"Legitimate Enterprises Have 'No Cars to Dismantle,' So Why Can Scalpers Monopolize Vehicle Sources?" | Power Plant

During the “3.15” period, CCTV News reported a controversial investigative story: In Linyi, Shandong, unlicensed dismantling shops control most of the local scrap vehicle sources, illegally dismantling and selling scrap parts, and even refurbishing vehicles to re-enter the market; while large, legitimate dismantling companies receive very few vehicles, with factories essentially shut down due to a severe shortage of scrap cars.

In fact, the number of scrapped vehicles is currently surging. Data from the Ministry of Commerce shows that from 2024 to 2025, the country will recover 17.673 million scrap vehicles, with an average annual growth rate of 45.8%. The number of scrapped new energy vehicles has doubled. Conversely, information from the Ministry of Industry and Information Technology indicates that by 2025, only about 1,000 companies nationwide are qualified for dismantling new energy vehicles, with only 148 qualified for battery dismantling.

With many scrap cars and few compliant companies, vehicle recycling should be a profitable business, but many companies are suffering huge losses. CCTV News reported that a relatively large dismantling plant in Shandong lost over 2 million yuan in 2024. According to industry insiders, this is not an isolated case.

Legitimate companies “have no cars to dismantle” mainly because most of the scrap vehicle sources on the market are monopolized by scalpers. Due to the special nature of vehicle recycling, scalpers have significant control over the scrap car industry.

Image source: CCTV News

Li Feng (pseudonym), a manager at a Beijing scrap car company, told Industry Insider that scalpers have a long history in the scrap car industry: some seasoned scalpers have been in the business for over thirty years, initially relying on rough operations to accumulate capital, then expanding through investment and equity participation to become legitimate operators, though they still engage in illegal activities and tax evasion; their apprentices are the main force within the scalper groups; there are also newcomers who blindly enter the industry, earning meager income through scattered recycling, mainly serving the second-tier scalpers.

“Almost 80% of the service providers for car owners in the market are scalpers, which has historical reasons and some rationality,” said Liu Cong (pseudonym), an industry insider from a scrap car platform.

First, dismantling plants need roles like scalpers to help reduce customer acquisition costs. Liu explained that in the past, most dismantling plants lacked sufficient staff and did not have dedicated customer service, making communication with car owners difficult. If a dismantling plant directly contacts scalpers, they only need to communicate with one scalper daily, who then delivers 3-4 trucks of cars waiting to be scrapped—each truck containing 8-12 vehicles. But if the plant contacts car owners directly, they might have to make 40-50 calls.

Before 2022, there were only about 370 qualified scrap car dismantling plants nationwide, with high industry entry barriers and significant influence. Manufacturers often assign trusted insiders as primary scalpers. Dismantling plants set purchase prices for primary scalpers, who then pass the quotes down to lower-level scalpers or directly to car owners. This directly fosters the growth of scrap car scalpers.

Additionally, logistics costs are crucial for scalpers. Most dismantling plants do not have their own towing fleets, but scrap cars are very dependent on reverse logistics. “Whether scrap cars are profitable mainly depends on the reasonableness and cost of towing,” Liu said. Dismantling plants directly pick up cars from owners one by one, while working with scalpers involves hauling in bulk, which significantly affects logistics costs.

Regional restrictions also promote the emergence of scalpers. Some dismantling plants in certain cities receive tens of thousands of cars annually, while others in mountainous areas only get around 2,000 cars per year. Smaller plants must increase profits to survive, which often means lowering the prices paid to car owners, making them more willing to sell to higher-bidding scalpers.

As the primary source of vehicles, scalpers can dismantle high-value parts like catalytic converters (excluding major assemblies). CCTV’s investigation shows that a single scrap catalytic converter can sell for 800 yuan on-site. By the time the vehicles reach legitimate dismantling plants, they are often leftovers. Reports indicate that “companies have to accept many ‘second-hand scrap cars’ transferred from small dismantling points. If they insist on only accepting complete, compliant vehicles, they will end up with no cars to dismantle and face bankruptcy.”

Image source: Provided by interviewees

This creates a vicious cycle: because dismantling plants receive low-value cars, they are reluctant to invest in direct customer connections and thus heavily rely on scalpers; scalpers, able to profit from the situation, promote and connect with customers themselves, maintaining control over the primary vehicle sources.

This distorted industry logic forces compliant companies to become part of the black market. The report also mentions that “these small workshops control vehicle sources, causing some large dismantling companies locally to participate, becoming part of this illegal car dismantling chain.”

This year, the Ministry of Industry and Information Technology and six other departments jointly introduced new policies, focusing on the “integrated vehicle and battery scrap” system to prevent third parties from illegally dismantling and reselling batteries, effective from April 1. Liu said that actual implementation still faces challenges: “As long as scalpers hold enough vehicle sources, dismantling plants will basically listen to scalpers. If necessary, they can even export vehicles overseas for dismantling.”

Besides scalpers, some scrap vehicles are also taken by dismantling companies affiliated with automakers. For example, Geely’s Anhui Jifeng Recycling Technology Industry Co., Ltd. has a natural advantage in the automotive aftermarket, capable of integrating reusable parts and aftermarket components from Geely’s various models. This further worsens the supply situation for ordinary dismantling plants.

The wave of scrapping new energy vehicles has not yet arrived. Li Feng said that, based on his company’s recovery data, the leading brands in scrapped vehicles are mainly JMC, JAC Motors, BAIC New Energy, Chery New Energy, and Changan. This result surprised him, as it differs from the currently popular brands like BYD, NIO, and XPeng. However, looking back 6-8 years, the earliest batch of new energy vehicles enjoying national subsidies were these brands.

Currently, most scrapped new energy vehicles come from companies and organizations, with individual owners’ vehicles not yet entering large-scale scrapping. Liu confirmed this, noting that models from Roewe and BYD are more common on the market, mostly used by taxi companies.

“The industry consensus is that before the demand for scrapping sharply increases, the entire industry will still be in a state of under-supply and vicious competition,” Li Feng said.