Automotive Manufacturing

Surplus Asset Market Trends

By Nusa Tukic, PhD 

Surplus Automotive Industry Market Overview

Market Overview, Drivers, and Challenges  

Market Overview

• In 2023 and early 2024 the automotive supplier market has seen a significant rebound from the effects of the COVID-19 pandemic.

• Valued at between USD 651.9 and 662.5 Billion in 2022, it is projected to reach USD 1.1 Trillion between 2023 and 2030, growing at a CAGR of 6 – 6.8%.

Key Drivers for Automotive Parts Manufacturing Growth

• The increasing number of electric cars (particularly in the European Union) is driving demand for specialized components like sensors, radar, and lidar.

• The shift towards light commercial, sports, and alternative fuel vehicles spurs innovation in transmission, drivetrain, brake, and steering parts.

• Traditional parts such as engine, electrical, drive, transmission, suspension, and braking components still dominate the market.

• Technological advancements, 3D printing, and e-Commerce platforms are the main trends expected to continue to fuel market growth (Technavio, 2024).

Key Challenges Facing the Automotive Industry*

• Brain Drain: The automotive industry faces a 40% job turnover rate, largely due to poor compensation.

• Aging Workforce: Nearly 25% of manufacturing workers are over 55 and the industry’s struggle to retain quality talent is exacerbated by the retirement of baby boomers.

• Skill Redundancy: Industry 4.0 and electrification have made many labor-intensive workflows obsolete.

• Product Innovation and Compliance: OEMs and suppliers must balance innovation with compliance.

• Customer Preferences: 60% of car buyers are under 45 and expect data-rich, contactless experiences. Manufacturers must reorient their strategies.

• Resource Availability: Manufacturers need to track their resource requirements, manage supply chain risks, and explore circular economy models.

• New Product Demand and Jobs: The shift to electric vehicles will create new jobs, but the U.S. must invest in local production of batteries and drivetrains.

• Agile Operations: OEMs should adopt agile methods to introduce new products and respond to supply chain disruptions.

• Unlocking Data Potential: Accurate data and analytics are crucial for competitive advantage. Automotive ERP software can centralize processes and improve customer engagement and product personalization.

• Building Risk Resilience: The industry must adopt risk management strategies.

*Including Automotive Parts Manufacturing

Source: Technavio. 2024; Cox-Little & Company. 2024

Surplus Automotive Industry Market Position

Compliance and Regulations and Market Position  

Compliance and Regulations

The once-in-a-generation shift the automotive industry faces is also driven by government bodies (national and international) implementing stringent regulations for vehicle emissions, driving manufacturers to continuously develop more sustainable automotive parts. Internationally, a coalition of 23 governments have created the International Zero-Emission Vehicle Alliance (IZEVA), to expand the global ZEV market.

The map below indicates which countries have set targets for phasing out of combustion vehicles and by which year, compared to the overall agreed IZEVA target of 2050.

Countries and Their Target Years for the Phase-out of Combustion Vehicle Sales

Howarth, J. 2024. 10 Important Auto Industry Trends (2024-2026)

Market Position

Considering how capital-intensive the global automotive industry is, it is no surprise that OEMs need to invest in new machines to keep up with innovation trends and remain competitive.

In 2024, US assembly plants are expected to spend $6.18 billion on new equipment, a 3% increase from 2023’s $5.98 billion. The average expenditure on assembly technology will rise to $1,970,582, the highest ever recorded, up from $1,905,175 in 2023, according to the 2023 Capital Equipment Spending Survey. Spending growth is evident, with 38% of surveyed plants having capital budgets of at least $500,000 for 2024, maintaining a trend above 30% for the past six years.

Source: Sprovieri, 2023; American Automotive Policy Council, 2022

Strategies for Surplus Asset Management

Capital Spending and Surplus Assets  

Typically, when OEMs invest in capital equipment, auto parts suppliers must also retool and upgrade their machinery. For instance, in 2022, Ford, Stellantis, and GM announced several investments in their existing plants in Missouri and Michigan, prompting their suppliers to follow suit soon after.

According to a 2020 European Commission study that examined the capital spending of 2,500 of the world’s top companies, the automotive industry spent more on capital investment than any other manufacturing industry. The only industry that spent more was oil and gas.

American Automotive Policy Council. 2022. INVESTING FOR THE FUTURE LEADING IN CAPITAL INVESTMENTS AND RESEARCH & DEVELOPMENT

Surplus Asset Management

Asset management protocols are a catalyst for benefitting all industries, including OEMs and automotive parts manufacturers, by reducing acquisition costs. Implementing preventive maintenance and asset life cycle management decreases the need for new equipment and opens avenues for cost savings. In the UK alone, over 40% of capital expenditure for motor vehicle manufacturers between 2014 and 2018 was attributed to new equipment, a figure that can be reduced with effective asset management.

Effective asset management is crucial for monitoring and tracking manufacturing assets. Implementing a robust asset management solution helps businesses efficiently handle asset acquisition, maintenance, operation, renewal, and disposal. This detailed approach enables informed decision-making and enhances financial and operational performance. By implementing asset management, and particularly asset life cycle management protocols, manufacturers can better understand when their machines need to be replaced or disposed of.

Source: Comparesoft, 2021

Liquidity Services has the expertise and tools (AssetZone®) and the platform (AllSurplus) to benefit any manufacturing company as they unlock value in idle and unused machinery, opening the way for capital to be available for future investments. With significant expertise in over 600+ asset categories, Liquidity Services can help OEMs and auto parts manufacturers achieve maximum value from their surplus by facilitating asset redeployment or selling for high recovery.

We Offer Consultative Surplus Asset Management, Valuation, and Sales Solutions

Ready to Power the Circular Economy? Contact Us Today!

Top 10 Reasons to Start Selling Your Surplus Equipment Now

Start the new year strong by managing your surplus assets today

1. Boost Your Cash Flow

Selling surplus resources brings an immediate influx of capital. Whether you’re expanding operations, funding R&D, or tackling unexpected expenses, the proceeds from selling surplus assets can be reinvested into your business for maximum impact. In today’s unpredictable market, extra cash can be a game-changer.

2. Cut Storage Costs

Idle equipment sitting in storage is a financial drain. Beyond taking up valuable space, it incurs ongoing storage, insurance, and maintenance expenses. By selling surplus items, you can eliminate these costs and repurpose the freed-up space for more immediate needs.

3. Optimize Warehouse Space

Unused and unnecessary assets clutter your warehouse, occupying space that could be put to better use. Selling surplus equipment allows your organization to better organize its storage, potentially avoiding the need for costly warehouse expansions or even allowing for a downsize in space.

4. Take Advantage of Tax Benefits

Selling surplus assets before year-end can offer tax advantages. By recognizing the loss or gain in the current tax year, you might offset profits and reduce your tax liability. Consult with a tax professional to understand how this strategy could benefit your situation, but know that the end of the fiscal year is often the perfect time to secure these advantages.

5. Support Sustainability Initiatives

Embracing a circular economy ethos ensures that your organization’s equipment is used to its fullest potential. Selling surplus rather than disposing of it reduces waste and aligns with sustainability initiatives, offering both financial gain and a positive environmental impact.

6. Preserve Asset Value

The longer an asset sits idle, the more its value depreciates due to technological obsolescence and market fluctuations. By selling before year-end, your business could secure a better price and protect the asset’s residual value.

7. Maximize Opportunity Costs

Every surplus item represents an opportunity cost—the difference between the value of the existing asset and the return that could have been earned from an alternative investment. Holding onto surplus assets might mean missing out on opportunities that offer higher returns.

8. Reduce Maintenance Costs

Surplus resources require periodic maintenance, even when not in active use. This can lead to unnecessary expenses in parts, labor, and time. Selling surplus items eliminates these costs, freeing up capital and resources for more critical needs.

9. Streamline Operations

Surplus equipment can be a distraction, cluttering facilities and diverting attention from core operations. By periodically selling surplus, companies can maintain a lean operational profile, ensuring smoother day-to-day operations and improved worker productivity.

10. Mitigate Risks

Surplus assets, especially aging ones, can become liabilities. If they degrade, they may lose value, become obsolete, or even pose safety risks. Selling these items before they become a problem can help mitigate these risks.

Managing surplus assets is more than just decluttering—it’s a strategic imperative with tangible financial and operational benefits. By efficiently managing and proactively selling surplus equipment now, you will begin the new year with a stronger, more agile business.

If you would like to explore these strategies, let’s talk. Contact us today!

Fast Moving Consumer Goods

Surplus Asset Market Trend Report Summary

By Nusa Tukic, PhD 

FMCG Processing Equipment Market Trends  

New Equipment Trends and Expansion 

Trends 

• The FMCG processing equipment market was estimated at USD 64.6 billion in 2023 
• Projected to reach USD 84.9 billion by 2028, at a CAGR of 5.6% from 2022 to 2028.  

Source: Markets and Markets, 2023

Industry Segments Expanding the Most by Region

Asia Pacific

• Baked Goods Equipment  

• Meat and Poultry Equipment 

Europe

• Baked Goods Processing and Packaging Equipment  

• Beverage Processing and Packaging Equipment 

North America

• Baked Goods Equipment  

• Non-alcoholic Beverage Processing Equipment  

• Dairy-based Beverage Processing Equipment 

 Source: Business Research Insights (2024), Mordor Intelligence (2024), Grand View Research, 2023, and Markets and Markets (2023) 

Used Equipment Trends

While used equipment and machinery market trends are not extensively researched, we can point to some observed trends sourced from a combination of third-party sources and supported by Liquidity Services’ statistics.  

• 2020 – 2022: Supply chain disruptions and new equipment shortages resulting from the COVID-19 pandemic gave rise to a boom in the used machinery market  

• Early 2023: The market faced an unprecedented machine supply crunch. Prices for used equipment soared to record highs, and finding used machines was challenging. The causes of this extraordinary situation included: 

• Interest Rates: In 2023, inflation drove up interest rates, making equipment loans more expensive.  

• Economic Uncertainty: In January 2023, 61% of economists predicted a US recession within 12 months, causing the US Consumer Confidence Index to reach its lowest point in six years. 

• COVID-19 Supply Chain Shortage: The pandemic resulted in end-use clients holding onto their equipment longer. This limited the amount of used equipment reaching the market, causing used equipment prices to surge to record levels.  

Observed Used Equipment and Machinery Market Trends

Strategies for Surplus Asset Management

With insight from Liquidity Services’ statistics 

Make Informed Decisions 

• Surplus equipment is a dynamic and fast-moving market.

• Keeping up with current information relating to equipment costs is key.

Avoid Timing the Market 

• Sitting on an idle or underutilized machine, hoping for a price uptick can as easily result in a price downturn. 

• Capitalize on depreciating assets as soon as possible.

Opportunity Cost 

• Your equipment is a business asset, and every surplus item on your balance sheet has an opportunity cost—the cost of the existing asset vs. the return that could be earned on an alternative business investment. 

• By holding onto these surplus assets, your organization is locking up capital and may miss opportunities that offer higher returns. 

Tax Benefits 

• Selling surplus assets before year-end may provide tax advantages. 

• By recognizing the loss or gain in the current tax year, businesses can potentially offset profits and reduce tax liability. 

Source: Boom and Bucket, 2024; Business Research Insights, 2024

The Five Best Books on the Circular Economy to Dive Into This Summer

Circular Procurement in 8 Steps by Cécile Van Oppen, Godard Croon, and Dirk Bijl de Vroe

The Circular Economy: A User’s Guide by Walter R. Stahel

The Circular Economy: A Wealth of Flows by Ken Webster

Waste to Wealth by Peter Lacy and Jakob Rutqvist

The Circular Economy Handbook by Peter Lacy, Jessica Long, and Wesley Spindler

If you would like to learn how to start leveraging the circular economy, let’s talk. Contact us today!

In the years since the EPA’s “Tier 4” emission standards first hit the heavy equipment world, a secondary market in older “pre-Tier 4” used construction equipment has blossomed. Buying pre-Tier 4 heavy equipment can be an economical way to address your business’s current needs. But, there are trade-offs and other factors to consider when you buy pre-owned heavy equipment – particularly when it comes to pre-Tier 4 machinery.

What are the EPA’s “Tier 4” emission standards for diesel equipment?

Basically, the Clean Air Act required the U.S. Environmental Protection Agency (EPA) to put regulations in place that would reduce air pollutants. In this case, “pollutants” would be black exhaust and soot from nonroad construction equipment’s diesel engines.

“Tier 4” is the grade of the EPA’s new emissions standards that all newly heavy equipment diesel engines must meet . From agriculture to construction to mining, new equipment must control its emissions through new technology.

Of course, meeting this new regulation can be expensive for heavy equipment manufacturers. The Independent Equipment Dealers Association estimates that new construction equipment costs buyers up to an additional 20% premium over models following less strict standards.

This expense explains the rise of pre-Tier 4 construction equipment in the secondary markets for business owners large and small.

What makes a piece of used construction equipment “pre-Tier 4”?

Essentially, “pre-Tier 4” heavy equipment were manufactured before the EPA’s mandate required all new equipment to meet the Tier 4 regulations. The EPA doesn’t require every currently operating piece of equipment to meet the new standards. Older equipment is “grandfathered” into the current ecosystem.

Depending on the equipment’s horsepower, Tier 4 regulations hit commercial heavy equipment manufacturers in 2014 and 2015. So, when evaluating a piece of used heavy equipment, look at its manufacturing date.

For example, if a used backhoe’s manufacturing year was 2013, it’s probably “pre-Tier 4” equipment. Consequently, the 2013 backhoe should be less expensive than a similar condition 2016 model.

4 Questions to Answer When Buying Used Pre-Tier 4 Construction Equipment

So, you’ve found a piece of heavy equipment that was made before the Tier 4 emissions regulations. Before you make an offer, find the answers to these four questions:

1. Does the machinery meet its manufacturing year’s emissions standards? While current regulations grandfather in pre-Tier 4 heavy equipment, the EPA requires the machine to function at the emissions standard set when it was first made.
2. Does the equipment have a solid maintenance record? You’re more likely to meet the required emissions standards with a well-maintained piece of equipment.
3. Do you own a large “fleet” of diesel-engine equipment? Owners of many diesel-engine machines can only keep the same or fewer amount of pre-Tier 4 engines that they started with. Essentially, you can only replace a pre-Tier 4 engine if you retire another pre-Tier 4 machinery. The goal is for all owners to gradually start replacing their older equipment with ones that meet the newer standards.
4. Do you bid on a lot of government work? Some states and contracts require that bidding contractors and businesses keep their emissions low during construction. This requirement will impact the type of engines you can use on-site, possibly limiting your ability to use pre-Tier 4 heavy equipment.

So whether you’re an independent business owner with a piece of heavy equipment you’d like to upgrade, or an international corporation looking to track and demobilize site assets after project completion, understanding the secondary market for pre-Tier 4 heavy equipment can radically impact your bottom line.

And, if you need help either selling, buying, or managing heavy equipment, Liquidity Services can lend a hand.

Maybe you’re waiting out the U.S. trade war with China, or you’ve got an eye on the hard Brexit date. Or, maybe you’re just in the middle of some expected seasonal downtime. Whatever the reason, you have mothballed equipment not being used, stockpiled supplies, and excess inventory that’s overflowing your warehouses. Every day you’re storing idle equipment and inventory, though, is a day you’re wasting thousands in overhead costs that could’ve been better spent elsewhere.

$32,000+ of Wasted Space in Your Warehouses and Factory Floors

Don’t believe it? Let’s do some quick math.

A recent warehouse industry survey puts the average cost of warehouse space at $6.53 per square foot. And, 64% of U.S. warehouses are at least 25,000 square feet, according to the United States Energy Information Association.

So, if fifteen to twenty percent of your warehouse or factory floor is effectively an “extra equipment” museum, then you’re throwing away $32,000+ every year. And, that’s just a ballpark estimate! If you have entire warehouses dedicated to excess inventory or returned stock that sits for months at a time, that’s a real money sink on your hands.

9+% Maintenance Costs for Excess Inventory and Equipment

All equipment needs repairs – all inventory stay pristine – if it will ultimately be useful for the company. This includes labor costs to maintain equipment and warehouse space. Sometimes, this also includes environmental maintenance costs for sensitive materials, like temperature and humidity maintenance.

Maintenance budgets normally reserve about 5-6% of the machine or inventory’s market value for labor expenses with an additional 3-4% for needed supplies. Plus, there’s an extra 1-2% for building maintenance expenses.

In all, you can expect to spend anywhere from 9 to 12% of your idle equipment or inventory’s market value on maintenance alone – and it’s not making your company a dime.

Beyond Capital Asset Depreciation: Your Increased Real Estate and Employee Tax Burden

On top of the space and maintenance costs for idle equipment and extra inventory, there’s an increased tax burden to consider.

Sure, capital assets like equipment and materials may be tax-advantaged through depreciation. But, you still pay real estate taxes for your commercial properties, and taxes on your employees’ compensation.

Every day you’re storing equipment that’s not producing goods or excess inventory that’s not available for purchase, you spend thousands in taxes for the privilege of hoarding it.

Higher Insurance Service Costs for Equipment, Products, Supplies and Excess Inventory You’re Not Using

Overhead for businesses includes necessary insurance payments ranging from professional liability to workers’ compensation. Property insurance pays for repair or replacement of equipment, inventory, supplies – anything inside the insured commercial building – should something happen.

Let’s estimate that commercial property insurance costs between $1,000 and $3,000 for every million dollars of coverage. In addition to covering your active lines and current products before they’re shipped to customers or stores, your commercial property insurance also covers idle equipment, unneeded supplies, and returned inventory.

Between insurance, taxes, maintenance, and storage – that’s tens of thousands you’re spending to keep unused and unwanted property. What else could you have spent that money on? Employee retention through training and benefits? Upgrading equipment? Product development?

And imagine how much more you could invest if you go an extra step further and sellthose formerly worthless assets to other businesses. That idle equipment and extra inventory becomes a new revenue opportunity instead of an unavoidable sunk cost.