Examination of Witnesses (Questions 1
TUESDAY 23 OCTOBER 2001
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
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
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.
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.
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.
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
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.