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Signals of Strength: Auto recycling sector’s pandemic power attracts investment, say consultants

Toronto, Ontario ⁠— As an essential business amid COVID-19, the strength of the North American automotive recycling sector has been thoroughly demonstrated⁠—and investors are taking note.

During the first of the Ontario Automotive Recyclers Association’s (OARA) virtual training series, guest speakers Rob Rainwater, Mike Kunkel and Lee Worman from Profit Team Consulting discussed the various lessons auto recyclers have pocketed amid the pandemic.

While Worman said the industry always knew it was essential, the pandemic reaffirmed this belief not only to auto recycling businesses across the country but to the wider economy.

“We always knew we were essential. Thanks to this label, we’ve been able to lessen the impact on the financial side of things and we’re very, very fortunate as auto recyclers,” said Worman. “There are definitely a lot of equity firms out there now approaching our industry in a whole new light.”

Worman said equity firms and investors are already noticing the strength of the sector and considering investment opportunities in various verticals.

“A lot of equity firms have looked to move money toward our industry, whether it’s on the scrap side or on the salvage side. The best part about that is that it has also made our businesses worth more than they were before.”

The pandemic has also sent used parts prices through the roof and increased demand as aftermarket supply dwindles and bodyshops turn to recyclers for solutions.

“I hear a lot of requests that we weren’t getting before. Shops are more desperate for a piece of inventory that we don’t normally sell or carry or isn’t available anymore. There are some pieces that salespeople should be taking opportunity of⁠—there are parts they can get $200, $300 or $400 for because the part isn’t available and the repair needs to be done. The prices of most of the parts have gone up and up and up,” said Rainwater.

Rainwater said, to take advantage of these increases, salespeople should pay attention to parts prices and know what’s available on the market versus what’s not.

“Everyone may be listing a door for $750, but another company may list that door for $1,000 because they’ve recognized that door is not available anymore. Pay attention to what some of the big companies are doing price-wise⁠—there are people out there researching what’s available and what’s in demand.”

“The winners of this pandemic are going to be the ones that come out of figuring out how to operate with less inventory debt but sustained parts sales,” said Worman.

In place of the annual OARA Convention and Trade Show⁠—which has now twice been cancelled due to pandemic restrictions⁠—the organization is hosting bi-weekly virtual training sessions now through June 3.

If you missed this week’s session⁠, fear not⁠—more online meetings are available from now through June 3. Mark your calendars for these upcoming sessions:

  • April 8th, 3:00 pm – Sales Management
  • April 22nd, 3:00 pm – Buying, processing and inventorying cars
  • May 6th, 3:00 pm – Recyclers Roundtable
  • May 20th, 3:00 pm – Dismantling, shipping and receiving: what happens after the sales team take the order and how your parts flow through to the customer.
  • June 3rd, 3:00 pm – Ask the Experts

Click here for more information on OARA’s online training series.

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