Copart Germany: A New Salvage Auction Model | In Practise

Copart Germany: A New Salvage Auction Model

Former Director at Copart Germany

Learning outcomes

  • Regulatory differences between the German and US auto insurance industry
  • The existing German salvage model and why it’s inefficient for both buyers and sellers
  • History of Copart acquiring WOM to enter the German salvage market
  • Why only 10% of buyer bids actually receive the car and how Copart solve the issue
  • How Copart are changing the German auto insurance regulatory landscape
  • The new Copart model in Germany and how the profits are shared with insurers
  • Core challenges in scaling the Copart model in Germany
  • How Germany can unlock the rest of Europe for Copart
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Executive Bio

Andreas Zeh

Former Director at Copart Germany

Andreas has 15 years in the German automotive salvage industry and is a Former Director at Copart Germany. Andreas grew up working on his family’s car dealership and was involved in buying and dealing wrecked vehicles very early in his life. In 2005, he joined WOM, one of the largest German salvage auction companies which Copart acquired in 2012, and was heavily involved in bringing Copart to Germany. Andreas became a Director at Copart after the WOM acquisition and he was responsible for driving new relationships with insurers to roll out the Copart model. He now works for carexpert, a leading German auto claims management company, where he works with insurers and Copart throughout the country. Read more

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Andreas, can you provide some context to your background in the German salvage industry?

From my childhood, I started working in my parent’s company. They had a car dealership and, there, I took my first steps in the salvage market, because we had lots of vehicles from accidents that had been wrecked, which we had to sell or which we were buying. From that time on, I became familiar with these accident vehicles. I did my studies, went to school and I also did an exchange year in the States, in Texas. In 2005, there was a big opportunity for me that WOM, Wreck Online Market, one of the salvage auction platforms was founded and I had the chance to step into the company and to raise the company from scratch.

I started in 2005, in WOM. From there, we built out the business. We established the workflows for the total loss vehicles, we provided a very good service and we improved the service. Later on, I will talk about the key facts of what is good at WOM and differentiates it from the other salvage auctions. I started there as an assistant to the board and grew up through the different departments and, finally, became the IT product manager. I also undertook some additional certificates in IT management. We improved our platform and our interfaces to the insurance companies here in Germany. We also made a good contact with the company called Copart which then, in 2012, bought the WOM company. I still worked at WOM, until 2019, as a product manager for Copart and made sure that the processes from WOM to Copart were integrated and that the Copart business could run well, here in Germany.

In 2019, I made a decision, related to the geographical location of my family. WOM and Copart were quite a distance from my home, so I decided to switch more to the insurance side, so I started to work for an insurance company, one of the biggest here in Germany. We have 450 car assessors, who go to the vehicles and decide what to do with the vehicles and how to compensate the car owners for the loss or damage. It is actually one step before the WOM platform, so we bring the damaged vehicles to the auction platforms, to get a salvage estimate, and then compensate the car owner.

That’s where I am right now. I am a business development manager and sales manager at carexpert. As I said, it is a company owned by three insurance companies, R+V, Ergo and Nürnberger, which is also pretty close to my hometown, to my family, so I just have to drive 15 to 20 minutes and then I am at work. When I was working at WOM and Copart it to me more than an hour to get to work, sometimes even two hours. I also spent a lot of time in hotels during that time. As I am now a father of two children, I now have more time to spend with my family. Of course, during this coronavirus pandemic, I am working from home, so I have even more time to spend with my family.

Did you approach Copart, at WOM, to sell the business?

We first met Copart at an exhibition, in 1998, where WOM was presenting their services and had a big stand. I actually made a contact with some guys at Copart, in the UK. From that time on, we met almost monthly, to talk about the opportunities for Copart, the opportunities for WOM. It took a couple of years until Copart could buy out WOM. WOM was also founded as an incorporated company and the shares sat with the big car dealership here in Germany. They sold all of their shares to Copart.

You actually saw the vision of a potential consignment model in the early 2000s, if not earlier?

Yes, exactly.

Can we dive into the German salvage industry. Let’s just assume we have a pre-accident value, of a vehicle, of €10,000. What is the process, typically, in Germany, when the policy holder crashes?

In the time before the salvage auctions, if there was an accident, a car assessor would look at the car and would estimate the salvage price by guessing or by orienting on some online platforms, such as mobile.de or AutoScout, newspaper announcements, where they put vehicles up for sale. This was before the auction platforms.

Then the auction platforms were built out in about 1998. This was a big improvement for the German insurance industry because now, there was a chance that the damaged vehicles could be offered to way more people, way more car dealers than before than with just these newspaper announcements. They had a good chance to get more damaged vehicles, to build out their business. For the insurance companies, the salvage value rises through these platforms.

The basic business model for the salvage auctions, in Germany, is that if you have a pre-accident value of €10,000 for your car, and you have a crash of €8,000, which could be repaired, the insurance company now don’t say, I will give you the €8,000 and you can repair your car. They put your vehicle into some salvage online auction platform and they would get, for example, a salvage price, for this damaged vehicle, of €5,000. The insurance company will say, your vehicle is not worth €2,000, which would be the repair costs subtracted from the pre-accident value; it would now be €5,000. We don’t pay out €8,000 to let your car be repaired, so that you get to the €10,000 pre-accident value. As an insurance company, we just pay €5,000 because, in the damaged condition, your vehicle is still worth €5,000.

In total, if you sell your vehicle, we pay you €5,000 and, also, you get €5,000 from a car dealer, and you will have €10,000, in total, which is the pre-accident of your vehicle, so you will be compensated. This is the major business with these salvage auction platforms.

Let’s say I am a driver, I crash, the pre-accident value of my car was €10,000 and we believe that it would cost €8,000 to repair. The insurer doesn’t buy the vehicle back from me, like they would in the US. The insurer doesn’t really own the vehicle?

Exactly. That’s also the law here in Germany, that the insurance company are not allowed to get ownership of a vehicle. They are also not allowed, by law, to trade the vehicle, to sell the vehicle and make money from the vehicles. This is prohibited by law, here in Germany.

Why is that?

It might create some conflicts of interest for the insurance industry, so we prevent the insurance industry taking steps into this market.

Is the US different because they are more entrepreneurial?

Yes; not only the US, but also a couple of other European countries. I think, in France, it’s the same. If it’s a total loss and the car owner is no longer allowed to drive or keep his vehicle, the insurance company will become the owner of the vehicle. In some places, like France for example, the insurance company will also hold the certificate of your vehicle; they keep it. Here in Germany, every car owner has the vehicle registration documents, which is the certificate of ownership of a vehicle. This is in the private hands of the people who buy the cars, in Germany.

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Copart Germany: A New Salvage Auction Model

November 4, 2020

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