The topic of COVID-19’s effect on industries across the spectrum has been bandied about for months and the automotive recycling industry is no exception.
As Sandy Blalock, executive director at the Automotive Recyclers Association explains, the automotive recycling industry was in relatively good shape prior to the pandemic and because the industry was considered essential, auto recyclers continued working for the most part throughout the pandemic.
“They, of course, had to modify their working environment to assure the safety of their employees and customers,” Blalock says. And while some chose to close for a short period of time, other than the expected shortages of available vehicle inventory, a large majority of recyclers saw little or no downturn in their businesses, some even reported an increase in business.”
According to Todd Bialaszewski, owner of Junk Car Medics, a nationwide junk car service, prior to the pandemic the automotive recycling industry was going strong. But when the news of the pandemic started breaking in early 2020, the Junk Car Medics team saw a 35% dip, which continued for a couple of months.
“Individuals who didn’t have to ‘junk’ their cars simple chose not to do it at that time. If they could let it sit in their driveway or extend their vehicle’s use with a few small repairs they were doing so,” Bialaszewski says.
However, as the pandemic started taking hold of the U.S. with complete shutdowns of economic activity throughout the country, there was a decline in new automotive sales. And, according to Edmunds, by the end of 2020, the U.S. market saw new cars sales finish around 14.5 million, which was a stronger result than the 13 million range that some analysts forecasted earlier in 2020. However, those sales are down approximately 15 percent, bringing new car sales in 2020 to the lowest levels since 2012. These numbers have a big impact on the automotive recycling industry.
As Bialaszewski points out, people were unsure of what was to come and whether or not they would have an income in the coming months. Therefore older, used cars started carrying more value due to the increased need for their parts.
“There was also a shortened supply of available new parts as many businesses shut down,” Bialaszewski says. “This led to increased values at the car auctions so we were able to pay more for vehicles. The volume still isn’t back to where it was last year, but the increased value for cars balances everything out.”
And while the pandemic has certainly altered the industry in the short term, Bialaszewski believes the above will continue—namely, new car sales will continue to be down, resulting in an increase demand for used car parts and subsequently, an ongoing increased value of junk cars overall.
Browse any news site or listen to a newscast and you’d be hard pressed not to find information about the impact the COVID-19 pandemic is having on how employees are doing their jobs. From wearing masks and gloves to cordoning off their workspaces, today’s workforce is doing whatever it takes to get back to “business as usual” while keeping everyone safe. And that is true for the automotive recycling industry as well, as company owners and their employees grapple with changes in the structure of their dismantling and inventorying processes, their parts handling, and their interaction with customers.
In fact, many auto recyclers were forced to rethink their business model and how they might work in a contactless or semi-contactless environment. In addition, they had to react quickly to the pandemic. They’ve had to modify stores with Plexiglas windows, COVID-related instructional signage and navigate new rules for engaging with customers. Crisis management plans – for those recyclers who had them – were dusted off and tested for the sustainability of their business.
Of course, anytime there are fundamental changes to an operation, whether by design or through a forced hand, you can see an altered financial landscape. Luckily, as Blalock points out, auto recyclers were eligible for the Paycheck Protection Program (PPP) and other COVID-19 relief money made available to businesses, which was a welcome relief for many automotive recycling business.
“I have not heard that recyclers are changing their buying or selling to a large extent,” Blalock says. “I do know that prices for salvage did not decrease and in some areas actually increased. And I have heard that auto recyclers used some of their downtime to make site improvements, add building space and generally get prepared for the end of the pandemic.”
A Shift to Ecommerce
The shift to e-commerce from traditional brick-and-mortar auto recycling locations has led some recyclers to invest in their ecommerce activities as the automotive e-commerce aftermarket industry continues to grow, especially in light of the ongoing pandemic. Consumers are embracing online purchasing like never before and that includes the automotive industry.
How consumers sell their end-of-life vehicles (ELV) greatly impacts auto recyclers. Nowadays with the widespread adoption of the Internet, most consumers sell their junk cars online. Notably, the advances in technology and the increased use of the Internet to sell and buy used cars, has helped the auto recycling industry, especially during the COVID-19 pandemic. Online avenues, including Craigslist and eBay are helping automotive recyclers locate and acquire junk cars more easily during a time where many consumers have been hesitant, at best, about leaving their homes and interacting with others.
Of course, managing these ecommerce marketplace channels requires expertise and the ability to manage hundreds of products and continuously monitor competition across various marketplaces. The good news is that the marketplace model within the automotive recycling industry increases visibility of a product. And many of today’s recycling companies also are utilizing the Internet to purchase junk vehicles in creative ways. For example, some companies list hundreds of locations on their web sites that will take junk vehicles and pay cash. Other companies utilize avenues on their web sites where consumers, insurance companies, and others can request a quote for recycling their junk car. During the pandemic, this has resulted in increased sales as many consumers have recently preferred to purchase and sell products from a trusted online marketplace rather than in person.
COVID-19 swept through the world during 2020 and continues to wreak havoc in the early stages of 2021, disrupting global economies and shuttering businesses—both temporarily and permanently. This disruption has resulted in economic, political, legal and regulatory issues aplenty. So what does this mean for the automotive recycling industry?
“We have made it through tough times before and there is no doubt we will survive and come out better on the other end,” Blalock says. “Auto recyclers tend to thrive when they are challenged. We have so many generations working in our industry and each brings a unique perspective to the table, so to speak, and that is what has always been one of the strengths of our industry. Auto recyclers openly share the good, bad and ugly for the benefit of all.”
In looking at the “big picture” Blalock believes the automotive industry will lose some long-time recyclers that were most likely struggling before the pandemic and who did not have enough resources to make it through the pandemic challenges. Others will modify their operations until they can get back to full strength, while still others will continue to thrive because they have structured their businesses to weather the ups and downs of business.
“Honestly, our industry seemed to have weathered this much better than many others,” Blalock says. “Even with the reduced driving during the pandemic we did not see terribly drastic drops in vehicles. Of course it certainly helped that many of the automakers were shut down for periods of time during the pandemic and new parts availability was affected. Auto recyclers took advantage of this to get more of their product into the marketplace.”
Bialaszewski agrees that while the ongoing pandemic certainly threw a proverbial curveball for many within the industry—particularly the newcomers to the industry, many of the seasoned industry veterans will survive and perhaps even thrive during this challenging time.
“Eventually people who are holding onto their cars are going to have to recycle them. So there’ll be an uptick there, too,” Bialaszewski says. “Overall the industry will probably come up on the better end. Contactless vehicle removals and payouts will probably remain standard but other than that not much else has changed. I always tell my family and friends, “I’m blessed to be an industry like the automotive recycling industry and nevermore, have I believed that more then now.”