The UK government’s department of trade and industry recently funded an overview of the extent to which vehicle parts aftermarket remanufacturing exists in the UK and basic trends in the sector. It’s an area gaining importance both as vehicle owners become ever more cost-conscious, and as the need for waste materials recycling assumes increased importance, writes Mike Wattam.
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Typically, this activity involves the reconditioning for sale and subsequent reuse of vehicle parts that can include a variety of items for which this activity is economic, including at the top end, engines and gearboxes.
The survey found that the automotive remanufacturing industry in Britain is ill-defined and fragmented, with the larger players still being small enterprises – typically of 10-50 employees. Estimates show an industry annual sales value in the UK of around GBP200m with around 20% of the players dominating volume. Anecdotal evidence supports the view that UK remanufacturing leads Europe.
The burning issue which has been exercising car and truck makers for many years – direct financial viability of remanufactured parts versus pulling new parts/units off the new production line for ‘service exchange’ programmes – was not addressed.
Remanufacturer questionnaires show the main influences being exerted on this industry currently are:
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By GlobalData- Cars and trucks now more reliable over longer periods/miles than ever before;
- It may be more economically viable to scrap a vehicle than to invest in a high cost replacement unit;
- Intense competition exists between remanufacturers in some fields;
- Import of new units (eg rotating electrics) from low-cost markets is undermining remanufacture in the UK;
- Benefits of scale seems impossible to apply due to the breadth of product processed by individual firms;
- Viability of re-manufacturing is often dependent upon the continuance of VM sub-contracting;
- Remanufacturing capability is often affected by lack of suitably skilled staff;
- The absence of an effective national system for returning old core, limits re-manufacturing capability;
- Routes to market are fragmented – in many cases OE contracts are held but marketing is also direct to user;
- Some remanufacturing has been moved off-shore primarily to lower unit costs and pricing.
Interestingly, Volkswagen Group in its quest to reduce waste has introduced a comprehensive programme of remanufacturing across Europe including the UK, matching other German makers who have always attempted to retain all displaced parts/units within their franchises. It is difficult to understand that these are not ‘cost’ operations, but easier to understand the longer-term benefits of such ‘containment’.
Clearly, the remanufacturing industry can benefit from enhanced inter-company co-ordination – for instance in marketing, inter-firm trading, standards, export, a national ‘core’ return system and so on.
Mike Wattam
