Abstract: With the continuous growth of the number of automobiles and the amount of scrapped vehicles in China, the recycling and dismantling of scrapped vehicles are increasingly receiving attention. If a large number of scrapped vehicles are not properly disposed of, China will become the world's largest "automobile waste factory" after the "parking lot", leading to resource waste, environmental pollution, and other issues. This not only affects the establishment of a closed-loop automotive industry chain in China but also poses a huge threat to the country's economic development. However, the recycling and dismantling industry of scrapped vehicles in China is still in the early stage, with many issues that need to be addressed. This article starts from this background and the reality of industrial development, deeply analyzes the problems and causes in the recycling and dismantling industry of scrapped vehicles, and proposes corresponding suggestions on how to promote the development of the recycling and dismantling industry of scrapped vehicles.
In recent years, with the continuous development of the economy and society, people's living standards have been continuously improving, and automobile production and consumption have also developed rapidly. Along with this, a large number of scrapped vehicles are produced every year. Scrapped vehicles are an important renewable energy source and a new emerging economic growth point. However, from the broad development prospects, there are still serious problems in the recycling and dismantling industry of scrapped vehicles in China, which affect the development of the entire industry. This article will sort out the problems existing in the recycling and dismantling of scrapped vehicles and propose corresponding countermeasures.
1. Overview of Scrap Vehicle Recycling and Dismantling
China began to manage the recycling of scrapped vehicles in the 1950s and with the gradual formation of the concept of reasonable dismantling of scrapped vehicles in the early 1980s, industry regulation has become more standardized. In the late 1990s, the relevant industry developed rapidly. Currently, the recycling and dismantling industry of scrapped vehicles has developed to a considerable scale and has become an indispensable industry. As of the end of August 2022, there are 1204 qualified recycling enterprises in the country, with nearly 2500 recycling outlets distributed throughout the country's cities and counties, employing more than 30,000 employees, and recycling nearly 2.5 million vehicles annually . At the same time, the government has also played an important role in the recycling and dismantling of scrapped vehicles. Starting from the 1980s, the government has been promoting the formulation and improvement of industry policies, regulations, and technical specifications, as well as deploying and updating industry development plans.
2. Main Problems Faced by the Scrap Vehicle Recycling and Dismantling Industry
2.1 Decentralized Management Authority, Difficult to Form a Joint Force
On June 11, 2019, the "Measures for the Management of Scrap Motor Vehicles Recycling" (Order No. 715) was officially implemented, and different government agencies have different management authorities over scrapped vehicles. They directly or indirectly manage the industry and enterprises from various aspects, but in actual management, there are inadequate functional linkages among various departments, resulting in a certain degree of management disconnection. This leads to a lack of coordination among departments, a lack of comprehensive, unified, timely, and coherent work measures and support policies, and correspondingly reduces the work efficiency of enterprises. Therefore, the construction and industrial operation of China's scrapped vehicle recycling system need to be upgraded and improved to meet the needs of China's economic and social development.
2.2 Legal and Standardized Management Needs Further Improvement
In recent years, China has issued a series of regulations and technical standards for the supervision of scrapped vehicles. However, compared with developed countries and the needs of the development of the scrapped vehicle industry in China, the existing laws and technical specifications still have problems such as insufficient quantity, inadequate coverage, and weak enforcement, resulting in problems in dismantling level, industry order, industry development, and supervision. This makes it difficult to form a unified, open, and orderly market order in the short term.
2.3 Outdated Industry Operation Methods and Concepts
With the official implementation of the "Measures for the Management of Scrap Motor Vehicles Recycling" (Order No. 715), a large number of high-quality enterprises have entered the scrapped vehicle industry, which has played a certain role in promoting the industry. However, the overall pattern of the scrapped vehicle industry is still "small, scattered, and weak" . Recycling and dismantling enterprises are mainly small-scale, with many from the recycling of renewable resources enterprises transformed, and the dismantling operation methods are extensive. Temporary workers are the main workforce in the enterprises, and the personnel turnover rate is high, with low technical skills and relatively scarce professional and technical personnel. Apart from simple tools and dismantling machines, there are basically no other dismantling equipment, and the dismantling process is mainly manual. The business chain is relatively short, and the business model is still in the low-profit stage of dismantling scrapped vehicles for material recycling. The financing channels are narrow, and the capital strength is insufficient, making it difficult to carry out daily operations and expand business. The technical strength is not strong, and there is no ability to develop new technologies. The automation and specialization levels of enterprises are low. This leads to low added value of most scrapped vehicle recycling and dismantling products, causing serious resource waste and secondary environmental pollution.
2.4 Low Quality of Employees in the Industry
Most of the existing employees in the majority of scrapped vehicle recycling and dismantling enterprises are old and have lower educational levels. In this field, due to the low income and harsh working conditions, universities and colleges do not set up corresponding majors, making it difficult to introduce relevant knowledge and skills into the vision of young people. The in-service personnel in the industry also lack organized learning and training, lack the concept of the rule of law, have poor environmental protection awareness, and have low technical levels. Most of them only learn the knowledge and skills in practical operations to carry out the reuse and dismantling of scrapped vehicles, and the comprehensive quality of enterprise personnel is difficult to meet the needs of enterprise development.
2.5 Depressed Market, Operating Difficulties
Due to the low price of scrapped vehicle recycling and the complexity of the scrapped process, in the absence of scrapped subsidies, the willingness of vehicle owners to scrap their vehicles is low, and most of them are resold in the form of second-hand vehicles or even sold to illegal dismantling enterprises . In such an environment, the regular scrapped vehicle recycling and dismantling industry faces the situation of insufficient collection and insufficient revenue. At the same time, because the raw materials sold by the scrapped vehicle dismantling industry are closely linked to industries with excess production capacity and other factors, the business volume and sales prices have declined, and the economic benefits have been significantly reduced, leading to difficulties in enterprise operations.
2.6 High Tax Pressure, Difficult for Regular Enterprises to Survive
On March 1, 2022, the government implemented a simplified tax law for the recycling of renewable resources, allowing recycling enterprises to choose to apply the simplified tax calculation method and pay value-added tax at a rate of 3%, greatly reducing the value-added tax for scrapped vehicle recycling and dismantling enterprises. However, after the recycling enterprise chooses the simplified tax law, the backend material disposal enterprise will recycle its dismantling materials, and because the 3% input invoice is less than the original 13% value-added tax invoice deduction, it will also correspondingly lower the recycling price, basically eroding the profit space that the scrapped vehicle recycling enterprise obtains from the tax reduction. For the recycling enterprises that did not choose the simplified tax law due to various reasons, due to the particularity of the scrapped vehicle recycling industry, they generally cannot obtain value-added tax input invoices from vehicle owners, and even if they can obtain them, they need to bear all the tax costs of the input invoices, so they basically need to pay all the value-added tax when selling dismantled materials, resulting in a huge tax burden. The increase in tax pressure has led to an increase in operating costs, a decrease in market competitiveness, and regular recycling enterprises facing difficulties, with the scale of operations continuously shrinking.
2.7 Chaotic Market Order
Compared to general waste materials, scrapped vehicles have a higher value, and the recycling and disposal process can generate relatively high profits, which has led to the proliferation of scalpers in the industry. They have gradually taken control of the scrapped vehicle recycling channels, making it difficult for recycling enterprises to obtain first-hand information on scrapped vehicles, and they can only obtain high-priced scrapped vehicle resources from scalpers, making it difficult for them to survive. Some scalpers even force recycling enterprises to engage in illegal operations to obtain excess profits, leading to a chaotic market order. At the same time, many underground vehicle dismantling workshops are using regulatory loopholes to raise prices and compete with regular recycling enterprises for supply. In recent years, underground vehicle dismantling has become increasingly frequent and has not been effectively banned, making the scrapped vehicle recycling and dismantling market even more chaotic.
3. Analysis of the Causes of Problems in China's Scrap Vehicle Recycling and Dismantling Industry
3.1 Insufficient Regulatory Power
3.1.1 Lagging in Regulation
Lagging regulation is inevitable. First, people will only think about how to supervise, regulate, and guide when problems occur. Second, China's scrapped vehicle dismantling industry started relatively late, and it takes time for new industries to respond and be recognized. Therefore, there has always been a lag in the control of scrapped vehicles, and dismantling is no exception. In the past few decades, sustainable development has not received enough attention from society, and the reuse and dismantling of scrapped vehicles have not received enough attention . However, with the rapid development of China's automotive industry, a large number of scrapped vehicles have been produced, which has also caused problems such as resource scarcity. Therefore, discussions on green, high-value treatment of scrapped vehicles have been carried out in various places, and relevant management methods have been formulated. Looking back at the regulatory process of the scrapped vehicle recycling industry, the environmental and resource problems caused by insufficient management of the recycling and dismantling of scrapped vehicles have received high attention from all sectors of society in a short period of 20-30 years.
3.1.2 Incomplete Regulatory System
Government departments and social forces have not been better integrated to form a good regulatory system, making the problems in the scrapped vehicle recycling and dismantling industry always more prominent. First, industrial regulation should be conducted on all aspects, rather than just government agencies. At present, the internal supervision system of the domestic scrapped vehicle recycling and dismantling industry has not been established, and there are still many shortcomings in supervision. Some illegal practitioners try to find non-standard ways to obtain excess profits, which has a negative impact on the development of the industry. Second, external regulation constraints. By observing and researching scrapped vehicles, it can be seen that the problems existing in the reuse and dismantling industry of scrapped vehicles have been greatly highlighted through the attention and reporting of the media, which has greatly increased people's attention to the scrapped vehicle recycling and dismantling industry. At the same time, we cannot ignore the power of the government. Currently, there are two main problems with government regulation in China. One is poor management and insufficient regulatory power, which has led to the rampant "underground dismantling plant" . The second is that effective and long-term supervision mechanisms have not yet been established for industrial supervision. In the past, inspections of the scrapped vehicle recycling and dismantling industry were mostly guerrilla, surprise inspections, which greatly weakened the effectiveness of supervision and could not fundamentally solve industry problems.
3.2 Regional Development Imbalance
Since the implementation of the reform and opening up policy in 1978, China's regional economic development has shifted from seeking regional balanced development to the development of coastal areas. With the rapid development of the eastern coastal areas, the gap between coastal and inland areas has widened, and this gap will continue for a long time. The imbalance in economic development between regions, the price difference between new and old cars is very obvious, which has formed an endogenous driving force for the illegal circulation of scrapped vehicles. In addition, due to the imperfect second-hand car trading in China, a large number of scrapped vehicles flow to underdeveloped areas in the form of second-hand cars before being scrapped.
3.3 Lack of Attention to Scrap Vehicle Recycling and Dismantling by Society
In the entire automotive industry, the recycling and dismantling of scrapped vehicles is an important link in the closed-loop processing of vehicles' entire life cycle. Its focus is not on how to solve the dismantling problem of vehicles but on how to achieve the reuse and utilization of waste parts more efficiently, so as to achieve the goal of a circular economy in an increasingly resource-scarce society, which is the essence of this industry. Therefore, as a sunrise industry, its development potential is huge. In the process of development, scrapped vehicle recycling enterprises can absorb a large amount of manpower and capital, effectively solve China's employment problem, and fully utilize society's idle capital. However, the attention given by society to the vehicle dismantling industry is still insufficient, which has led to a low overall level of the industry, internal management chaos, and the proliferation of scalpers and illegal dismantling enterprises. All of these have brought great obstacles to the development of the scrapped vehicle recycling and dismantling industry.
4. Effective Measures to Solve Problems in the Scrap Vehicle Recycling and Dismantling Industry
4.1 Improve the Regulations and Technical Standards Management System for Scrap Vehicle Recycling
The state and local governments should continue to implement the current technical standards for the recycling and dismantling of scrapped vehicles, draw on advanced experience from developed countries, and further improve relevant laws, regulations, and technical standards. Develop medium- and long-term development plans for the scrapped vehicle recycling and dismantling industry at all levels, and make expanding the responsibility of production entities a priority. Implement the extended producer responsibility system for automotive products, implement a lenient entry, strict management, and zero-tolerance policy, establish a recycling and disposal fund for scrapped vehicles, and provide certain subsidies to qualified regular enterprises to ensure that they can recycle and dismantle scrapped vehicles in accordance with the requirements of resource recycling and environmental protection, and avoid the bad money driving out the good money in the scrapped vehicle recycling industry . Governments at all levels and relevant departments should actively cooperate and assume their respective responsibilities to ensure that the construction of the scrapped vehicle recycling system and the development of the industry enter the track of legalization and standardization as soon as possible.
4.2 Moderately Increase the Number of Scrap Vehicle Recycling Enterprises
Based on the existing number of vehicles and the number of scrapped vehicles in each region, gradually expand the number of enterprises in the same administrative region according to relevant national laws, regulations, and technical standards, establish high-quality recycling and dismantling enterprises that meet modern development, encourage moderate competition between industries, promote market integration through economic means, eliminate backward production capacity, and improve the recycling rate of scrapped vehicles, as well as improve technology, equipment management, and operation level. At the same time, a sound market entry and exit mechanism matching the number of scrapped vehicles in the region should be established according to relevant laws and technical specifications.
4.3 Construct a Modern Scrap Vehicle Recycling Network
In response to the current difficulty of scrapped vehicle recycling for enterprises, encourage enterprises to innovate their business models based on existing management systems, fully utilize the Internet of Things and Internet technologies, comprehensively create online and offline recycling networks, form an efficient scrapped vehicle recycling system, establish stable point-to-point recycling relationships with scrapped vehicle owners, improve customer stickiness, create first-hand recycling channels for scrapped vehicles, and effectively reverse the difficult situation of recycling vehicles.
4.4 Strengthen the Research and Promotion of Advanced and Applicable Technologies for Scrap Vehicle Recycling and Dismantling
Adhere to technological innovation, strengthen economic and technological exchanges, and strengthen the integration of industry, academia, and research. Relevant government departments and industry associations should regularly organize economic and technological exchanges with relevant colleges, research institutions, etc., broaden their horizons, update their concepts, and learn from advanced experience in enterprise management, industrial planning, system construction, operation models, and other aspects in the same industry at home and abroad. Strengthen technological innovation in the scrapped vehicle industry, promote the independent development of common basic technologies and major cutting-edge technologies for green vehicle recycling in China, and comprehensively improve the overall operational capabilities of the scrapped vehicle dismantling industry and enterprises.
4.5 Focus on Training Professional Talents for Scrap Vehicle Recycling and Dismantling
Through on-the-job education, full-time education, adult education, vocational skills training, and other channels, improve the overall quality of personnel in the scrapped vehicle recycling and dismantling industry, and lay a talent foundation for the sustainable and healthy development of China's scrapped vehicle recycling industry. First, form an internal benign training and promotion mechanism, vigorously promote the "craftsman spirit," and carry out on-the-job training, technical competitions, innovation and creation activities. Organize employees for vocational skills training and assessments in stages and batches to improve their technical and business capabilities . Second, through various incentives, attract outstanding external talents, improve the upper limit of team capabilities, and cultivate a team of technically competent professionals that is compatible with the industry and enterprise development.
4.6 Rectify the Operational Order of the Scrap Vehicle Recycling Industry
In response to the current problems, relevant policies should be issued to regulate the industry order, comprehensively use various means, strictly crack down on illegal and criminal activities in accordance with the law, strengthen industry administrative management and self-discipline, and through continuous governance and rectification, regulate business behavior and further create a competitive and orderly scrapped vehicle recycling order and market environment to create a healthy development environment for legal and compliant enterprises.
4.7 Promote Further Development of the Scrap Vehicle Industry
First, increase the re-manufacturing and reuse of scrapped vehicle parts, improve relevant laws and regulations, and increase people's recognition and acceptance of re-manufactured and reused parts, creating a living soil for the recycling and reuse of parts. Second, establish an integrated business management system for enterprises. In the central cities of economically developed areas, relying on scrapped vehicle recycling and dismantling enterprises, break down barriers, realize the reasonable flow of resources, technology, capital, and talent within and outside the industry, implement scientific management, and establish highly standardized, mechanized scrapped vehicle recycling and dismantling enterprise groups. At the same time, establish a complete dismantling material sales channel and system to promote the healthy and orderly development of the industry.
The number of scrapped vehicles in China is increasing rapidly. Standardized recycling and dismantling of scrapped vehicles is an important task to promote resource recycling, protect the ecological environment, and promote green, low-carbon, and circular economic and social development.