MPs seek to calm ELV cost fears

A committee of MPs has brushed aside concerns raised by some manufacturers warning of the debilitating costs of implementing the End of Life Vehicles Directive.

The trade and industry select committee established to review the ELV Directive also raised, in its first report published yesterday, a number of concerns regarding new laws governming the disposal of unwanted cars and has called on the Department of Trade and Industry to clear up a number of uncertainties, particularly who will pay for their implemenation.

MG Rover has voiced concerns that as a new and relatively small company, with 'a stable market share of 4%', it could not be expected to stand the cost of the 10% of the car parc incorporating marques it still owns (MG, Austin, Wolsley and Morris) and those which it no longer owns (Mini and Triumph). Mitsubishi Motors UK had also warned that the directive would bankrupt the car industry if it was imposed earlier than 2007.

The select committee says: “We do not presume to recommend any particular option for apportioning costs: whether current or historic market share is chosen, someone will suffer. However, if the date for implementation for the historic parc is left at 2007, the historic car park will largely reflect the market share in 1995-97, given that the average age of a natural ELV is 10 to 12 years.

“If the date is to kept at 2007, we would not expect any particular manufacturer to be excessively penalised. Moreover, given that the free take-back of all cars does not have to come into force until 2007 provision can be made in the interim to cushion the effect of the historic car parc.

“The solvency of companies could be protected by the adoption of a mechanism which avoid companies having to book substantial reserves rather than contingent liabilities.”

The select committee criticises the DTI for failing to clarify who will bear the brunt of the directive's economic impact, despite it conceding there were “very substantial cost implications for motor manufacturers”. The DTI has said there would be 'big issues for everybody' regarding costs.

In its conclusion the select committee says: “We urge the Government to clear up the uncertainty over the funding of the implementation of the directive as soon as possible.” It also urges the DTI to ensure the directive is implemented in an “efficient and speedy manner” to minimise confusion and disruption.

The Retail Motor Industry Federation (RMI) warned that the economic uncertainty could disrupt new car pricing.

“It is of concern that the Trade and Industry Select Committee believes this will generate additional costs to the consumer,” said David Evans, RMI chief executive.

“The new car market has only just begun to settle down after two years of turmoil and the suggestion that dealers will have to start raising prices again to cover the cost of ELV will be an extremely bitter pill for them, and consumers, to swallow. The Trade and Industry Select Committee has rightly criticised the DTI for failing to account for the cost implications either of the potential value of components recovered or the true cost of destruction.”

The SMMT welcomed the report on the economic impact of the directive. It says it confirms industry concerns about funding new ELV rules in the UK and urges the government to follow the 2007 date for cost-free take back of older vehicles on the road.