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ANALYSIS

End-of-Life vehicle recycling to see big growth in GCC

Dubai, July 9, 2014

Stricter laws, green marketing and public-private partnerships are key drivers for end-of-life vehicles recycling market in the GCC, a report said, adding that automobiles have high potential for recovery, making it a lucrative market.

A fast catching up trend globally, End-of-Life Vehicles (ELV) recycling, is a market with high growth potential in the GCC, added an analysis released by Frost & Sullivan, a growth partnership company.

Though currently at a nascent stage with the first plant being opened in Sharjah in 2013, the GCC countries have the potential to recover 0.9 million tonnes of metal by 2020, the analysis said, noting that automobiles are one of the highest recyclable-engineered goods produced, with recovery rates of almost 90 per cent.

According to the analysis, vehicle sales in the GCC is likely to grow at a compound annual growth rate (CAGR) of 5 per cent between 2014 to 2020 with Saudi Arabia and the United Arab Emirates dominating with a combined market share of 76.5 per cent.

Middle East in general and the GCC in particular is a fast growing market for automobile industry. Higher standards of living combined with other factors like improved per capita income, auto-financing programmes and lack of public transportation system and growing population are driving the auto sales in the region.

According to Frost & Sullivan estimates, 58 million tonnes of metal is expected to be recovered from ELV recycling by 2020, globally. Vehicle ownership globally has been increasing higher than the population and has already crossed the one billion mark, which has also resulted increase in generation of ELV. Since ELV consist 73-75 per cent metal, it has been traditionally traded as valuable secondary resource and is easily recyclable.

The auto recycling industry plays an important role in conservation of natural resources through recycling and reuse of vehicle parts, automotive fluids and scrap metal. This has made “Sustainability” a key for success in todays’ automotive industry.

Today, most of the global car manufacturers have acknowledged that used cars are an important source of secondary raw materials and by closing the gaps in the material cycle through recycling, ELV contributes towards conservation of natural resources by providing renewable raw materials which are cost effective and environment conscious.

“Almost 1.17 million vehicles will be reaching End of Life state by 2020 in the GCC, which makes the GCC countries highly potent for ELV recycling,” said Subhash Joshi, senior consultant, Automotive & Transportation Practice, Mena, Frost & Sullivan. “ELV offers a sustainable business model for recyclers and part re-manufacturers, which is presently very limited in the region.”

Globally, countries are making it a priority to encourage recycling of ELV. Japan, for example, has outlined a law that defines responsibilities of automakers and other concerned parties in order to encourage the recycling, thermal recovery, and proper treatment of ELVs. In the GCC, Mercedes –Benz has made an inspiring effort on this front by developing their own recycling management system.

However, challenges like lack of unified regulations and infrastructure, limited attention to ecological impact of ELV disposal and minimal vehicle assembly and manufacturing in the region are hindering growth of ELV recycling market in the GCC.

To address these challenges, Frost & Sullivan believes that the GCC governments have to advocate stricter laws with respect to ELV recycling and initiate appropriate incentives for all stakeholders involved in the process.

Another important aspect is to initiate Green Marketing, to brand the automotive recycling industry as a professional organisation selling green, economical and safe recycled parts. Frost & Sullivan also recommends public-private partnership with cooperation of all stakeholders, and appropriate incentives, to develop an efficient and viable recycling industry in the GCC. – TradeArabia News Service




Tags: automobiles | GCC Market |

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