What direction are we headed? Thought leader Tanvir Arfi provides insight on what is in store for professional automotive recyclers of the future. The industry timeline of change is on the fast track, the time is now to adjust workflows to technology and millennials.
By Caryn Smith
Professional automotive recyclers would love to have a checklist for their future operations. Knowing what is coming could mean the difference between profitability and extinction. It is predicted that many of the businesses in operation today, in automotive recycling, collision repair, and even auto manufacturing won’t exist in ten years, because of consolidation, retirement, or failure to change with the times. Fortunately, the Automotive Recyclers Association (ARA) presents industry forecasts at their annual convention, in the bi-weekly e-Newsletters, and in Automotive Recycling magazine to keep you informed.
In this special Q&A, Automotive Recycling visits with Tanvir Arfi, a popular speaker and visionary when it comes to the future of recycled auto parts. Tanvir Arfi is Managing Director of Solera Holdings and a business-transformation leader with more than 25 years of experience in the automotive world.
As a follow-up to “Deconstructing New Cars” on the future of vehicle design in the November/December issue, here we seek his insights on what the automotive recycling facility will look like when dismantling those future-is-now automobiles.
Automotive Recycling (AR): Tanvir, thank you for visiting with us again. Let’s start with the burning question: What is the role of OEM part numbers and OEM data in the future? Can the auto recycler survive without it? What are your thoughts on ARA’s quest to get OEM data through federal legislation?
Tanvir: Thank you. Well, the industry has been around a long time and the need for part numbers industry-wide is important. Consumers and insurers require them to identify the right part for a repair and auto recyclers need them to ensure they are selling them the right part.
The automotive recycling industry plays a role in the vehicle’s lifecycle and the OEMs understand this and do value it. Safe parts and choices are good for consumers, period. Auto recyclers provide them options. I am not sure that it needs to be confrontational. Legislation will most likely work out how that looks in the future for all parties.
Can an auto recycler survive without it? I would say ‘No,’ they need the parts numbers throughout the whole chain of a part. ARA is our friend in the industry and we fully support the need to have that information. As long as parts are being provided which are safe and reliable, we support it and access to all information. We support consumers right to have choices.
AR: How large of a role will online recycled parts sales play in the future?
Tanvir: As a technology provider in Hollander®, we are obviously tied to this variable. But we have a large amount of data to back our confidence in online parts sales. While in-person sales are still very strong, we believe online parts sales are a huge part of an auto recycler’s future. To have an increasingly growing viable business, an auto recycler must embrace selling online, and those who do it now should start to expand it.
We are tracking a portion of auto recyclers with online presence with our exciting and unique relationship with eBay®. This leading ecommerce market increases 20 percent to 25 percent every year and will continue to grow as the market is going now.
AR: Switching gears to human resources, how does one find qualified employees trained in these more advanced vehicles as we spoke about before [see November/December Automotive Recycling]?
Tanvir: When it comes to our workforce and employing people, if we are saying that the online parts sales will continue to rise on e-channels, and not as much with front door commerce, and taking into consideration the automobile is getting more complex with electronics and automation, where to find employees skilled with automotive technology and online sales cultivation is a great question.
The industry must attract talent and hire differently, and skew toward those who are technologically adept. The industry must also step up its training, whether by establishing a new or modifying an existing program to include education on new types of parts (e.g. electronics, electric), digital tools, and diagnostics training for current employees. Training on the innovation in the industry is possible with the employees with the right mindset.
Will some employees get left behind? Unfortunately, they may if the employee doesn’t have the skills or mindset to make the transition. Their value will diminish, but this applies across all industries, not just for automotive recycling. The rate of change occurring is so quick that the employee most likely will adapt and change with the technology, as they have in the past, or retire out of it.
AR: What about the recycled parts with new materials and technology, how can we help our teams see the future of auto recycling?
Tanvir: From our data-driven perspective, I believe auto recyclers will have to be broader in their scope. As in the past, one cannot rely just on body panels and such. Understanding new inventory, like control modules and sensors are a must, however; this is not a negative trend, this is just change, not the end. We see vehicles like alternative and electric recycled completely differently.
For instance, I predict that these vehicle batteries will very likely have a use beyond their 8-15-year car use, outside of traditional salvage market. The public will not want them in landfills, and they will go to be used in other industries where it may not be usable in a car but still a viable alternative source of power for a home, etc. These batteries are rechargeable and a non-traditional market for these will emerge. There are other parts that will also have this life beyond cars, including body panels new metals.
AR: Will recycled parts usage on car repair estimates be up or down?
Tanvir: We track data closely, with millions of estimates created on our platform today. The data going back several years and into the most current past shows that recycled part usage is up. Why? Insurers are better educated on recycled parts and professional recyclers are providing safe and reliable alternatives. Ecommerce makes it more accessible, and ecommerce-savvy recyclers inventories are more readily available and they’ve made it easier in the shipment of parts, so repairers are not limited to specific localities.
As far as projections into the future, I believe technology as a consumer is amazing, fascinating! However, it does create rather expensive replaceable parts on vehicles, so while collision avoidance may decrease accidents, the cost of a repair will likely be higher. And again, the market will be looking for alternative options continuing to step up as the alternative options for these parts.
AR: What is the role of certification of parts and/or certification of the individual recycling facility? How can ARA engage more auto recyclers to become certified?
Tanvir: Certification has real industry value going forward, and especially value that ARA can provide. External 3rd party validation raises the overall watermark of the industry. We support it and it is better to have 3rd party external recognition, like JD Power has done for auto makers. ARA is greatly positioned to be that for the industry.
While it is an investment and expense, and may be viewed as taking too much time, hassle, and work; it is needed. I understand that one cannot just work on long term items, like certification, because then we would go out of business. But you can’t avoid it either and just focus solely on short term goals. This is one area worthwhile to invest in, where consumer confidence grows, the industry is lifted, and those who shine are recognized.
AR: What should auto recyclers be doing now to insure they are around in 10 years?
Tanvir: Embrace ecommerce, expose inventory on global platform, provide shipping options (same day, next day, etc.….), and invest in technology and training to be ready for these new car technologies, so they are ready to inventory and sell them. Hire the right workforce of tomorrow, train workforce of today, and stay abreast of rapidly trends.
Where ARA can play an important role is to be the go-to training academy. [Note: ARA’s training arm, ARA University, arauniversity.org, announced it’s positioned and ready as the training platform for the future. See page 42.]
AR: Any thoughts on more advanced vehicles and what it will take for them to be Total Losses? How will the market correct itself with less parts needed, but more advance parts to be sold?
Tanvir: Our data shows that total loss rate is actually growing. For instance, the Kia K900 Sedan (with a MRSP sticker price as low as $49,999) has parts which are priced well above other comparable four door sedans and may impact the likelihood of a total loss. Even an entry level car, like a standard Toyota, Honda or Ford, same vehicle base model at listed $22K may not have high dollar replacement parts, but the fully loaded versions with added technology, infotainment and options at $37K has a higher total loss probability. So, it is expected that this trend will occur.
AR: Then, if autos are totaled more than not, and new metals not recyclable, what does that look like to our earth? What do we do with these cars?
Tanvir: Very good question and as an environmentally-conscious consumer, this is a deep question. The auto recycling industry is extremely important to overall recycling. Currently each year, 12 million cars reach their end of life, and that percentage will increase, as we said, with shift of metal and battery and less recyclable product.
To our earth, this is a business problem, as metal now largely gets reused in new cars and other applications, and other major components get reused as well. We will have to expand our horizon when these are not recyclable. What is the alternative use? As a society and marketplace, we will have to get creative, and I see it as a budding a business opportunity. We need to expand our ideas to see what value does that item have outside of its traditional use.
This shift in this line of thinking is relatively recent. Not many are considering this, yet with volume will come innovation. Right now, there isn’t enough of demand to make changes. These are the kinds of opportunities that will reveal themselves to the automotive recycling industry, as the leaders in car dismantling and recycled car part distribution.
We are at the top of the world of innovation, when money is to be made people get creative. For that to happen, value will have to outweigh value of total car. High value metals, batteries, etc., will most likely land outside auto recycling but will still travel through those businesses, we expect. That is for the automotive recycling industry to capture and take the lead. We need to partner with those who need the parts for their new business models.
AR: Thank you, Tanvir.
Caryn Smith is the Editor of Automotive Recycling magazine.