- How will this affect auto recyclers?
- How will you need to present your product?
- Do you have a web presence and how effective is it?
- Is a website just for information or is it a selling tool?
These are all questions we must come to terms with. Whether it’s eBay, your own website, Hollanderparts, Gumtree or even Amazon, we need to think ahead and make sure we understand as much as possible about these platforms.
With knowledge we can more effectively participate in trading and profiting from them. Failure to operate online using these platforms will be fatal to your auto recycling business!
This area has exploded in the past 10 years especially in the collision repair space.
There are multiple platforms around the world that either insurers use to try and identify cheaper parts (to the repairer’s detriment) for their repairs or repairers use to increase their margin on parts (with no benefit to the insurer in many cases). Either way, the parts industry has the challenge of efficiently offering their product on these platforms. They have become the meat in the sandwich, so to speak, often resulting in a race to the bottom.
I have certainly discussed this with different stakeholders in the market and ultimately all are looking for ‘what’s in it for me’ and that’s fair enough. Is there a better way, one that is focussed on partnership and mutual benefit, or am I being too idealistic or even unrealistic?
Either way though, let’s face it, if you are in New Zealand and do not participate on the Parts Trader platform, for example, you are not supplying collision repairers many parts, if at all.
Now I am not saying this is all bad. Many parts sellers (not only auto recyclers) have embraced it and built business processes around servicing these platforms for benefit. It can be great but as an industry we need to be able to participate efficiently and with as little overhead and friction cost as possible. We have a way to go but going backwards will not be an option.
- Understanding Vehicle Technology and how it is Changing
I have previously written on this topic, but I have some questions for consideration:
- Have you considered how changing vehicle technology will affect you or your business?
- Have your really done anything about it?
- Have you dismantled a hybrid or electric vehicle – will you?
- Have you thought about the training required to do so safely, or is it just too hard?
- If so, what are you going to be selling beyond 2025?
I’m not saying that the world as we know it will not exist in 2025, but the trend is clear. At some point in time in the future, the normal combustion engine and gearboxes will be replaced by electric motors, high voltage batteries and a myriad of computers and sensors.
All bad? NO!!
These are all expensive, disposable parts that will need replacement. There are thousands of these going through auto recycling facilities as we speak, and they are very profitable vehicles to process, but we need to change our mindset and our approach moving forward.
You see, it’s not just about the operational approach you will take to handling these components. It is about creating new markets for them. Will it be the local mechanic that buys them, or will it be an insurer? Now there’s a challenge but imagine the prize for all participants – it’s huge!
ABOUT CHRIS DAGLIS
Chris is a recognised and respected leader in the automotive parts industry with 30 years experience working in Australia and internationally with successful, long-standing relationships and networks. He has a proven record underpinned by close working relationships with all the key stakeholders including insurers, repairers, vehicle manufacturers and alternative parts suppliers. He has worked with ASX top 20 and Nasdaq listed companies, to smaller family managed businesses, with a focus on creating win/win outcomes. For more than a decade, Chris has been the leading independent advisor to major Australian insurers on alternative parts strategies, including building models that support positive cost outcomes while growing parts margins for collision repairers.
Chris is passionate about the automotive repair industry and strives to share his experience, learnings and successes with the aim of building a modern, innovative, forward-looking industry that will adapt to changes in technology and continue being relevant, support growth and produce profits for all involved.
Chris Daglis PARTnered Solutions