The Chinese government provides that a vehicle should be sent to a qualified enterprise for dismantling and scrapping when it runs for 600,000 kilometers. And scrap vehicles’ engines, steering gear, transmission, front and rear axles and frame are forbidden to be sold illegally and should be recycled as scrap metal. The vehicle owner can get the residual value of the recycled scrap metal. However, this provision is poorly enforced.
According to CRI analysis, vehicle consumption becomes increasingly popular in China with the development of economy and increase of income. China had ranked first in vehicle production and sales volume for twelve consecutive years from 2009 to 2020. And the vehicle reserves keep rising. China’s vehicle reserves reached 254 million at the end of 2019, ranking second in the world. It is estimated that China will surpass the U.S. to have the largest vehicle reserves in the world in 10 years. As the average vehicle age increases, scrap vehicle recycling has become one of the social concerns. On the assumption that the service life of passenger vehicles is between 8 to 10 years, the number of scrap vehicles had exceeded 7 million by 2020 and will grow at an annual rate over 10%. However, only 1.95 million scrap vehicles were recycled in 2019. Many scrap vehicles are still being used or were illegally disposed. For example, some of them were reassembled or refurbished to be sold as second-hand vehicles.
Owing to the poor industry regulation, legal scrap vehicle disposal has been affected by the illegal one. China’s annual recycling volume accounts less 1% of the vehicle reserves, which is much lower than 5%-7% in developed countries. Because of the quota on the number of scrap vehicle recyclers, the numbers of registered scrap vehicle recyclers and recycling outlets were 800 and 3000 respectively at the end of 2020, having a wide gap with the fast-growing number of scrap vehicles. According to CRI analysis, in 2020, due to the outbreak of the COVID-19 epidemic, it will have a certain impact on China’s automobile manufacturing industry. In order to promote car sales, the Chinese government has issued a series of measures to encourage scrapping old cars and buying new cars. Therefore, the outbreak of the epidemic has promoted the development of China’s auto scrap industry to a certain extent.