Salvage market bucks market downturn

Manheim Australia says that despite the current automotive downturn due to COVID-19, the National Salvage Auction market is showing continued strength.

First quarter results year on year show Salvage vehicle returns rose between 3% and 5% of pre accident value compared with the same period in 2019.

Whilst the market suffered the impact of multiple natural disasters during the first quarter of 2020 including national bushfires, Canberra hail and Queensland and New South Wales floods, the increased volume in the market has not dampened buyer consumption.

“There was an expectation that with the increased volume in the market as well as uncertainty surrounding the impact of COVID-19 that both prices and clearances rates would suffer. So far this hasn’t materialised.” says Manheim’s Head of ANZ Salvage, Jonothan Ellerton.

According to Ellerton the outlook for quarter two and beyond has also improved on the back of recent market activity.

“Based on quarter one results and the activity we have seen in the market during April we’re now anticipating a much less severe decline in returns and clearance rates over the coming two quarters.

“Obviously our IT challenges through March restricted some supply but more interestingly what we are hearing when talking to our customers is the impact of COVID-19 lockdowns across North Asia has severely restricted the import market for new and parallel parts.”

In addition to part restrictions, supply of salvage vehicles will also likely be reduced through the coming quarters as COVID-19 lockdowns keep people off the roads and reduce vehicle accidents.

“Depending on the extent of COVID-19 restrictions in terms of both their severity and length of implementation, the advice we have received is that the volume of new vehicle write off’s we should expect to receive, may reduce by anywhere between 30% and 50%, at least in the short term.” Ellerton says.

Manheim has continued with the all online salvage auctions it implemented in 2018 and other than migrating staff to a ‘work from home’ environment where possible, implementing appropriate social distancing and PPE measures for vehicle delivery and collections, there has been little impact to its daily salvage sales.