It has been a busy few years for LKQ in the UK and Ireland. The company, led by its European parent, has grown to incorporate brands that span the aftermarket, offering a range of services from car parts, to workshops, bodyshops, and even boats.
Now, we sit down with UK and Ireland CEO Andy Hamilton to talk about what’s good, what’s bad, what’s changed since Covid, the proposed MOT extension, tackling supply chain issues, and what’s next for the ever-growing corporation.
Can you give an overview of LKQ Euro Car Parts in 2023?
So Euro Car Parts is the main trading organisation for our service, maintenance repair parts. So that’s servicing both key account customers and independent workshops as well as consumers for service repair products.
We have a body shop division, LKQ BodyShop. That is an organisation that deliberately targets the body shop customers, because the needs of the body shop are a bit different from the needs of the independent workshop.
We have a leisure marine business [Arleigh Group]. We supply replacement and new parts or replacing parts and new OE parts for caravans, motorhomes, holiday parks as well as boats, barges, yachts, super yachts.
Then we obviously have our new addition to the family, Diagraph, which is our heavy goods vehicle business. So we’ll be adding that and hopefully kind of integrating that as much as possible over the coming couple of years.
So we have a few faces, to recognise the different types of customers we have.
What are the biggest changes you’re currently making?
So the independent workshop is beyond transactional nowadays, it’s beyond just providing a part; we are providing insights, data, technical support, training, systems, digital as well as the physical products required to do the work. Because that’s what the workshop needs to be able to fulfil that particular job on that vehicle.
And I suppose the question around where the direction of travel is, that task is getting harder and harder for the workshop. And therefore it’s getting harder and harder for us to make sure that the workshop can say yes. And there’s some really interesting stats out there now around where the consumers are moving to hybrid and EV [electric vehicle].
There’s a big shift in where they are then looking to take their vehicle for any sort of maintenance work. And so my primary objective is the preservation of independent workshops. Because ultimately, if we don’t have a customer base, then we don’t have a business. So we need to keep those independent workshops operating, we need to make sure they’ve got the skill, the equipment and the software and the data to be able to do those tasks.
How is business going?
We are doing well. LKQ Euro Car Parts in the UK and Ireland, we are a market leader, and we’re in a market leading position. The team’s doing a fantastic job, we are trying to evolve our proposition, we are continuously trying to find ways to improve the service, the experience, the availability, the support for the customers. And we are seeing continued success around those areas.
The markets, it’s been a turbulent few years. So we’ve seen the impacts of a lot less new vehicles entering the UK car parc over the last four, five years. Whilst you’d say the aftermarket would benefit from that in the short term, because the age of the vehicle parc gets older, there’s less new cars entering. That’s true. So there is a bit of upside there.
However, there’s been between 500,000 and 750,000 less vehicles per year for the last four years entering the aftermarket. So whilst there’s a bit of an ageing vehicle parc, which is good for the aftermarket, we’ve seen some kind of positives and negatives.
The ageing vehicle parc will be good for the aftermarket. So over probably a five or 10 year period, most of that was smooth itself. The biggest challenge for the aftermarket is making sure we are ready for the technology changes. The aid is coming in on vehicles and the electrification of vehicles. That’s the biggest challenge.
What impacts of the proposed MOT extension have you seen, and what are your views on it?
It caused some challenges. An independent workshop will have two or three technicians, they need a steady constant flow, and that MOT extension will put a big divot in the demand of when MOTs come through the year. So everyone’s having to adjust and to kind of try and manage that.
EVs and hybrids, from an MOT perspective, actually fail as much, if not more, than petrol and diesel cars on this third year anniversary, primarily around steering suspension and tires because they are heavier cars and they tend to either damage the suspension or the tires are getting worn out quicker.
So from a safety perspective on keeping cars safe technology isn’t really changing the dynamics, if anything, with EVs and hybrids, you need to keep a firmer eye on some of those key aspects of the vehicle.
We’ve had this conversation with the Department of Transport for the MOT review. Because the perception was, “well, vehicles are safe, and therefore we don’t need to have an MOT as frequently” and we’ve proven that that’s not the case. They actually, because of their weight, because of the way they operate, you actually need to check them at least as frequently as an internal combustion engine vehicle.
Supply chain issues are affecting car manufacturers at the moment. Are they impacting LKQ as well?
I think the situation is improving. There’s two kinds of significant impacts. One was, obviously the microchip or the conductors semiconductor issues that we had, which was an impact of post-Covid. That was impacting new vehicles. Sometimes when the OE [Original Equipment] production has been impacted, the aftermarket will then see a subsequent impact as the demands change. So we’ve seen a bit of that.
And we also saw through the Ukraine [war] crisis, we’ve seen shifts in supply which have caused disruption as well. So we had Covid, we had post-Covid with the semiconductors and chips, and we’ve had Ukraine. I’d say the situation now is improving.
But certainly over the last couple of years, it’s been challenging. And I say improving, improving our ability to service our customers, I think at a market level, OE new products are still significantly impacted.
And if we look at our body shop customers, the key-to-key time on a repair now is still probably double to what it was pre-Covid.
Speaking of Covid, how was it for LKQ, and did it change how you operates?
I think a favourite British word which sums it up is: interesting. Probably colourful, that’s another one.
That was probably our hardest, my hardest, time. I’d actually think I’d been in the role 12 months when [Covid] happened. So we’ve never heard of lockdown before Boris came on the TV and said right, we go into lockdown and key workers are the only people that had to move around.
We then debated all through the night and through the following morning as to whether we could even trade the next day. Because there was no clarity around whether we could trade.
We took the risk. And by the Friday it was actually confirmed that we could trade because key workers need to get work. And we are supporting workshops and roadside assistance – such as the AA and RAC – to get people to where they need to go. So we eventually got granted permission. But it was a bumpy few days. Over the next three months, 50% of the garages in the UK closed or just didn’t bother opening. And therefore we ‘slept’ half of our network, merge teams. We had 7000 colleagues out of 11,000 on furlough at one point – and we topped up their salary so there were no worse off.
And yeah, it was an incredibly challenging time. We slowly kind of then reopened. I live in London, I’ve got a number of friends who are in financial services and banking and within that first year, they were told to get back to the office four days a week or three days a week or five days a week. We said no, let’s play it by ear. Let’s try and be flexible. Let’s try and create an environment. This is probably my only time in my working career where the country, the globe, went through something that enabled us to change the way we work. So Teams didn’t exist beforehand. So I think we are more agile and we work in a different way.
The offices we had reconfigured so you come here for a reason. You come here for meetings face to face. You come here for team events, team meetings, if you’re gonna come here on screen, just go and do it at home or do it somewhere else. You don’t need to be here.
So we had nearly 600 people here pre-Covid. We now have probably about 30 people based here through their roles because it’s more convenient; then we have people floating in and out. So that’s kind of changed the way we work.
From a cultural perspective, it has changed the business as well. Trying to certainly focus around wellbeing, and around work life balance. And we’ve put a lot of rules in to kind of stop people working not to make people work. So no one’s allowed meetings before 9am or after 5pm. You’re not allowed to email after work, just to encourage that actually, you can have that work life balance
…And from a customer perspective?
From a customer perspective, it’s giving us more confidence around how we communicate with the customer, our digital capabilities, our online ordering, or E-commerce has significantly shifted in b2b [business to business], and we will continue to develop in that area.
Now, I think historically, it was still a very traditional telephone and face to face conversation dialogue, there is more confidence in the E-commerce side because everyone was forced to do things online during that time.
We’ve also changed the way we’re physically handling products [as well as] the way they’re been ordered. It’s the way we’re all interacting. We’ve got new developments coming in the next 12 months, which will change our telephony and change our approach on the way we communicate with the customer. So there’s a lot more contactless digital. And that’s not just an efficiency for us, that’s trying to make it efficient for the customer as well.
How can we get to a place where we can take time and cost out of [our customers’] working days? Things like used to send and print off of all invoices, and that’s all now digitally available, even though sometimes customers still want paper.
And we’ve just launched with our ‘Where’s My Order?’ so they can actually see us because the vans are all now connected. They can see when the vans are on route, they can see how far it is. But that whole digital visibility was born out of Covid for the right reasons. And I think those are the big things that stuck.
What’s currently going well for LKQ?
There’s been a lot going on, we’ve been consolidating the businesses, both operating perspective as well as brands. So we were three or four years ago, we were five individual businesses. And we’ve been bringing that all together, not just from a systems perspective, but from a people’s team. So we’ve been doing a lot of work to kind of create that single entity or single organisation, and more consistency in how we support customers.
So we’re part of LKQ Europe. The great thing with having 20 markets in Europe is that you see some things that are in front of us and some things that are behind us. So the LKQ Academy, which is our online digital trading platform that we adopted from our Scandinavian sister business. And we’ve now rolled that out successfully across the UK.
We’ve also done a massive amount of work on the whole supply chain, and trying to maintain those availability levels through the last few years. So it’s not necessarily always sexy stuff, but just making sure we’ve got stuff that we can actually supply and support our customers with.
So what’s what’s next? What’s the next big thing?
I think for us, is the independent garages’ ability to be able to work. So getting them ready for hybrids and EVs. It kind of sounds obvious, but the numbers are pretty scary. In the last year there were only 3000 technicians in the UK qualified [to work on] ADAS [Advanced Driver-Assistance System]. We need 100,000 In the next three years. So we’ve got a long way to go.
And EV, hybrid is not much different. I think we’re now at about 40,000 trained to work on EVs, but we need nearly 200,000 eventually. So these are the things we need to help with: the technical ability, the tools, the systems, the solutions, being able to support the customers to be able to actually work on this vehicle. We don’t want the exodus of the independent aftermarket by all cars going back to the OEM [Original Equipment Manufacturer] because in my own personal experience, the service and the experience in the OEMs isn’t great, so making sure that alternative experiences are available is critical.
Sustainability is a big topic. What’s LKQ doing with that?
Yeah, I think every organisation in every industry faces sustainability challenges. We have gotten our CNG [gas-powered] trucks, we’ve, by the end of this year, will have 100 EV vehicles. But of course that puts a massive strain on our infrastructure. We don’t have car parks full of EV charges for all of our vans and our vans to go back with our drivers every night and they don’t have chargers necessarily either. So we need to think about what type of vehicles, what sort of support [is best] for a logistics business.
So it’s really thinking about how we set ourselves up from a sustainability point of view is we’ve got this whole entire organisation, this wholesale central distribution centre will have solar panelling by the start of next year, that will make this neutral, hopefully might generate enough to make our two CDCs next to each other completely neutral. But we’ve got 250 sites, so we’ve got a long way to go.
We are lagging behind. A lot of European markets you get, as a business, far more support to get better green capabilities. We seem to be behind the curve as an industry. And as a as an economy.