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16
2019-05
The improvement of the old parts recycling system in automobile remanufacturing is driving the development of the automobile industry.
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Xianji Network
Summary：
The State Council recently promulgated the Measures for the Administration of the Recycling of Scrapped Motor Vehicles (hereinafter referred to as the “Measures”).
The State Council recently promulgated the Measures for the Administration of the Recycling of Scrapped Motor Vehicles (hereinafter referred to as the “Measures”). As an upgraded version of the current Measures for the Administration of the Recycling of Scrapped Automobiles, the Measures will come into effect on June 1, 2019, and represent a product that is highly attuned to the needs of our times. In particular, the provision allowing qualified “five major components” to be recycled reflects a clear commitment to strengthening environmental protection and promoting the development of a circular economy. It is believed that the introduction of the Measures will inject green vitality into the development of China’s entire automotive industry chain.
When a vehicle is scrapped, it does not necessarily mean that every single part is reduced to scrap metal. Many components are, in fact, “scrapped but not truly wasted”; after being disassembled and reprocessed, they can be reused, effectively enjoying a “second life.” Both domestic and international experience demonstrates that remanufactured products can match or even surpass the performance and quality of new parts, while their cost is only about one-quarter to one-third that of new products. Moreover, remanufacturing can achieve energy savings of more than 60% and material savings of over 70%. In fact, the remanufacturing of automotive components has emerged as a burgeoning industry that aligns with the global trends of energy conservation and environmental protection, with an ever-expanding market and exceptionally promising prospects.
According to statistics from the Remanufacturing Branch of the China Association of Automobile Manufacturers, there are currently more than 300 automotive parts remanufacturing enterprises in China, with an estimated output value exceeding RMB 10 billion. Their product portfolio covers all automotive components that can be remanufactured. The industry is also exhibiting a trend of full-industry-chain development, with the emergence of specialized used-parts service companies. In Hejian City, Hebei Province, and Taolin Town, Lianyungang City, Jiangsu Province, tens of thousands of people are engaged in the collection of used automotive parts, giving rise to professional used-parts trading markets. Meanwhile, specialized firms providing equipment and services for the remanufacturing industry have successively entered the market, and the world’s only dedicated e-commerce platform for remanufactured automotive parts has already gone live. In addition, the development of remanufacturing bases and industrial clusters has gradually resulted in distinctive regional industrial characteristics.
However, although the domestic automotive parts remanufacturing industry is a burgeoning, sunrise sector, it still lags significantly behind its international counterparts overall. More than technological capabilities, the greater gap lies in public perception. Industry insiders point out that in mature markets in developed countries, consumers view remanufactured products as being of equal quality to new parts and exhibit high acceptance; by contrast, Chinese consumers generally regard remanufactured goods as “second-hand” and are far less receptive. Abroad, remanufactured components are routinely used for warranty-period part replacements, whereas in China there are currently no successful cases of such practice. Moreover, it is not only consumers but also many manufacturing firms that harbor misconceptions about developing the remanufacturing industry. Some companies believe that remanufactured products will undermine the market for their new offerings, failing to recognize the profound, long-term benefits remanufacturing can bring to corporate sustainability or the fact that remanufacturing is an essential requirement for advancing a green, circular economy.
Of course, this low level of public awareness is attributable both to insufficient government promotion of the remanufacturing industry and to inherent policy biases. For instance, under the current regulations on the management of end-of-life vehicles, the resources that can be reused after a vehicle is dismantled are extremely limited: the vehicle body is typically sold at scrap steel market prices, while the fate of other components—such as tires, seats, and auto parts—depends on whether there is still market demand. At present, whether the vehicle is a BMW, a Haima, a Mercedes-Benz, or a Benben, once it is scrapped it is treated as a single category and receives a uniform subsidy based on a fixed price per ton (currently about RMB 250, a rate that has remained unchanged for many years). This policy sends the signal that the government does not place much emphasis on the secondary utilization of scrapped vehicles, which in turn fosters resistance among many vehicle owners and dampens their enthusiasm for scrapping and recycling their vehicles.
Institutional shortcomings are also evident in the tax system. As far as we know, typical manufacturing firms are required to pay value-added tax at a rate of 16% on product sales, with the tax liability calculated as the difference between output VAT and input VAT that can be offset. However, in the remanufacturing sector, when acquiring used parts, firms often cannot obtain VAT invoices—since most used parts come from non-profit individuals who are not authorized to issue such invoices—meaning there is no input VAT available for offset, let alone any benefit from the VAT credit. To safeguard their profit margins, remanufacturers are thus forced to cut costs by raising selling prices, which in turn places the burden on purchasing customers. Naturally, these customers are reluctant to absorb such increases, ultimately leading both buyers and sellers to adopt a more cautious stance and resulting in persistently low investment enthusiasm across the entire industry.
Encouragingly, the Measures have adjusted policy orientation, and their promulgation and implementation are expected to reverse this unfavorable situation. The Measures not only refine the system for collecting used automotive parts eligible for remanufacturing but also set forth requirements for remanufacturing enterprises that can accept the “five major assemblies,” while mandating product traceability to allay consumer concerns about quality and safety. These provisions will play a positive role in raising public awareness of the recycling and reuse of automotive components and in advancing the development of the entire remanufacturing industry.
Looking further ahead, for the automotive recycling industry to achieve broad public awareness and expand its market reach, it is essential not only to refine specific industrial policies and strengthen targeted publicity but also to develop comprehensive plans that cover the entire product life cycle and the full value chain, integrating green principles at every stage—from design and procurement to manufacturing, consumption, and recycling. Only in this way can we identify the challenges facing China’s automotive recycling industry, pinpoint their root causes, and devise effective solutions, thereby truly transforming this sector into a thriving, sunrise industry.
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