Dismantlers’ dilemma in end-of-life vehicle recycling markets: a system dynamics model

Stringent environmental regulations, improving technology, and growing incomes have shortened vehicle life-cycles that leads to increasing number of end-of life vehicles (ELVs). ELVs form a valuable source of materials when they are recycled in an efficient manner. Regulated ELV recycling markets for ELV recycling ensure an efficient material recovery, unlike unregulated markets which are present predominantly in emerging economies. We analyze ELV recycling in an unregulated market through a system dynamics model. These markets are close to perfectly competitive markets with low enter and exit barriers for dismantlers, and the scrap from dismantled vehicles is traded as a commodity. Dismantlers entry and exit decisions—dismantlers’ dilemma—are based on profitability. We conjecture that the dismantlers’ dilemma constrains the dismantling capacity and fluctuates the scrap supply in unregulated recycling markets. Using the Indian data, the simulation results show that the unregulated market will lead to lower dismantling capacity, which may further worsen by increase in dismantling costs. From our analysis, we suggest that lowering dismantling costs through coordination among the dismantlers and providing support for scrap prices through regulation can improve the dismantling situation in these markets.