Why should repairers buy more green parts when vehicle recyclers, generally speaking, supply and deliver a product and service that is often below standard, even if insurers incentivised their use appropriately?
Now, I know that vehicle recyclers globally will be reading this in shock horror. Why is he saying this? We need to be telling insurers and repairers that our industry is great and provides products that are second to none. Don’t fret, I will make the case in a moment as to why the vehicle recycling industry is such an important part of the supply chain, today more than ever.
In 2008, I attended an automotive recycler conference in the USA. Up on stage giving the keynote were two insurance representatives from State Farm and All State. Their message was simple: “As insurers, we would love to use more of your parts, they are genuine, they are more cost-effective and can be used to have the vehicle returned to our policyholder in its pre-accident condition.”
There are several reasons why this is not as simple as it may seem on the surface. At this conference 12 years ago, some of the attendees came up to me in the break saying that repairers just don’t want to use green parts, that it is all the fault of insurers and that repairers are just too fussy. Honestly, this approach is just not good enough.
In 2019, I chaired the Vehicle Recyclers Association Annual Conference in the UK, and again heard the same message, this time from an Aviva Insurance representative. The message went along the lines of “… of course we want to use more green parts, they make sense from a sustainability perspective, commercially and they will help us repair more vehicles, so they are excellent for the collision repairer. Not to mention the benefits to the policyholder.”
I have visited hundreds of vehicle recycling facilities around the world. I remember one visit to a facility selling a lot of parts to the collision repair industry. From some distance, I saw a bonnet that was being prepared to be shipped to a repairer. Its condition was terrible – filler in multiple areas, paint blistering in one spot, shrink marks on the underside and even some crow’s feet starting to come through. I asked what they were doing with that bonnet, hoping to be told that it was going in the bin. “That’s part of an order that we are shipping to a collision repairer with a heap of other parts,” was the response.
I couldn’t resist: “Do you realise that this part has been poorly repaired before and will be unusable” as I proceeded to explain all the faults? Again, the response wasn’t what I was hoping for: “What do they expect, it’s second hand. We don’t sell new parts; they need to expect it will not be perfect.” Now don’t get me wrong, there are some great suppliers out there that would never supply such a part and I am a strong advocate of quality green parts. What the industry must come to grips with though is that it is very difficult for repairers and insurers to know who the best suppliers are. It’s that bad apple syndrome – one bad apple in the basket makes all the others bad, slowly but surely.
The vehicle recycling industry has a huge opportunity for growth. Usage levels of green parts among UK repairers are well below other countries. Most insurers will tell you that usage hovers around 0-2% of the total parts spend. In the US usage hovers closer to 12%, although we are seeing signs of it waning there as well, as the certified aftermarket part is taking significant market share, while in New Zealand it is not unusual to hear of usage levels reaching 30-40%.
In real terms recyclers make up a fraction of the repair and the only way is up, but it will require commitment, training and investment. Failure to do so will lead to further decline as the likes of the certified aftermarket and OE parallel parts grow their share of the total available market.
For 20 months now, along with the Vehicle Recyclers’ Association (VRA) in the UK, some insurers, eBay UK, environmental consultants and I have been working to build a robust, independent certification programme. VRA Certification is the result of this work and now we have an independently audited set of criteria that vehicle recyclers must meet in order to be certified. This is a world first. Of course, there are other programmes which are great and serve a very important purpose as a stepping-stone towards such a certification programme, such as the ARA Gold Seal and CAR programmes in the US. But it is the level of independence and the robustness of this model that makes all the difference.
Insurers can now rest assured that there is the appropriate level of independent scrutiny, applied to the certified recycler that will give them the comfort they need to know they are, at arm’s length, enabling the use of quality, safe, recall-checked, legally acquired green parts from facilities that meet all environmental and occupational health and safety standards – guaranteed.
There are some great facilities out there that simply go unrecognised. They have worked hard at it, invested heavily and will change the way their auto recycling business is viewed. The VRA Certification programme is progressing well and already more than 10 recyclers have been certified. In total the VRA has received in excess of 160 applications, which the certification bodies are auditing.
All well and good, but what can we do to streamline the parts acquisition process and make parts a symptom of writing an estimate; easy, accurate, frictionless? Maybe we in South Africa could use some of these ideas going forward.