Sustainable Automotive Technologies 2012 || New Insights into the Australian Automotive Recycling Business
Post on 08-Dec-2016
New Insights into the Australian Automotive Recycling Business
E. El Halabi and M. Doolan
The Australian National University, Canberra, ACT 0200, Australia email@example.com
Abstract. Eight automotive dismantlers/parts recyclers across News South Wales, South Australia and Victoria were interviewed to obtain an understanding of mate-rial flows and influences within the Australian automotive recycling system. This paper gives new insights into the current automotive recycling business and its op-erations by presenting and analysing some key quantitative and qualitative data that was collected through these interviews.
1 Introduction and Background
Automotive parts recyclers1 or dismantlers are an important link in the reverse supply chain of cars. They seek to purchase End of Life Vehicles (ELVs) that are then dismantled and sold as parts or materials for profit. With 793 firms all over Australia, 3410 employees and a turnover of $1.1 Billion Australian Dollars (IBISWorld, 2011); this niche industry plays an essential role in the recycling of vehicles. Over the past five years, it handled 610,000 ELVs annually, which is about 4% of the Australian automotive fleet (Australian Bureau of Statistics, 2011).
In recent years environmental awareness has brought attention to the industry practice when dealing with pollutants contained in the ELVs such as hazardous fluids and chlorofluorocarbons etc. (Department of Environment and Heritage, 2002). The issues of car theft and car rebirthing2 also became of concern. The in-dustry in Australia remains largely unregulated. In other parts of the world like Europe and Japan, laws were adopted to help tackle the environmental issues through industry regulations - albeit with mixed results (El Halabi et al., 2008).
This project attempts to create a policy decision tool that helps stakeholders discuss policy options and their implications on the Australian automotive
1 Vehicle dismantling and parts recycling are two different but closely related activities. The first one is the process of taking a vehicle apart. The latter refers to the trade of used parts. Some parts recyclers do not completely dismantle vehicles themselves, like the U-Pull-It wrecking yards where customers do it. Both terms are used interchangeably in this paper.
2 Car rebirthing is an activity which involves re-registering a stolen vehicle by using anoth-er vehicles identity (Crimes Act, 1900).
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recycling sector. We are using System Dynamics (SD) as a systems thinking method to model the ELV processing system in Australia. We are adapting the Modeling Process from (Sterman, 2000) in engaging with the stakeholders.
To date very limited information about the Australian automotive dismantling business is available. This paper attempts to address this gap, by providing a quan-titative and qualitative snapshot of the average Australian automotive recycling business and its operations.
2 Interview Design and Questions When designing the semi-structured interviews we loosely followed the interview design recommendations of (Vennix, 1996). We then interviewed thirteen stake-holders to get an understanding of the flows of products and materials in the sys-tem as well as the factors that influence these flows.
The interviewed stakeholders include: eight automotive recycling business owners/managers, two representatives from state industry associations, two man-agers of salvaged cars auction houses and officers of a law enforcement agency. In this paper we focus on the business characteristics and operations of the eight dismantlers in New South Wales (1), South Australia (3), and Victoria (4).
In trying to understand the operators business characteristics, we specifically asked them about how long theyve been in business for, their affiliation with in-dustry associations, premises area, workforce size, working hours, specialisation (if any), and annual turnover.
For each of these points we prompted interviewees for trends and changes. Most of these factors vary over time and we wanted to gather an understanding on how their businesses evolved. To cover aspects of business processes we asked about stock control (handling of incoming cars, use of labelling), the use of Infor-mation and Communications Technologies (ICT), and the handling of hazardous waste.
3 Results and Analysis
In this section we present the aggregated results and analysis for each focus point with a brief description.
3.1 Business Characteristics
Years in business: On average, the interviewed operators have been in business for 20 years (3 of them have been operating for almost 30 years). They have well-established businesses with strong commercial presence and links with suppliers and customers. They are generally proud of their line of work and are constantly on the lookout for ways to improve their business. Most view role as doing some-thing good to both the environment and the public (extraction of hazardous mate-rials and recovery of reusable parts).
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Affiliation with industry association: 7 out of the 8 interviewed operators are members of their state's automotive/motor trade association. An interviewee ex-pressed his dissatisfaction with the industry association he is member of, in terms of lack of campaigning against illegitimate operators. Another one sees the asso-ciation meetings as an opportunity to voice concerns or to propose ideas that could be beneficial to all. Membership of an industry association is not compulsory (by law). Those who are members link non-members to illegitimate in the industry practice.
Premises area size: On average, the area size of a dismantling business is 18,800sqm. This figure is based on operators having more than just a single site. Half of those interviewed had two or more sites. Dismantlers in general need large premises. This is due to the stocking system they use and the physical dimensions of cars.
Workforce Size: On average, size of workforce is 13 employees. Most of the operators indicated that they decide to grow or shrink their workforce size depend-ing on how well their business is doing. We found that labour cost varies depend-ing on the function of the employee. Skilled mechanics and salespeople are well paid and represent a major cost factor as well as an asset/investment for the business.
Working Hours: 6 out of the 8 interviewed operators are open 9 to 5, Monday to Friday. They recognise that overtime labour is costly and generally try to avoid it. Operators that engage in mechanical repairs activity are the ones more likely to have overtime. 2 of the interviewed operators operate 7 days a week to cater for the Do-It-Yourself market. Dismantlers that rely on another revenue stream such as mechanical repairs recognise its profit potential and hence are able to afford the costs of overtime work. Revenue from parts/materials trade alone cannot justify the added costs.
Specialisation: 5 out of the 8 interviewees have some form of ELV-type spe-cialization that allows them to operate within specific market niches. Some, for example, specialise in a specific make and/or model like Holden Commodore. Others may specialise in vehicles older than 10 years or 4WD/commercial vans, or even in a group of makes like all Japanese or all German. In addition to used parts trade, all interviewed dismantlers were found to engage in mechanical repairs and used car trade. In a couple of cases we noted that mechanical repairs were the core business activity, while the used parts trade being only supplemental.
Annual Turnover: In terms of fiscal turnover and based on information given from 2 interviewees who agreed to share their figures, we have an average of 2.5 Million Australian Dollars. In terms of number of vehicles processed and based on the 8 interviews: 1530 ELVs per year. Though when taking into account the maximum capacity that some operators are capable of, the number can go up to 1910 ELVs. It is worth noting that the combined total of ELVs turnovers from these interviews is 12,258 (2% of the total ELVs in Australia).
We found that the operators could be grouped according to the number of ELVs they handle each year. Small scale (less than 300 ELVs), mid-range (300-2000 ELVs), and large scale (more than 2000 ELVs). The interviewed auto recyclers are spread across these groups (three small, three mid-scale, and two large).
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3.2 Business Operations
Handling of incoming cars: All interviewed dismantlers have well-established systems to manage incoming ELVs. The process includes the labelling of vehicles (creating a file for every ELV), testing (if driveable), depollution (draining engine fluids, removal of batteries, tyres), and stocking the vehicle in the yard. A small scale operator that we interviewed pointed that they sometimes do not depollute a vehicle if they see a potential in it being sold as a cheap old car.
Labelling: All interviewed operators engage in some form of labelling (incom-ing ELVs stock, parts) to help manage their stock. U-Pull-It type operators only label vehicles while parts stay on the vehicles until they are removed by the customers.
Use of ICT: 7 out of the 8 interviewees make use of ICT to help find potential stock in the market, manage incoming ELV stock (labelling, sorting), and manage dismantled parts stock and sales.
Hazardous waste: All interviewees were aware of their local EPA requirements concerning the handling of hazardous materials. Batteries, drained fluids, and even air conditioning gas are collected then sold to their respective markets. Tyres were the only component that operators had to pay for to dispose of. Two dismantlers have certified systems to capture left over petrol and liquid petroleum gas (LPG) from ELVs then use them to power their business vehicles.
One of the early challenges that we faced when we first attempted to create an SD model of the ELV processing system in Australia was to find relevant and con-crete data about the automotive recycling business. Reports like (Accenture & VACC, 2006) provide a good high level perspective about the industry but lack the data about businesses. We needed to know how long these businesses have been in operation for, workforce, annual turnover, sources of revenue, etc. along with their historic trends as well as the norms and processes being followed.
The results presented in this paper serve both as reference point and as a part of the bases of a SD model being developed to study policy options and their impli-cations on the industry.
Prior to these interviews, little information was available about the automotive re-cycling business in Australia. Through this paper, we presented relevant business characteristics data. We identified three different groups of operators based on the volume of ELVs they handle per year. We also shed light on key aspects of their business operations that included a major environmental concern (the handling of hazardous waste).
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Acknowledgments. This original research was proudly supported by the Commonwealth of Australia through the Cooperative Research Centre for Advanced Automotive Technology (AutoCRC) and the Australian National University (The ANU). We thank VACC and APRAA who endorsed this research and helped putting us in touch with most of the stakeholders. We also thank all the stakeholders who invested their time and effort in these interviews.
Accenture & Victorian Automobile Chamber of Commerce, HORIZON, - Changes and Challenges for the Australian Retail Automotive Industry, Victorian Automobile Cham-ber of Commerce, Melbourne (2006)
Australian Bureau of Statistics, Motor Vehicle Census, cat. no. 9309.0, ABS, Canberra (2011)
Crimes Act 1900 (NSW) s. 154G (Austl.). Department of Environment and Heritage, Environmental Impact of End-of-Life (2002) Vehicles: An Information Paper, Canberra El Halabi, E., Doolan, M., Newell, B.: A Global Comparison of End-of-Life Vehicles Poli-
cies. In: International Conference on Sustainable Automotive Technologies, Melbourne (2008)
IBISWorld, Motor Vehicle Dismantling and Used Part Dealing in Australia Industry Re-port, F4624 (2011) (retrieved from IBISWorld database)
Sterman, J.D.: Business Dynamics: Systems Thinking and Modeling for a Complex World. McGraw-Hill, Boston (2000)
Vennix, J.A.M.: Group Model Building: Facilitating Team Learning Using System Dynam-ics. Wiley, Chichester (1996)
New Insights into the Australian AutomotiveRecycling BusinessIntroduction and BackgroundInterview Design and QuestionsResults and AnalysisBusiness CharacteristicsBusiness Operations