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‘Keep the goose that lays the golden eggs well fed’

The worldwide automotive recycling market was worth more than US$ 75 billion (EUR 70 billion) in 2018 and is projected to witness up to 20% growth by 2025. But with the cards thrown up in the air by the Covid-19 pandemic, can the industry bounce back to its former glory?

‘We want to keep our attitude positive but we can’t ignore what’s happening at the moment. It certainly is a challenging time. Cash flow is a problem, with sales already down significantly at most Australian car recyclers and scrapyards,’ says Chris Daglis, owner of Melbourne-based automotive consultancy firm PARTnered Solutions. ‘Most likely, the global economy will be down for some time. That’s why we have to be smart and find new ways to attract business.’

Into the storm

Eager to discuss the best survival strategy, Daglis recently organised a virtual conference. Among those taking part was Scott Robertson, owner of Robertson’s Auto Salvage in Massachusetts and president of the US Auto Recycling Association, who said revenue had decreased roughly 50% recently.

‘I’ve heard from people based in New York, Connecticut and New Jersey saying that revenue is down by 80%. These drops came practically overnight. Within four or five business days, our whole world changed,’ Robertson spelled out. ‘No one could prepare for this. I imagine it feels kind of like sailing into a hurricane when you’re expecting good weather – all of a sudden you’re hitting big waves.’

All things considered, it’s challenging to remain optimistic and he admits, ‘The cash flow problem is the first thing I think about when I get up, and the last thing on my mind before I go to sleep. I’m lying there wondering, how am I going to make this work? How am I going to survive in business earning half of what I usually do, but with 100% of my expenses?’

A number of US scrap yards were closed throughout April. ‘It doesn’t surprise me, to be honest. Every day, you really need to ask yourself a hard question: is it worthwhile staying open? I decided to stay open.’

A different reality

Peter Butler of Hykia Partsworld in Auckland, New Zealand is also feeling the strain on his business with the country on full lockdown, including a ban on auctions. ‘The government is providing emergency funds for the next six months for any company that is out 30% – which is basically everyone,’ he says. The funds total NZ$ 1.5 billion (EUR 800 million) across all industries. ‘That support will carry us through the start of this unpredictable period but it’s unsure how many weeks we’re talking. For now, this financial buffer means I can sleep at night.’

It is a different reality now, acknowledges Chad Counselman, business development manager at All Auto Recall. ‘As a minimum, you need to keep a core crew on-site to handle likely surges in volume. Also realise that you can’t reap the benefits of an economy getting back on its feet if your crew is too small to handle the volume. It would be wise to keep a couple more hands on deck.’

What alleviates the supply bottleneck for auto parts for Counselman is the fact that people are not driving as much. ‘Claims are down by a lot – 70% to 80% on average, I’ve heard. Even so, original parts are rare and they will stay rare until production goes back to normal.’

The full article on this topic will be published in the upcoming issue of Recycling International.

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