The End-of-life Vehicle Recycling Law came into effect in January 2005 with the aim of lowering chlorofluorocarbon emissions, preventing illegal disposal of materials such as shredder dust and increasing vehicle recycling. The law has caused changes in the vehicle recycling business, and created a market for shredder-dust recycling. New players have entered the market, and used car exports have increased, reducing the number of junked vehicles. New entrants have boosted shredder-dust processing capacity, and competition has increased.
Japan's massive economy has boosted mass production, mass consumption and mass disposal. In recent years, however, awareness of environmental degradation, resource depletion and related problems has increased, emphasizing the importance of resource recycling and greater interest in environmental protection. The Basic Law for Establishing the Recycling-Based Society, passed in January 2000, legislates the recycling of containers, packaging, home appliances, unwanted food products, construction waste and cars. It also provides a comprehensive legal framework for regulating the lifecycle of products, from manufacturing to disposal.
The end-of-life vehicle (ELV) recycling law, enacted in 2002 and put into force from January 2005, was prompted by the problem of insufficient landfill space, which led to illegal disposal of automobile shredder residue (ASR)1 generated when vehicles are scrapped. By systematizing vehicle recycling, the law specifies the responsibilities of car manufacturers and importers, the recycling fees to be paid by vehicle owners, and the registration and licensing of processors. The changes it has brought about have encouraged more companies to enter the field. Car ownership in Japan totals around 80 million vehicles, and as many as five million are disposed of yearly, so vehicle recycling is a key step in establishing a recycling-based economy in Japan.
1. Current state of vehicle recycling
A. Market scope and size
The vehicle recycling industry involves a range of processes, including disassembly, component recycling and reuse of shredder dust. Although it is difficult to define the scope or size of the market, in terms of the number of ELVs2, around five million vehicles are recycled each year.
B. Trends
The auto recycling market includes auto dismantling, parts recycling and ASR recycling. This section provides a summary of trends in each segment.
1) Vehicle dismantling
Until now, the dismantling segment has been mostly tiny companies with just two or three employees. However, large auto-wrecker startups have increased in recent years. Along with trading companies and manufacturers who handle recovered metals, new car dealers have entered the market to meet their Extended Producer Responsibility obligations.
In recent years, integrated companies that collect, dismantle and shred vehicles for auction houses and used car dealers have also been entering the market to raise the efficiency of their overall operations (Fig. 3).
Some large corporations shred 10,000 or more vehicles annually, about 10 times the number typically handled by conventionally small operators. One advantage of a wrecker affiliating with a large company is access to trade-in vehicles received by new car dealerships, non-life insurance firms and leasing companies that do business with their large parent companies.
Easier access to financing also makes it easier for wreckers to source ELVs, which has increased competition and hurt many wreckers.
Fewer vehicles are now being dismantled as more ELVs are being resold at auction, and because of changes in distribution. Many wreckers say that ELV inventories fell 20%-30% between 2004 and 2005. Wreckers have been known to pay around ¥50,000 (plus auction fees) for cars that would ordinarily be dismantled, pushing up prices.
2) Recycled parts
The demand for low-cost repairs, primarily for older vehicles, has grown in parallel with the trend to own cars for longer periods of time. To minimize repair costs, customers are buying more used or rebuilt parts taken from ELVs. Wreckers used to sell primarily iron scrap, but with falling prices and rising costs of shredder dust disposal, they are turning to the supply of used and rebuilt parts to maintain profitability.
From around 1985, the growing demand for used parts resulted in the sharing of distribution networks and inventories. This has increased availability and business efficiency,
further encouraging demand (Fig. 4).
With substantial drops in inventories, and with more good-quality used vehicles (the source of used parts) being exported, acquiring used parts has become more difficult. Competition for supplies has increased due to a decline in the number of vehicles being dismantled, and by rising ELV prices. Rising prices for used parts have slowed the market in recent years.
Nevertheless, latent demand for used parts remains large, representing 40% to 50% of auto-part replacement. Several distribution network mergers now underway are expected to improve both availability and customer convenience. Consequently, increasing acceptance of used parts is expected to boost the market from ¥120 billion in 2005 to around ¥150 billion sometime after 2006.
3) ASR recycling
The market for shredder dust from scrapped ELVs was created when the ELV recycling law addressed the dual issues of lack of landfill space and illegal dumping of shredder residue.
The Japan Automobile Manufacturers Association’s 1998 voluntary ELV recycling initiative aims to increase ELV recycling to 95% by 2015. An important issue in achieving this goal is dealing with ASR, most of which is dumped in landfills.
High processing costs have been an issue. ASR recycling requires complex technology to recover the electrical, thermal and gas energy bound in the organic materials, and metal and slag contained in the shredder dust. Moreover, ASR constituents are not uniform, and require processing, such as dioxin treatment, different from treating ordinary waste. The ELV recycling law has prompted the industry to step up efforts to achieve industry-wide ASR recycling goals, and has encouraged several companies to enter the ASR recycling business
for details, please download the following file.
