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China scraps 5 million vehicles annually, yet the reuse rate of repaired parts remains low.
Release time:
21 May,2015
Amidst the roar of the shredder, one after another, car transmissions, stained black with engine oil, are constantly being disassembled and flattened. This scene represents the ultimate fate of most scrapped vehicle parts in China today—becoming a pile of scrap metal and then sold as junk. Every time he sees this, Zhang Wensheng, general manager of Beijing Borey Yanmei Automotive Transmission Service Co., Ltd., a subsidiary of Beijing Xianglong Borey Group, feels a pang of heartache, because these veteran parts, after years of service, have the potential to be reborn through remanufacturing.
To study the market, Zhang Wensheng often visits 4S shops. He pays close attention whenever a customer needs a transmission replacement. When most customers choose new products over remanufactured ones, he shakes his head in dismay. "In developed countries like the US and Europe, 'exchange for remanufactured' was quite popular in the 1980s. However, in China, although the remanufacturing industry has been promoted for about ten years, there has been no clear policy." He believes that China's strict control over vehicle scrapping and the limited channels for processing old engines are detrimental to the development of the remanufacturing industry. Furthermore, due to current regulations, the "five major assemblies" of vehicles, which are urgently needed for the "exchange for remanufactured" industry, must be sold to steel companies as raw materials, causing remanufacturing companies to remain under-resourced.
Remanufacturing is not the same as refurbishment.
Automotive parts remanufacturing refers to the mass production process of professionally repairing old automotive parts using advanced methods to restore them to the same quality and performance as new products.
"Are remanufactured products simply refurbished products?" Yang Xiaodi, deputy general manager of Xianglong Borey, takes a reporter to the transmission remanufacturing workshop to address this consumer concern.
This production line is the first automatic transmission remanufacturing line in Beijing, established by Borey Yanmei's technical team in 2013. The first batch of remanufactured automatic transmissions successfully came off the line at the end of that year. Rows of transformed transmissions lie quietly in the warehouse. "We ship transmissions of different models to various parts of the country every day, with an annual production capacity of nearly 2,000 units, but current sales account for less than half of the capacity," he says.
How do used car transmissions undergo this transformation after arriving at this "hospital"? Borey Yanmei uses a multi-station assembly line to produce remanufactured products, completing the remanufacturing of automatic transmissions through eight processes: "disassembly—cleaning—inspection—repair—replacement—assembly—testing—packaging".
This process is not simple refurbishment, but remanufacturing according to strict production procedures." Yang Xiaodi explains, taking the disassembly process as an example: technicians disassemble the transmission assembly to its smallest indivisible components. This is to allow for thorough, gapless cleaning of the transmission parts in the subsequent cleaning and inspection processes, fully exposing any defects for easy inspection. This process requires high precision.
"Each remanufactured automatic transmission undergoes at least 40 minutes of dynamic testing on a test bench. During testing, advanced equipment simulates most of the operating conditions of an actual vehicle to check product performance and ensure reliable operation of the product delivered to the user." he says.
60% energy saving, 80% emission reduction
Remanufacturing is essentially a manifestation of the circular economy. On American highways, 1 out of 10 cars has a remanufactured engine. However, the number of remanufactured parts in China is far lower. For example, the remanufacturing and reuse of transmission assemblies is almost nonexistent.
In August 2013, the National Development and Reform Commission, Ministry of Finance, Ministry of Industry and Information Technology, Ministry of Commerce, and General Administration of Quality Supervision, Inspection and Quarantine jointly issued the "Notice on Issuing the Pilot Implementation Plan for the "Exchange for Remanufactured" of Remanufactured Products," launching a pilot program for "exchange for remanufactured." The notice stated that the pilot program would initially focus on remanufactured products such as car engines and transmissions, with the scope gradually expanding based on implementation results.
Remanufacturing is green manufacturing: Every year, remanufacturing saves 14 million tons of materials worldwide, conserving energy equivalent to the annual electricity generation of eight medium-sized nuclear power plants. In some countries with developed automotive industries, the remanufacturing industry is a actively promoted green industry, receiving not only policy support but also financial support from relevant departments.
According to Yang Xiaodi, remanufactured transmission products account for about 90% of the US automotive aftermarket. Compared to new products made from recycled materials, remanufacturing can save 60% energy and reduce atmospheric pollutant emissions by 80%. Producing 10,000 remanufactured engines generates nearly 360 million yuan in recycled added value, saves 14.5 million kilowatt-hours of electricity, and reduces carbon dioxide emissions by 600 tons.
Customers have concerns about remanufactured products.
To promote remanufactured products using this green technology, relevant departments continue to introduce supportive policies.
At the end of last year, the National Development and Reform Commission issued a notice requiring that the quality of promoted products should meet the standards of the original new products, with performance test reports issued by a third-party testing institution with legally obtained accreditation (CMA), and a warranty period in the product qualification certificate no less than that of the original new product; the exchange price is the product price minus the residual value of the old parts, and should not exceed 60% of the original new product, which is the maximum sales price limit for enterprises.
Zhang Wensheng explains that current remanufactured products have at least 95% of the functionality and quality of new products, but most consumers still hesitate to buy them. Even 4S shop customer service representatives will explain the situation: "This transmission is not brand new, but is remanufactured from an old transmission using complex processes, but it has the same performance, safety, and quality assurance as a new product." Ultimately, customers still choose to give up. At Borey Yanmei, the cost of remanufacturing a transmission is only 30% to 50% of a new one, and the transmission's lifespan is about 70% of a new one. Despite these facts, the acceptance of remanufacturing remains low in the market.
Jia Xinguang, a veteran automotive industry expert, told reporters that one of the challenges for remanufactured products is the significant mismatch between the high-tech production processes and high-quality performance and consumers' traditional perceptions of remanufacturing. "Whether the remanufacturing of major automotive components can be promoted in China depends on effective regulation." He said that in developed automotive countries in Europe and America, the automotive parts recycling and remanufacturing model has been operating smoothly for decades, thanks to the strict approval of automotive recycling and manufacturing enterprises by regulatory authorities. In foreign countries, automobile manufacturers are responsible for the recycling of scrapped vehicles and parts of their brands, with smooth recycling channels. In addition, scrapped vehicle dismantling plants are the source of the remanufacturing chain, and their recycling qualifications should be strictly approved.
Remanufacturing enterprises lack raw materials.
According to relevant data, at the end of 2014, China's vehicle ownership reached 147 million, and is expected to exceed 200 million by 2020. Conservatively estimated, the number of scrapped vehicles each year is over 5 million. It can be said that the domestic source of raw materials for automotive remanufacturing is very abundant. However, in stark contrast, many remanufacturing enterprises' waste recycling volume is far from meeting their limited production capacity.
Regarding this, some industry insiders analyze that, on the one hand, due to the lack of a systematic and reasonable recycling system, a large number of remanufacturing resources are scattered everywhere, making recycling very difficult. "China has more than 500 automobile recycling and dismantling enterprises, and formal recycling channels account for about 30% of the total scrapped vehicles. The rest of the scrapped vehicles are either sold to remote areas for extended service or dismantled through illegal means, resulting in resource waste, environmental pollution, and safety hazards." On the other hand, China's current laws and regulations cannot meet the development of the market - the current "Regulations on the Recycling Management of Scrapped Vehicles" stipulates that the five major components of automobiles, namely the engine, steering gear, gearbox, front and rear axles, and chassis, "should be treated as waste metal and sold to steel enterprises as smelting raw materials," forcing many raw materials that could enter the remanufacturing process to be sold to steel enterprises.
In fact, among these "five major components," there are many high-value-added, used parts products that can be reused after remanufacturing, but they are all melted down as waste metal, which is a huge waste of resources and objectively leads to the current situation where domestic remanufacturing enterprises lack sources of used parts.
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