Select Committee on Trade and Industry Minutes of Evidence


Examination of Witnesses (Questions 1 - 19)

TUESDAY 23 OCTOBER 2001

MR DAVID EVANS, MR JOHN BOND-SMITH AND MR BOB HOOD


Chairman

  1. Good morning, gentlemen. Welcome to what is our first inquiry in this Parliament. Perhaps, Mr Bond-Smith, you could introduce your colleagues.
  (Mr Bond-Smith) I am John Bond-Smith, President of the Retail Motor Industry Federation. On my right is David Evans, Chief Executive of the Retail Motor Industry Federation and on my left is Bob Hood, Director of Independent Garage and Bodyshop Services Division.

  2. Thank you for your submission. One of the things we are very conscious of is that there are a number of players who have an interest in this matter. Maybe we could start off by getting from you your impression as to what you see as the role of the authorised dealer in the handling of ELVs. How do you see the dealers' role in this process?
  (Mr Evans) To some extent, it will depend on which option is acceptable. You will know that the relationship between dealers and manufacturers is regulated by the block exemption regulation and manufacturers encourage dealers to provide a range of services, including part exchanges and so on. It seems to us likely that the manufacturers will require dealers to ensure that vehicles which have reached the end of their lives are properly dealt with, with the implications for dealers having to store them, to depollute them and so on. There will be a cost and we hope that will be shared with the manufacturers. We also think the government should play a part in this. They are the beneficiaries of about £30 billion of tax and we think it not unreasonable to take the example that started in the Netherlands, where a fund was created for vehicles reaching the end of their lives so that they could be properly disposed of. There are inadequate facilities currently to cope with the number of vehicles which are either abandoned or which have reached the end of their lives, so coping with the practical problems associated with that should not all devolve on the heads of dealers. There will be other actors on the scene, people who sell cars now, parallel imports, grey imports, dot com companies and all the rest. They will have a part to play or at least, if they do not, someone is going to have to be responsible for it and it is going to be difficult, but is there anything that is not difficult about any of these regulations?

  3. You used the word "facilities". What do you mean by "facilities"? Do you mean services or physical buildings?
  (Mr Evans) Both. If a vehicle has to be taken from the scene of an accident or if a customer brings in a vehicle to a dealership, until it can be properly disposed of, it has to be stored. Space is always at a premium and it is hard to envisage the possibility that dealers will have to have separate premises and acquire premises on which these vehicles awaiting disposal would have to be stored, but that is a possibility. Certainly space is a tremendous feature of all of this and to depollute a vehicle you have to have skilled people and the wherewithal to be able to dispose of what you take off vehicles. That requires space, investment and technicians.

  4. The impression we get from your submission is that ELVs with a positive value will not provide a source of revenue for dealers. You indicate the costs to dealers in handling, storing etc. If the ELV has a positive value, you may benefit from spare parts, from some of the bits of the car which are still reusable in one way or another. Surely it is not all negative?
  (Mr Evans) First of all, product liability. There are some parts that may look okay but which are not and if put into service and they fail the consequences can be horrendous for the supplier of those parts and indeed for the user, who may find that he is in a terrible accident because of the parts. There are some parts which do not fall into this category. It may be that dealers would have opportunities to reuse parts but, generally speaking, the relationship between manufacturer and dealer is to discourage the use of parts that are taken from other vehicles in circumstances which may give rise to subsequent difficulties.

  5. In some circumstances, it would be the case that you would be frightened or reluctant or very pessimistic about making money from it?
  (Mr Evans) Yes.

  6. But in others you could?
  (Mr Evans) Yes.

  7. It is not wholly negative?
  (Mr Evans) No.

Sir Robert Smith

  8. The RMIF's submission notes that dealers representing a particular make or makes of car, as you have been saying, are worried that the vehicle manufacturer will then handle the ELVs which will then involve transportation, depollution and storage. Are dealers that are tied to a particular make of vehicle currently obliged to handle ELVs on behalf of manufacturers?
  (Mr Evans) No.

  9. What sort of costs would dealers face?
  (Mr Evans) It is terribly difficult to anticipate what they would be, in terms of volume also. We think they will increase. There was a time not so many years ago when there was a vibrant market in metal for a scrap person or insurance company to take an interest in disposing of a wreck and they would sell it on for scrap and so forth. In those times, the scrap metal merchants would pay for the wreck. Not any more. The dealer has to pay the scrap metal merchant for the privilege of having it taken away.

  10. At the moment, the dealer has complete discretion when faced with a customer to decide whether it is in their interest to take the ELV or not?
  (Mr Evans) Yes.

  11. The manufacturers are not in any way saying it would help if you were to take it?
  (Mr Evans) No.

Mr Hoyle

  12. Obviously there must be worries and concerns with the members about the impact that it will have on car dealers through the End of Life Vehicles Directive and I wonder what your views are. Will more people go straight to dismantlers rather than putting them into part exchange?
  (Mr Evans) It will be a combination of the two, I would think. There will be those who are persuaded to go direct to the dismantlers and those who would hope to gain something from going to a dealer, by having the dealer say, "I can supply you with another car and I will relieve you of the responsibility of handling this particular wreck."

  13. Roughly how many ELVs do dealers currently handle in part exchange? How are they dealt with at the moment?
  (Mr Evans) I cannot give you a figure. ELVs are usually dealt with by insurance companies because it is usually as a result of serious accident damage that a vehicle is treated as beyond economic repair or not capable of being repaired.

  14. That is not quite true, is it? If I look at some of these spectacular adverts that we see in the press at the moment, they say, "Guaranteed minimum £1,000 for your old car." People will nip round to the scrapyard or wherever and find the cheapest car to get £1,000. Surely, that must be encouraging some people to go to dealers?
  (Mr Evans) Maybe, and it may be that the dealers are regretting they do it, but that is for them to decide. I would not know how many vehicles there are but certainly we do know that under this regime there will be an enormous increase in the dealing in or handling of end of life vehicles.

Sir Robert Smith

  15. Is not the reality though that when the dealer is offering you £1,000 for any car they have built that into the price they will ask of you for the car they are going to sell you?
  (Mr Evans) A dealer who wants to stay in business has to have regard to the economic reality of the business he is running, of course.

Mr Hoyle

  16. We have seen before that what we believe to be end of life vehicles have suddenly ended up in the eastern block and in different parts of the world when they should have been scrapped and all we have done is move the pollution and the problem. Do you see that continuing?
  (Mr Evans) No.

  17. You believe that that can be dealt with and it will be?
  (Mr Evans) If the United Kingdom has regard to what other Member States do and we adopt a regime which is consistent with our other partners in the European Union, one would hope that there would be a consistency of treatment and therefore the situation you describe would discontinue.

Mr Djanogly

  18. What impact do you think the directive will have on the independent repairers? How will it affect them?
  (Mr Evans) I think it will affect them maybe more than the franchised dealer because independent repairers of course repair vehicles. The more the merrier. Also, many of them sell used cars. Any used car has inbuilt wear and tear and therefore it may reach the end of its life before a new one. One would hope so. In the way of things, accident damaged vehicles can become ELVs and so on but a new vehicle would last that much longer. Independent repairers dealing in used cars will have an interest in end of life vehicles. Franchised dealers dealing in used cars will also have but the point I am trying to make is that, in addition to carrying out the repairs, independent repairers supply used cars and therefore would be very much involved in end of life vehicles.

  19. To the extent that they dismantle ELVs for spare parts, are they likely to want to qualify as Authorised Treatment Facilities under the directive themselves?
  (Mr Evans) I would doubt it. It is a very expensive exercise. Invariably, independent repairers are small businesses and they are tending more and more to specialise under current circumstances. I would think that an independent repairer would have to think very hard before entering into the realm of being able to have a treatment facility and becoming an authorised dismantler.


 
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