When technology companies are in the driver’s seat of vehicle design,
you don’t need ESP to know that this means a redefinition of the auto recycling business model. What is real and what is perceived about new cars?
By Caryn Smith
You’ve seen the television commercials. The young lady driver is imagining herself rocking on stage, singing “…’cuz I’m hollow, ‘cuz I’m hollow uh uh oh…” in front of a panel of three encouraging judges that happen to be versions of herself, and then suddenly her car comes to a stop. On its own. Jolting her from the daydream and saving her from rear-ending the car ahead.
Or, the young girl awkwardly asking her overly caring father to drop her off before they get to the school to avoid the expected parental embarrassment. Then, by chance, a driver cuts them off granting her secret wish as the car suddenly stops. On it’s own. And the girl pops happily out of the car, leaving a disappointed father behind.
As auto recyclers, one has to wonder – what is going on with these cutting-edge cars loaded with futuristic technology coming off assembly lines and straight into the driveways of the mainstream consumer? With all these innovations, how will this impact the auto recycling industry and, more directly, the already-shifted profit margin due to plunging steel prices?
In the transition from the rudimentary cars of the Flintstone’s town of Bedrock, that are, yes, almost powered by one’s running, to the flying self-con- trolled electronic cars of the Jetson’s Orbit City … is it the end of automotive recycling as we know it?
Well, yes … and no.
As an expert in the field of automotive innovation as it relates to the availability of replacement auto parts, Tanvir Arfi, Managing Director at Solera Holdings, knows too well the landscape for automotive recyclers is changing and he has dedicated his research to stay ahead of the curve. Solera is the company behind the Hollander yard management, e-commerce, data, and sales and inventory solution used in the industry as well as the pioneers in part interchange numbers. “As a technology company,” Arfi says, “we facilitate the interactions between our customer and our customer’s customer. Therefore, it is important to have our finger on the pulse of the future as related to the sale of replacement auto parts. Then, we help the customer use what we learn to their benefit.”
Automotive Recycling magazine’s editor Caryn Smith spoke with Arfi about his recent presentation to the 73rd Annual ARA Convention & Exposition attendees in Baltimore, Maryland, on the future of the vehicle as it relates to the auto recycling industry.
Hungry for More
Automakers are responding at light speed it seems to the consumer’s voracious appetite for technology in every area of their life. The smart phone keeps the consumer connected 24/7 and they want to stay connected in their cars, too.
With all this distraction, the National Highway Traffic Safety Administration (NHTSA) Office of Vehicle Safety Research has made its mission to strategize, plan and implement research programs to continually further the Agency’s goals in reduction of crashes, fatalities, and injuries. Their research is prioritized based on potential for crash/fatality/ injury reductions and is aligned with Congressional Mandates, DOT and NHTSA goals. Their Crash Avoidance and Electronic Controls Research Program is seeking to develop a broad base of understanding that can lead to introduction of advanced crash avoidance systems.
With imposed government safety mandates, the consumer’s appetite for technology, and a shorter driver attention span, automakers are digitizing the car at rapid speed to meet demands. Besides handy driving features like the self-parking car, the self-stop- ping car, and the impending self-driving car, techno- logical advancements are also being made in emissions, comfort technology, and entertainment.
“We are seeing amazing advancements in engines and transmissions, two key recycled part categories, such as the 2017 Ford F-150’s 3.5-Liter EcoBoost V6 engine. It offers 10-speed automatic transmission to deliver improved performance.This 3.5-liter EcoBoost is paired exclusively with the first volume- production 10-speed automatic transmission available from any automaker. We will see more advancements like this coming off assembly lines.”
In fact in a 2015 Forbes.com article “Top 10 Advanced Car Technologies by 2020,” contributor Karl Brauer writes that based on his research at the CES and Detroit auto shows that the following are the top 10 technologies to watch for: autonomous vehicle, driver override systems, biometric vehicle access (unlocking your car with a fingerprint or, even, an eyeball), comprehensive vehicle tracking (insurance- driven innovation), active window displays (active glass capable of displaying vibrant images — think video in a self-driving car or, as seen from a driver’s perspective, through the windshield), remote vehicle shutdown, active health monitoring (through seat belt or steering wheel monitoring), four-cylinder supercar (as in a V6 making over 600 horsepower), smart/personalized in-car marketing, and reconfigurable body panels (an SUV/truck configuration at your fingertips with a few retractable panels).
Imagine what all that would be like to dismantle and recycle?
“The digital transformation of vehicles is definitely increasing. The era of vehicle innovation in technology, emissions and efficiencies, comfort technology, entertainment, safety and car connectivity is here,” says Arfi. While vehicle safety technology innovations may increase and the result may be less accidents, according to NHTSA, he reminds automotive recyclers that these innovations also means an increase in the number of parts that have higher value on the car.
The Amazing Car Experience
Overall, auto manufacturers are promoting safety first. On their race to the George Jetson-age, safety is their first stop. They are almost all moving forward with their version of the autonomous self-driving car. Right now, on high-end premiere vehicles, the active safety technology generally known as “ADAS” must be perfected to get there. These systems include emergency braking, lane-departure warning, adaptive cruise control, and “parktronics.”
In fact, the new 2017 Mercedes-Benz E-Class is a shining example. It drives itself on the highway. It will maintain a speed, slow down if the car in front slows, stay in its lane up to 130 mph, and change lanes automatically with nothing more than a touch of the turn signal. This is astounding technology.
As far as “parktronics,” it also parks itself. After you’ve let the car drive for a while you can find a parking spot. It’s “Parking Pilot” searches for suitable parallel or perpendicular parking spaces to either side as you drive by. Choose a space to pull or back into, and it can expertly shift, steer and brake for you. When it’s time to leave, it can also steer you back out.
In a Mercedes-Benz “first,” their PRE-SAFE® sensor technology can detect instability during certain vehicle maneuvers that suggest a collision or rollover is imminent. It can then tighten the front seat belts, adjust the front passenger seat, and close the windows and sunroof, all in an effort to better prepare the occupants and restraints in the moments before a collision. If no accident occurs, the seat-belt tensioners reverse, and you simply readjust your seat, open the sunroof and continue on your way.
While you are not driving your E-Class, you can also take advantage of its amazing infotainment system that is operated on the steering wheel while comfortably sitting in seats that were two-and-a-half years in the comfort-design phase. And you can enjoy an array of ambient lighting to the tune of 64 colors … because you need that.
Geely Automobile’s new global brand, Lynk & Co., will start sales of its first model, an SUV developed with Volvo Cars (seen on page 30), in 2018 in Europe and the U.S. The launches will happen after the vehicle debuts in China late next year. According to Lynk’s website, the “car is not a car – it is an app, a hub, a bike, an idea, a key, a service, a revolution.” All models will come with a large central touch screen and telematics systems that are always connected to the Internet and to the car’s own cloud network. A share button will allow the owner to provide others with access to the vehicle via a shareable digital key. Owners can use the Lynk app to control and monitor their car from a smartphone — or directly from the car. Lynk is collaborating with Microsoft and Alibaba to build a new digital customer infrastructure for the car industry, with new digital order, supply, sales and customer relationship management systems and custom applications for user interaction.
Ready … or Not?
Are consumers ready for all this? A recent ReportLinker.com survey says maybe not. A majority – 63% – of consumers say they won’t feel safe in a fully-automated vehicle. When asked what they believed was the main drawback to automated vehicles, 36% cited road safety and 10% named vehicle safety. Together, this represents nearly half of all respondents. By comparison, just 18% cited the cost of acquiring the vehicle as a drawback.
Yet, the thinking is that as drivers become acclimated to automated features on traditional cars first, according to ReportLinker.com, they will be more willing to embrace fully-automated models. And they may not have a choice. This process is already underway — twenty automakers reached a voluntary agreement with the National Highway Traffic Safety Administration to incorporate automated emergency braking systems as standard equipment in all cars by 2022. This is just the beginning.
Jetson’s Car Pool
In the future of George Jetson’s Orbit City, imagine you are at the airport. You’ve just landed. You whip out your cellphone to call your ride, like we do, but instead of calling your spouse or friend, you call the robo-car you own (or that you share) to come get you! New players in automotive design and manufacturing are technology companies like Uber, Google and Telsa, creating their brands with such connectivity as an objective. Uber already has invested in research and plans to deploy a fleet of autonomous vehicles by 2030. Google has also announced plans to create a new ride- sharing business using its self-driving car. These moves could accelerate acceptance of the technology.
Even more compelling, Tesla, primarily backed by a technology company, just announced all its new cars would have a self-driving feature, and officially positioned itself in the ride-hailing market. They believe that in places where one doesn’t need a car, like a big city, that technology can help identify schedules of people who could essentially share a car, and use it when they need it, in an effort to save money.
While more than half of Americans, or 58%, say they are reluctant to summon a driverless taxi, ReportLinker’s survey found, and 42% of this group cited road safety as the top reason for not being will- ing to do so. However, interest is divided by age. Younger Millennials express more interest in using driverless taxis or buses than older generations. According to the ReportLinker survey, 57% said they were open to using self-driving services, in stark con- trast to the 35-44 year old group, 66% of whom say they have no interest.
The attitudes of younger Millennials may pave the way for future growth of automated cars because consumers who express an interest in using driverless taxis are also more likely to be early adopters of self- driving cars. According to ReportLinker, 54% of potential users of self-driving taxis say they would purchase an AV, compared to 41% of non-users.
Google is also paving the way legislatively for self- driving cars to hit the market faster than lawmakers are agreeing to allow. Google is objecting to California’s proposals to set new, mandatory rules for testing self-driving vehicles. The proposed requirement that manufacturers generate a year of driverless testing data before applying for an operating permit drew objections from General Motors, Volkswagen AG, Honda Motor Co., Ford Motor Co., and Google, saying the state’s approach “could greatly delay the benefits that self-driving vehicles can bring to safety and mobility for individuals,” said David Strickland, who heads the Self-Driving Coalition for Safer Streets that includes Google, Ford, Lyft, Uber Technologies Inc. and Volvo Car Group.
Connecting to Opportunity
Vehicle cloud connectivity is also something to watch. It will tell whomever needs to know where you are driving, how you are driving, how systems are working while you are driving, tires sensors etc., data seamlessly going to manufacturer, back to driver, and really to whomever needs or wants the information.
“General Motors are the pioneers on vehicle telematics with ‘OnStar’ and telematics offers significant opportunities for new business models to emerge, including for auto recyclers,” says Arfi. “For insurance companies, for instance, it is driving ‘use-based’ insurance policies. What is important to the automotive recycler is the opportunity they have foreseeing the impact of these advanced systems on need and usage of parts. In fact, Solera is releasing a white paper soon on it.”
The opportunity to make money in automotive recycling will be in increasing part’s value and in numbers of parts needed per repair driven by increasing vehicle complexity, Arfi suggests. “Complexity of vehicles and value of components is going to be much higher. The number of programmable units, sensors, controllers, cameras etc. in a vehicle is increasing. The overall number of parts on a vehicle, is rapidly multi- plying. While collisions will decrease, an accident can result in larger cost repairs based on part value and custom programming on parts. So far, we have not seen a need for parts decrease.”
Recyclers will need to evolve with the technology,” says Arfi. “More electronics are showing up at recyclers facilities, and will show up at higher rates tomorrow. Auto recyclers need to invest in training and technology to identify which parts to remove, store and sell, successfully. These electronic part categories will be more susceptible to heat, dust, static, and water damage.”
“If you look at a front bumper cover from a Jeep Grand Cherokee from 2010 and one today, they are not so visually different, but very different in part complexity. You will need to understand what to dismantle. A sensor on the bumper cover may now be more valuable than the whole bumper. Without knowledge and training, one could easily crush sellable inventory, or if dismantled and then not stored properly, ruin it.” To track these parts, inventory management systems like Hollander are dedicated to offering an advanced inventory module to add-on to what they already offer. “As providers we have to anticipate these and provide solutions to connect our customers better to their customer.”
A question that comes to mind is: Total loss vs. partial loss? With current conventional wisdom and less accidents, wouldn’t insurance companies just total cars with such advanced systems? Arfi seems to think not. “In the total loss vs. partial loss scenario, we do not anticipate the ratios to change insurance company protocols for total loss evaluations. We monitor parts on unique cars in 78 countries. There will still be plenty of interchange- ability of those parts in these new car parts
There would also be the question of what happens to these robo-ELVs? Upcoming environmentally conscious generations are likely to support the recy- cling industry’s green credentials. Even the entrance of new vehicles from companies like Tesla, they want to manufacture cars economically and will source parts from common manufacturers much like they do now. The value Hollander brings is interchange- ability, and we are making investments in continuing to grow and lead the industry in this information.”
The Digital Workplace
Once, your best employee liked to tinker with cars, and had a real knack for making broken gadgets work again. Your new best employee might be better suited at tinkering with computers or an ace in software. As the Boomer generation ages out of the workforce,50% of the workforce is soon to be Millennials. Generally, they are socially and digitally connected and enjoy electronic programmable toys. With train- ing, your current Boomer and GenX workforce will transition with car technology, and just about the time these new-tech cars hit full steam ahead, you are likely to have a Millennial staff ready for the challenge.
Safety and training will be a priority as more and more cars are hybrid, and less are gas dependent. As you know, the dismantling of electric and hybrid vehicles is a significantly different process. Your team must know how to safely handle highly-volted cars.
But the real dollars could be made in creating a business model that supports the recycling of electronic and digital parts. Your team will need to know how to handle these new parts, and how to store them. They need to know what photos to post, how to describe them, and, looking to the Automotive Recyclers Association or others, how to grade them. With scrap metal prices low, and new metals creating fewer ways to recycle crashed body parts, the modern automotive recycling yard may have a smaller foot- print, and focus totally on electronics, sensors, cameras, and other high-end parts interior/exterior parts.
With many of these parts programmable, someone will have to reprogram them for a new car. That is a void that automotive recyclers could potentially fill.
Electronic parts will not be crushed like metal and put into landfills. The marketplace will expect that these parts are responsibly handled. “The automotive recycling industry already carries the reusability car- bon footprint green flag,” says Arfi. “We need to celebrate this green potential.” The potential for after-market life of certain parts is also a business model waiting to happen. “The battery packs in hybrid and all electric vehicles have serious environ- mental consequences if not recycled appropriately. Our industry could drive a secondary use of these battery packs in non-auto use, like residential or commercial sources of back-up power,” says Arfi. “Recycling changes with technology. What if the power pack became a power source in a home, running a generator or some other need for energy?” The opportunities are out there and our auto recycling industry is again at the cusp of change.
The Forbes.com article, “Future Of Automotive Aftermarket And Car Servicing: Consumers Will Have More Channels To Shop Around,” says “there will be a rise in ecommerce for auto parts. Online business-to- consumer sales of automotive parts and accessories alone are expected to become a $20 billion business by 2020 in North America and Europe – an estimated 9-10% penetration rate within overall aftermarket. While Western markets will drive the transaction volume, emerging markets like China and Brazil will see explosive growth. Online pure players have found initial success targeting consumers with maintenance parts (filters, lubes, etc.) and tires. However, the litmus test for the longevity of these participants will be selling to business customers such as garages and fleets.”
The question remains, how will automotive recyclers have a seat at that table of business?
It is a reality to consider. Overall, the car is changing, fast and furious. Getting perspective and given enough ideas for new opportunities, auto recyclers can find more profit in the future with high-end parts recycling, maybe even transforming their scrap metal deficit with profitable sensory overload. Literally. ■
Caryn Smith is the editor of Automotive Recycling magazine.