"We have value-add plans for the future"

Varun Laroyia sat down to talk with Jos Veldhuisen, editor in chief of the Dutch "Aftersales Magazine". In the interview the Chief Executive Officer and Managing Director of LKQ Europe talked about LKQ’s visionary foundation 25 years ago, the company’s positioning and future perspectives in Europe, how LKQ brings sustainable growth into the Independent Aftermarket, and why OEMs should forge a closer relationship with the aftermarket leader.

If we look to the European map of the aftermarket we see a lot a white spots in France and certainly Spain. Do you expect growth opportunities on the short term for LKQ in these countries/areas?

Globally, we just celebrated our 25^th anniversary. A quarter of a century in which LKQ has made a huge impact with a simple, but bold and visionary idea – to reimagine the automotive salvage marketplace. In Europe our legacy, leadership and growth is equally as impressive; we have been here since 2011, and our presence has grown rapidly. We now have a presence in more than 20 European countries, serving over 100,000 workshops each day through our network of over 1,000 branches and led by our 26,000 colleagues showcasing the products and services of our supplier partners.

In our Benelux-France region we opened a new headquarters in Rotterdam, Netherlands, and our 7th distribution center in France with the latest being in near Marseille... We see intense competition in the region and are confident of our plans for the region. The situation is different on the Iberian Peninsula, where we currently do not have a presence. This region is definitely interesting for us. I strongly believe in profitable growth, prioritization and execution; at times one has to be patient and alert to be able to react for the right opportunity.

To sum it up, LKQ is the automotive aftermarket leader in Europe and we plan stretch out our top position with the goal to provide our customers with world-class service reliability and unmatched breadth and depth of inventory to help them succeed.

Sustainability is a key priority for LKQ. Is there a grand master plan to become sustainable? And what about suppliers and customers (the whole ecosystem of LKQ).

Absolutely right, since the first day LKQ Corporation was established, we have always had a strong focus on providing sustainable solutions in the automotive industry. For us, sustainability is not a choice, it’s a responsibility and sits at the core of our DNA and culture. Our commitment to sustainability is unwavering, and we continuously seek opportunities to enhance our efforts. We have been investing in sustainability projects across LKQ’s business, making significant progress in technologies that will help to reduce our carbon emissions, implementing energy-efficient solutions, and developing sustainable product lines. We also prioritize resource preservation and promoting the reuse of vehicle parts, with a focus on the proper and environmentally sound handling of end-of-life cars.

At the same time, sustainability is about much more than just environmental factors, if you think for example about the 17 Sustainable Development Goals from the UN. It is also about ensuring the well-being and development of the people who drive our business every day. You will hear me talk about our people being our greatest asset. We make sure to provide them with the necessary tools and resources to be successful and safe. And finally, we strive through charitable endeavors to make the world a better place in the communities where we live and work – for our employees, their families, and the customers we serve.

Dismantling is core business for LKQ in the USA. Is this now a – among other dossiers – a priority for Europe? Will acquisitions be the generator of growth in this segment?

First, we need to change our memories of disassembly. Today, it no longer has anything to do with climbing up to a warehouse of junk cars to unscrew one part at a time. Those days are gone for a long time. Today, spare parts are ordered online and you can choose from different conditions including a warranty, and have it delivered the next day.

The roots of our company lie in the dismantling of salvage vehicles to recycle OEM parts. As part of our European strategic plan, we intend on capitalizing on that knowledge coupled with remanufacturing capabilities. This is part of our ongoing commitment to offer affordable and sustainable mobility. With Atracco, the LKQ Europe group is a leader in Scandinavia in environmentally friendly car dismantling and car parts sales. And in February, we have expanded our European salvage network and remanufacturing capabilities with the acquisition of Rhenoy Group – a leading supplier of remanufactured engines, and recycled OEM car parts in the Netherlands. We are very familiar with the business and we have exciting plans for the future.

For an affordable mobility, repairability and pricing are key factors for consumers. How will you convince repairers to adapt used parts? And how do you cope with guarantees on used parts?

The world is changing, and beyond having not as much of an impact on the environment, used car parts have additional benefits: for example a lower price tag or that they can often be sourced faster. In terms of affordable and sustainable mobility, the use of recycled parts makes more sense than ever, and not only private buyers or auto repair shops are installing used parts, but insurance companies as well. The perception of used parts is changing, and the macro-economic effects give additional tailwinds. Our used parts are graded up to new condition, additionally customers receive for example our remanufactured engines with a comprehensive warranty. And as for the environmental impact mentioned earlier of remanufacturing, according to the U.S. Environmental Protection Agency remanufacturing is estimated to provide as much as 85% reduction in total energy used and a 70% reduction in carbon emissions compared with original OEM manufacturing processes.

Electrification also brings new opportunities, not at least for battery repairs. Can you tell us a little more on LKQ’s plans? And the experience you already have in the USA and Sweden?

The automotive industry is undergoing a major transition. LKQ is committed to deliver and help our customers to champion this change. In North America, Green Bean is a reconditioner and installer of batteries for hybrid electric vehicles. With its portfolio this LKQ company offers solutions for the mobility of the future already today. In Europe, Scandinavia and Benelux are leading the transformation. And with Moobi, our workshop concept solution for electric vehicles, LKQ Europe became already the leading provider of innovative services for electric and hybrid vehicles in the field of maintenance, repair and charging solutions across the Netherlands and Belgium; the network of certified specialists contains now more than 100 Moobi centers and more than 250,000 charging points, and we have plans to further develop this innovative e-mobility services. And we are just getting started!

Truck parts are now part of your sales operations. The UK, Czech Republic and Germany are already busy with it. Will the rest of Europe follow?

Mid-July LKQ had acquired the remaining stake in Digraph, the UK’s leading independent aftermarket commercial parts distributor specializing in heavy goods vehicle (HGV), coach and bus parts. This was a milestone for LKQ Europe as it marks our formal market entry into the truck parts business. We broaden our capabilities, and importantly provide our customers unparalleled parts availability, expertise and benefits of our scale. Our focus in Europe is on the distribution of aftermarket parts for cars, commercial vans, and industrial vehicles.

Will truck parts be a separate company or will it be integrated in the standard wholesale operations?

Digraph will be integrated into our LKQ UK and Ireland group, alongside LKQ Euro Car Parts, LKQ Bodyshop and the Arleigh group. By joining our organization Digraph benefits from enhanced buying scale and the support of a combined financial strength, with new investments planned in its people and systems. The business, however, will continue to operate as a separate legal entity under the Digraph brand.

Connectivity and of course car data are the basics for new business models, especially for car manufacturers. What role will LKQ play in supporting the independent channel with a car data strategy?

We are the automotive aftermarket leader in Europe. That brings with it responsibilities and duties, and we are committed to helping our customers manage future change. The EU Commission's so-called Data Act defines who can access and create value from data generated in vehicles and under what conditions. By applying harmonized and transparent rules, the Act will make data generated by the use of products or related services available to the user, third parties or the public sector. LKQ Europe supports these efforts and believes that the legislation can provide a solid framework for data access rights for private and commercial users. We are ready to work with the European institutions to further refine the proposal and support the creation of additional sector-specific legislation on access to in-vehicle data to address the specific needs of our industry. This can only be achieved by putting consumers at the center and ensuring that the decision to release data rests with vehicle owners and drivers.

… and last but not least, how thinks LKQ about cooperation with car manufacturers like Stellantis?

The undergoing transformation of our industry has an impact on the aftermarket, but above all the auto OEMs. In changing from cars with internal combustion engines to all-electric powertrains, and the intervening transition, they have to supply multiple drive trains over a long period of time, which entails enormous financial commitments. LKQ Europe currently supports a network of more than 8,000 workshop partners across the countries we are operating. Today, this network offers motorists and fleets standardized technical support for a broad range of vehicles and might bear benefits for manufacturers as well. In short, it is always good to connect and work collaboratively – LKQ Europe has a lot to offer!

Information first published in the Aftersales Magazine (www.aftersalesmagazine.nl), 24 October 2023.