Green parts in collision repair: The opportunities in recycling and reuse

The subject of green parts – official OE parts that have been removed from a vehicle to be recycled or reused – has become increasingly topical for OEMs in recent months. Manufacturers are keen to understand emerging trends surrounding green parts and the future impact they’ll have on their businesses. The COVID-19 crisis and subsequent reductions in the need for maintenance and repair have led directly to a loss of parts sales revenue which OEMs are eager to replace, prompting significant parts price increases in the last 12 months.

Rising parts prices will further stimulate the green parts market as recycling becomes more economical and repair businesses discover used parts are more accessible. In some instances, recycled parts have become a necessity for repairers who have been affected by global supply issues caused by the pandemic.

Stakeholder complexity and regulation

The collision repair market is complex and involves multiple stakeholders, from insurance companies to body shops and parts suppliers. As illustrated in figure 1, green parts are created from dismantled vehicles typically written off as a result of an accident. The practice of reusing parts in the repair of older vehicles is long established, but its extension into the younger vehicle repair market has only gained traction in recent years. A 2019 report from ICDP estimates that the value of green parts used in a typical collision repair is relatively low but is higher in the US and Sweden than other markets, at around 10% of the total parts value. It is likely that regulations in these markets that protect repairers and consumers have bolstered use rates. In the US, for example, the long-established Automotive Recyclers Association and its members provide vehicle owners with recycled alternatives to new OE-parts which comply with strict environmental and safety standards. Sweden has also adopted similar standards that offer quality control over the sale of used parts. Insurers in these markets support and encourage the use of green parts, and large suppliers ensure they are readily available to repairers.

A recent MSX study focusing on the UK and Germany (see figure 2) reveals a list of crash repair parts where green parts are most likely to be used (commonly doors, tailgate, front fender and hood) across high-selling models for four manufacturers. The research indicated that of all parts examined, more than 20% were available as green parts in the UK, but in Germany, availability of green parts was much lower.

As expected, the prices of green parts are substantially lower than the equivalent new OE part sourced from a franchised dealer. Prices vary significantly depending on the type of part and the brand or model of vehicle, but overall, lower-cost parts will make repairs more affordable for consumers.

Factors driving the adoption and supply of green parts

Several factors are currently influencing the growth of green parts, and notably, customer attitudes to the use of these parts in major repairs have softened. Independent research commissioned by Allianz Insurance in 2019, which aims to strengthen a more sustainable claims culture, found most UK motorists (69%) would choose the option of a green replacement part to repair their vehicles. Protecting the environment (77%) was the main reason provided by respondents. A survey conducted on the French website L’argus.fr in 2016-2017 found even higher acceptance levels among motorists, with over 87% claiming they were ready to buy a reused part, and 57% of respondents claiming they’d already done so.

Like the standards in the US and Sweden, government legislation in various markets has buoyed the green parts industry. France introduced a law in April 2019 which makes it mandatory for garages to offer customers the option to use a recycled part that’s equivalent to a new OE part when repairing or replacing post-warranty vehicles. The law aims to encourage consumers to opt for recycled parts through the offer of a lower-cost, more sustainable repair. This is one of several eco-friendly initiatives that the French government has implemented.

Insurance companies are actively promoting the use of green parts to help keep cars on the road, and, in turn, to keep policyholders happy. Green parts also support a more ethical claims culture among consumers, reducing the costs of repair and, in some cases, driving down premiums. In the UK, the Association of British Insurers has published a Climate Change Roadmap that pushes insurers towards a net-zero target, advocating the use of green parts. This strategy has been adopted by the UK subsidiary of leading insurer Ageas, which is seeking to differentiate itself from other insurers by reducing the environmental impact of the development of new parts.

How green parts are changing aftersales relationships

In recent years, more structured green parts supply chain solutions have emerged, with repairers setting up new ventures in partnership with green parts salvage and supply services. LKQ Corporation, for example, which specializes in the provision of high-value recycled alternatives to replacement parts, buys vehicles from salvaged car auctioneers such as Copart. These vehicles are then dismantled, and reusable parts are offered for resale.

Green parts aggregators – companies that acquire and sell used parts online – have emerged, with some offering automated portals through which vehicle repairers can source fully traceable parts faster and more efficiently.

OE green parts offer the first-time fit quality of new parts, with the added benefit of being more affordable for repairers and customers. But it means fewer new parts are sold. Alongside sustainability concerns, many OEMs are now examining the market more closely, identifying opportunities to replace potential losses to their parts revenues. The Daimler Mercedes-Benz Used Parts Center (UPC) in Germany, for example, is the first manufacturer-owned recycling center for end-of-life vehicles. This organization has dismantled its discarded vehicles for recycling and sale of parts since 1996. Other large manufacturers have established active working groups examining this topic.

Green parts programs are a compelling response to sustainability concerns and emerging regulatory pressures, although significant technical, commercial and safety obstacles make economic viability an ongoing challenge. But by complementing existing parts ranges with green parts in certain niche scenarios, total loss avoidance for example, OEMs may be able to reduce parts sales losses in a more sustainable way.

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