The Bigger Picture
Changes at the OEM level are impacting other sectors of the automotive industry.
Andrew MacDonald owns and operates Maritime Auto Parts in Glenhome, N.S. Collision Management recently asked him about how vehicle technology and market shifts are impacting the recycling business, the knock on effects for the collision and other sectors of the automotive industry and what the future may bring.
CM: What are some of the biggest changes you’ve seen in the operating environment for recyclers your local area and beyond (if applicable)?
AM: I’ve seen two major changes:
- Revenue streams are changing. As the market for buying cars becomes more global, this increases costs per car and makes our margins thinner. We now have to focus more on commodities (selling to remanufacturers for components) and turning vehicles faster. Exporting parts is also a growing market.
- Vehicle technology—this changes each decade, but we’re seeing a huge change in crash components and lighting technology turning mirrors and headlights from $100-150 components to more than $500 components (used). It’s great from a part sales perspective, but on the insurance side more vehicles are becoming economic losses due to the high costs of replacement. Electrification is also penetrating the market at an exponential rate. This will affect our employee safety and training, but also greatly change our number one and two selling parts—engines and transmissions.
CM: How have the vehicle OEMs impacted the used parts business for collision repairs, especially with the shift towards certification programs?
AM: Although it’s tough to put an exact number on it—it’s bad for our business. If the vehicle must go to a certified shop to get repaired, the OEM’s objective is vertical integration and to sell their own parts. We tend to get grouped in with the aftermarket suppliers when it comes to this, however this is the wrong way to look at it. Recyclers sell OEM parts, just like the vehicle being repaired. Every vehicle on the road today is running on OEM used parts. We harvest these parts, verify the quality and sell them for re-use. Certification of repairers is fine so long as they can accept that we’re selling their original manufactured part.
CM: What do you feel is key for the success of the recycling industry moving forward and to ensure there continues to be a source of quality used parts for repairers?
AM: I think that it’s vital we better align how we harvest and sell parts to how the manufacturers do. You already see this in the aftermarket industry where the resolution of parts they’re selling allows them to compete more strongly with the dealers. You can buy an aftermarket bumper cover, but they also make the fender brackets and mating splash shields that allow the repairer to complete their estimate faster and easier. As recyclers, we have hundreds of thousands of these parts in our yards all without part numbers. Basically, our sales staff can’t see them on their screens and the repairers can’t see them on our website.
This is a challenge for two reasons:
- The manufacturers will not share their build data so the companies that we buy interchange from have to spend a lot of time compiling data and creating the interchange. There’s a data firewall between the collision side and the recycler side of these companies.
- The database for which all used parts interchange isn’t keeping up well with vehicle technology and components making it hard to market our parts.
Although we have many great standards and best practices, we need to sell and market parts the way that the collision and repair industries expect them.