The scrap metal market has taken a pounding with a strengthening U.S. dollar and slower than expected economic growth internationally, especially with regards to Crushed Auto Bodies. To highlight this, the average price of Crushed Autobodies across the U.S. averaged $178.73 per gross ton as we finished the first quarter of 2015. This is a 21.15% decline just from the last quarter (a drop from $226.67), a drop of 34.96% a year ago from the first quarter of 2014 (at $274.80), and a whopping 44.6% decline from the average price of $322.60 during the first quarter of 2012. This decline is expected to continue into 2015 as the forecasts for domestic demand remains flat.
These figures and forecast currently seem to be echoing throughout the scrap metals market despite the U.S.’s GDP, construction industry, and industrial activity all trending positively.1 However, a bright spot opens up in the form of new opportunity with low crushed autobody values, and that’s with the lower pricing that is trickling down to used vehicle pricing as observed in the third quarter of 2013 with used vehicles reached their lowest price-point in 12 years.2
From these lower prices, third world nations will now be able to increase their purchase/import of these used vehicles, and help drive used car sales. This is echoed by Tejashri Pai, VP of Chowgule Industries that “The second hand car market….is growing steadily and will continue to do so in the coming years.”.3 This is true even in the luxury market as India’s pre-owned luxury vehicle market is projected to boom this year. Coincidentally, these used vehicle prices are dropping right as India has started to ease its excise duty on vehicles/vehicles parts; this, in conjunction with the trend of Indian pre-owned luxury car owners changing their vehicles within 2-3 years of purchase is only powering the pre-owned luxury vehicle market in India even further.4
Moving on elsewhere, in China a middle class continues to quickly emerge, and with it the used car market in the country. Currently, ownership of a vehicle is viewed as a status symbol and is highly sought after. Furthermore, despite legislation to make electric vehicles more attractive via large tax breaks/subsidies, there will be plenty of people in rural China that will be welcome to the bargain of gasoline-powered vehicles.5
Bottom Line: with these nations set to being the drivers of the growing global middle class through the next decade and beyond, it is certainly wise to not overlook their appetite for used vehicles, and to utilize the current low prices as an opportunity to break into their markets.
About ARS
Advanced Remarketing Services offers innovative solutions to some of the remarketing industry’s toughest questions. We navigate the confusing landscape of wholesale, salvage and consumer markets to sell the vehicles in the best venue to the most appropriate buyer base.
Media Contact
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References
1. Lane, A. (2015, February 23). Morningstar Free Smartpage | News. Retrieved March 16, 2015, from http://news.morningstar.com
2. Q3 is Weakest For Used-Car Prices Since 2002. (2014, October 14). Retrieved March 16, 2015, from http://www.autoremarketing.com
3. John, A. (2015, February 16). Second hand car market cruising along. Retrieved March 16, 2015, from http://www.heraldgoa.in
4. Solanki, S. (2015, March 15). Why India’s Pre-Owned Luxury Car Market Will Boom in 2015. Retrieved March 16, 2015, from http://www.gtspirit.com
5. Karklins-Marchay, A., & Sasson, S. (2013, April 23). Middle class growth in emerging markets – China and India: Tomorrow’s middle classes. Retrieved March 16, 2015, from http://www.ey.com