Advice Counts By Mike Kunkel profitteammike@gmail.com

What Hybrid Batteries Are Teaching Us

iStock.com/Yurchello108

ount’s Consulting has a theme that we will be highlighting throughout 2015. That theme centers on the differ- ence between a core and a commodity and more importantly how controlling the commodity allows us to increase our dollar yield per vehicle.

C

With regards to the hybrid battery, let’s look at how it relates to how the future of our industry needs to be viewed. The batteries seem to fall into two simple cat- egories: units that are damaged to some extent, and undamaged units. The ability to use cells from a damaged unit to replace bad cells in an undam- aged unit means that each have a dif- ferent value than the other, but both still have value. How much value is most often determined by how you handle them and who you sell them to. I live in the Dallas-Fort Worth area with a population base of 6 million plus peo- ple. When you do a Google search, you get very little back as far as choices to pur- chase a rebuilt hybrid battery. So, if there is a limited group of people that are rebuilding batteries, the demand that sit- uation produces determines the ability to get a higher price.

22 Automotive Recycling | March-April 2015

As business owners and managers, we always want to control our own destiny. The core/commodity market is an area that we can control our fate.

The number of hybrid vehicles is con- tinuing to grow, but it is still a small per- centage of the vehicles that are on the highway. That ends up creating a limited supply of an item that has a number of components that create value. As the only people who can process the com- plete hybrid vehicle to can access to the battery, we have control over that com- modity as it flows back to OE or after- market sources or potentially foreign markets.

If done in a consistent and repeatable fashion and with the ability to market the material to a single point of contact, this system will allow us to get the maximum amount of money and allows us to rein- vest in our inventory to repeat the process.

Using this discussion of recycled hybrid batteries as the example, how many other items do we handle on a regular basis that are currently not being treated as commodities, which causes us to lose control of the market and the receiving end of making less than we should for something nobody else can produce? We need to keep in mind what the competitive alternatives are. In this case, you need to have raw material to manu- facture the battery. The costs associated with that make it much easier for the rebuilder start with a refined material that is much more cost effective. As business owners & managers, we always want to control our own destiny. The core/commodity market is an area that we can control our fate, but only if we understand the way that market forces apply to our industry.

Mike Kunkel has 35 years’ experience in the auto industry, with 20 years serving as general manager of a salvage facility. He is immediate past president and a founding member of TEAM PRP, a noted speaker, and past chair of the Used

Parts Committee at the Collision Industry Council. His ex- pertise is streamlining processes and maximizing the rev- enues per employee, measuring historical data when buying to build a growth/profit strategy, and the Pinnacle system.