The insurance industry has been adapting to recycling car parts during the claims process for some years now, but the Covid-19 outbreak has really brought things into sharp focus. IE spoke to Jane Pocock, MD of Copart UK, about the new spare parts landscape.
IE; Times are changing fast, aren’t they?
JP; They are. As far as the green parts market is concerned, there is a huge opportunity here, but the marketplace isn’t yet set up to maximise it – there’s the challenge with quality control and the cost of setting up a nationwide network and inventory system. However, these days there is more interest and there are some very professional companies operating in this space.
Typically, Copart already feeds the green market, with many of the UK’s largest recycled parts manufacturers purchasing vehicles for parts through our online auction. Our ability to sell cars for parts overseas also boosts the green market across Europe. Wherever possible we optimise vehicle recycling opportunities – otherwise these cars wouldn’t be broken for parts, they’d be crushed.
IE; Corona is a global problem and the car industry has gone into limp mode right now on vehicle production, including spares.
JP: It has in some cases, yes. The global demand for cars has declined rapidly right now and the supply chain for parts is impacted too. Parts supply is further impacted when new cars are damaged as sometimes new car parts have not gone into production yet or are not available in non-OEM versions, so factory closures have impacted all elements of the supply chain. Some bodyshops and parts departments closed and invoked the furlough schemes so more cars found their way into the total loss process than normally would.
Copart has a huge supply of vehicles that can be dismantled for repair, and we’ve adapted our processes so that this core part of our service can continue. This will help to enable some small automotive businesses reliant on the supply chain to maintain a level of trading, as well as helping to maintain the flow of parts to feed repair garages. That’s very important, because these smaller garages have been deemed as essential to keep key workers’ vehicles on the roads – at a time when parts supplies from many sources are drying up.
IE: What do you think will happen as the lockdown eases?
JP: It’s crucial that everyone in the automotive industry works together to support each other and ensure that the supply chain remains resilient during this unprecedented situation. The demand for used parts will probably continue to increase throughout the year ahead, which will boost demand for salvaged vehicles to source parts both in the UK and beyond.
Experience tells us that the demand for parts and used vehicles increases during economic downturns and uncertainty, and that currency fluctuations create opportunities for both EU and non-EU buyers. Looking ahead, our buyers, especially in non-EU countries, will certainly help with maximising salvage returns for our customers.
IE; If prices of parts rise, so do repair costs. That means the average claim is going to rise too?
JP; In the insurance supply chain, the immediate impact of the virus is hard on the bodyshops as they will reopen but will not be as busy as usual, so the overheads and costs are there but not the normal profit levels. Copart facilitates a portfolio of damaged vehicles, already discounted as they need repair, and a huge range of green parts opportunities, and we also export a large amount of vehicles for parts so that useful components can be recycled. That recycling does reduce costs slightly, as repair networks aren’t using brand new parts in every case.
Assuming that demand for repairable cars and serviceable car parts continues globally, then ultimately it is the customer who puts a price on the salvage vehicle. They set the market value, not the virus.
IE; Interesting times, thank you.