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The peak of scrapping is approaching, and the market size of the dismantling industry may reach 450 billion yuan
Release time:
22 May,2015
China has a large number of vehicles, and the peak period for scrapping vehicles is approaching. In 2014, the number of vehicles in China exceeded 154 million. From the perspective of vehicle sales, the Chinese auto industry entered a period of explosive demand growth after 2000, and new vehicle sales grew rapidly. The scrapping period for vehicles is usually 10 to 15 years, and China will enter the peak period for vehicle scrapping after 2015.
China has a large number of vehicles, and a peak in vehicle scrapping is approaching. In 2014, the number of vehicles in China exceeded 154 million. From the perspective of vehicle sales, the Chinese automotive industry entered a period of explosive demand growth after 2000, with new vehicle sales increasing rapidly. The typical lifespan of a vehicle is 10-15 years, and China will enter a peak period of vehicle scrapping after 2015.
Although the volume of scrapped vehicles in China is growing rapidly, the vehicle scrapping rate remains low, at only about 4% of the total number of vehicles, significantly lower than the 6%-8% level in developed countries. The recycling rate is even lower, at only 0.5%-1% of the total number of vehicles, far below the 5%-7% level in developed countries. Therefore, there is a large market for vehicle dismantling in China.
It is generally believed that the Chinese automotive market is similar to the American market; the current state of the American automotive market may be the future of the Chinese automotive market. According to statistics, the market size of the US scrapped vehicle dismantling industry has reached US$70 billion, accounting for one-third of the total output value of the US circular economy. This corresponds to a well-established scrapped vehicle dismantling and processing system in the United States. There are more than 12,000 vehicle dismantling companies in the United States, more than 200 professional crushing companies, and the annual recycling capacity is 16 million tons of waste steel, 850,000 tons of waste aluminum, 386,000 tons of waste tires, and more than 46,000 tons of remanufactured parts. There are more than 50,000 remanufacturing parts companies. Based on this, some experts believe that the market size of China's vehicle dismantling industry may reach US$70 billion, or 450 billion yuan, within 10 years.
The development of the vehicle dismantling industry is closely related to the improvement of the vehicle remanufacturing rate. With the improvement of the remanufacturing rate, the scrapped auto parts will have a place to be used. On February 6, 2006, the National Development and Reform Commission, the Ministry of Science and Technology, and the State Environmental Protection Administration issued the "Technical Policy for the Recycling and Utilization of Automotive Products," which became a guiding document for the recycling and reuse of scrapped vehicles in China. In 2014, the recycling rate of M2, M3, N2, and N3 vehicles in China reached 90%, and the material reuse rate was no less than 85%; the recycling rate of M1 and N1 vehicles reached 85%, and the material reuse rate was no less than 80%.
It is expected that by 2017, the recycling rate of vehicle bodies in China will reach 95%, and the material reuse rate will be no less than 85%, reaching the international advanced level.
Li Guoqing, an engineer at Hongxing Automobile Dismantling Plant in Hefei, Anhui Province, said that the future development opportunities of China's automobile dismantling industry mainly lie in two aspects: firstly, the improvement of the automobile remanufacturing rate, which will greatly increase the profit margin of dismantling plants; secondly, the application of the "Internet +" thinking will make the one-stop channel for scrapping, dismantling, processing scrapped auto parts, and selling remanufactured parts more smooth.
Transit station or final destination: Can dismantling plants prevent the entry of used parts into the market?
Recently, data from the old vehicle scrapping window of the Asian Games Village Automobile Market shows that the amount of vehicles received by automobile scrapping and dismantling plants has increased by 50% compared to before the implementation of the elimination and renewal policy, and the dismantling capacity of automobile dismantling plants with formal qualifications in Beijing is approaching its limit. Li Guoqing, an engineer at Hongxing Automobile Dismantling Plant in Hefei, Anhui Province, also said that the dismantling volume of the dismantling plant has increased by 55% year-on-year this year. In the face of the sharply increasing number of scrapped vehicles, can formal dismantling plants withstand the test? Can a large number of scrapped auto parts be successfully digested in dismantling plants without flowing back into the auto parts market? According to the reporter's investigation, the situation is not optimistic.
The sharp increase in scrapped yellow-label vehicles puts dismantling plants to the test.
Yellow-label vehicles refer to gasoline vehicles that do not meet the National I emission standards and diesel vehicles that do not meet the National III emission standards. Since last year, the Ministry of Environmental Protection, together with the National Development and Reform Commission, the Ministry of Public Security, the Ministry of Finance, the Ministry of Transport, and the Ministry of Commerce, has formulated the "Implementation Plan for the Elimination of Yellow-label Vehicles and Old Vehicles." The plan stipulates that on the basis of eliminating 6 million yellow-label vehicles last year, by the end of this year, yellow-label vehicles will be basically eliminated in developed regions such as Beijing-Tianjin-Hebei, the Yangtze River Delta, and the Pearl River Delta; by the end of 2017, yellow-label vehicles will be basically eliminated nationwide. Recently, a relevant person in charge of the National Development and Reform Commission said that the elimination target last year has been successfully completed, and the goal of eliminating yellow-label vehicles nationwide by the end of 2017 is also expected to be achieved.
In order to support the elimination and renewal work, various places have also introduced a series of reward and subsidy policies, and a large number of car owners have scrapped their vehicles ahead of schedule. Mr. Wang, a car owner living in Tongzhou District, Beijing, said that his car is 9 years old, and if sold as a used car, it would sell for at most 11,000 yuan. If scrapped under the subsidy policy, he can receive a subsidy of 9,500 yuan, and he can also avoid the trouble of major repairs and renovations, which is very cost-effective.
A relevant person in charge of Beijing Automobile Dismantling Factory Co., Ltd. said that since the policy of rewarding the renewal of yellow-label vehicles and old vehicles was introduced, the dismantling volume of the dismantling plant has increased by 60%-70%, and the dismantling capacity has been tested, and there has been a delay in accepting orders.
The person in charge said that automobile scrapping and dismantling has a strict process, and it is difficult to speed up the dismantling speed. It can only rely on employees working overtime to increase the dismantling volume. When a scrapped vehicle enters a dismantling plant, it needs to be photographed, archived, the license plate saved, and the vehicle driving license and other information verified. The "Scrapped Vehicle Recycling Certificate" in six copies (for the receiving unit's records, the owner's records, the application for subsidy funds, the traffic management department, the control office, and the commerce department) needs to be filled out in the system. For commercial vehicles, the signatures of provincial and municipal commerce departments are also required. In the dismantling process, the wheels, seats, and glass must be removed first; then, the unused gasoline, diesel, and engine oil must be collected; batteries must be recorded in the waste register and handed over to qualified companies for processing; garbage must be disposed of uniformly; finally, the five major components, namely the engine, steering gear, transmission, front and rear axles, and chassis, must be dismantled and registered to prevent them from illegally entering the auto parts market. In addition, commercial vehicles, large passenger vehicles, and special vehicles must be "supervised dismantling" under the supervision of relevant departments.
Li Guoqing frankly admitted that automobile scrapping and dismantling is meticulous work. Every part of a car can potentially be turned into treasure, and a car is composed of thousands of parts, so dismantling a car is time-consuming and labor-intensive. In addition, in order to prevent the scrapped parts from flowing into the auto parts market, registration or cancellation is required in many aspects, which increases the workload and extends the working time.
The limited dismantling capacity of formal, qualified automobile dismantling plants has led to the emergence of a large number of unqualified dismantling plants, endangering the quality and safety of auto parts.
Illegal dismantling paves the way for the entry of scrapped parts into the market.
Recently, a reporter visited an area where automobile dismantling plants are concentrated on the roadside in Yanjiao Development Zone, Langfang City, Hebei Province, and saw the five major components piled up. Some plants even have billboards indicating the prices of the parts. "The dismantled five major components are not allowed to flow back into the market." Li Guoqing said, "Qualified dismantling plants are considered to be engaged in illegal business if they sell scrapped vehicles, scrapped five major components, or assemble vehicles with used parts. Once discovered, their dismantling qualifications will be revoked."
However, the reality is that many companies that do not have the qualifications to dismantle scrapped vehicles are still recycling large passenger vehicles, trucks, ambulances, and other commercial vehicles, not to mention small cars. Some dismantling plants also resell dismantled scrapped auto engine parts to irregular auto parts stores for profit.
Some dismantling plants even directly sell scrapped vehicles in relatively good condition, eliminating the need for dismantling. Li Guoqing pointed out that since the relevant information registered by the traffic management department for scrapped vehicles has been cancelled, driving them on the road constitutes unlicensed driving, which carries significant risks. Therefore, these vehicles flow to rural or township areas with more relaxed traffic management.
An unnamed owner of a small dismantling plant said: "According to regulations, the only parts of a scrapped vehicle that can be sold for money are aluminum, steel, and rubber tires. Even including dismantling costs, there's not much profit. For example, according to the "Pricing Principles for Scrapped Vehicle Acquisition" set by the state based on the prices of used metals in the market, the acquisition price of steel from scrapped vehicles is 450 yuan per ton, with companies allowed to fluctuate by 20% based on vehicle condition and local market steel acquisition prices. In other words, all the steel from a regular small car can only sell for five or six hundred yuan, which is really too little. We have to find ways to make money elsewhere."
The person in charge of the aforementioned Beijing Automobile Dismantling Co., Ltd. stated that the existence of illegal dismantling is not entirely due to the recent insufficient dismantling capacity of regular dismantling plants; a more long-term reason is that some people can profit from illegal dismantling.
It is understood that the difficulty in recycling scrapped vehicles has always been a problem plaguing China's automobile dismantling industry. From the perspective of China's scrapped vehicle volume, China has begun to gradually enter the peak period of automobile scrapping. Data shows that from 2010 to 2014, the registered sales volume of vehicles in China was approximately 3.64 million, 4.48 million, 4.68 million, 5.35 million, and 8.8 million, respectively, but the registered dismantling volume during the same period was over 2 million, over 1 million, 600,000, 1.37 million, and 5.1 million, respectively. A portion of the difference between the registered sales volume and the dismantling volume enters the gray area, illegally flowing back into the automotive market as used parts and assembled vehicles.
Industry insiders generally believe that to ensure the orderly development of the auto parts market, it is necessary to regulate the automobile dismantling industry. On the one hand, unqualified automobile dismantling plants should be cracked down on and eliminated; on the other hand, the dismantling capacity of dismantling plants should be improved, and dismantling plants with higher efficiency and better equipment should be built; at the same time, stronger connections can be established with the automobile remanufacturing industry, turning scrapped parts into treasures, legally entering the automobile market, and allowing automobile dismantling plants to profit in the process.
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