Select Committee on Trade and Industry First Report


Definition of an ELV

8. The ELV Directive defines an ELV as a vehicle which is waste within the meaning of Article 1 of the Framework Directive: "waste shall mean any substance or object which the holder discards or intends or is required to discard".[8] It is estimated that there are around 1.8 million ELVs in the UK each year.[9] Of these, some are 'natural' ELVs (NELVs) and some 'premature' ELVs (PELVs).[10] Natural ELVs are considered to have reached the end of their natural useful life through age, for example MOT failures beyond economic repair. In the UK, the majority of natural ELVs are between 10 and 15 years old, with the average around 12 to 13 years old.[11] Premature ELVs are largely the result of accidents and are damaged beyond repair.


9. Figures supplied by the MVDA suggest that around 200,000 to 300,000 ELVs per year are accident damaged vehicles.[12] The vast majority of these are disposed of as a result of insurance claims. There is no standard route for disposal; some insurers use contracted salvage dealers, some use approved buyers, and some use Internet auctions. The Association of British Insurers' Code of Practice will, depending on the severity of the vehicle damage and its age, categorise the vehicle as 'A', 'B', 'C' or 'D'. Universal Salvage plc set out the different categories:

    —   Category A: vehicle burnt-out or very severely damaged;

    —   Category B: vehicle damage excessive, to be dismantled for spare parts use only and body to be destroyed;

    —   Category C: financial total loss, vehicle to be repaired and put back on the road;

    —   Category D; as C but newer vehicle or stolen and recovered.[13]

10. In oral evidence it was drawn to our attention that "there are indications in the body repair world that insurers are writing off relatively new cars because both air bags have exploded in a relatively low impact accident. The damage to the vehicle may only be around the £300, £400, or £500 mark, but because the air bags have exploded and need to be replaced that sends the write-off value of the car over the threshold".[14] Insurance companies effectively decide when a PELV is not worth repairing. This is usually when it is estimated that the repair costs are likely to exceed 60% of the car's undamaged trade value.[15]


11. The ELV Directive does not aim to deal with the problem of abandoned vehicles. Nonetheless, the substantial increase in the number of abandoned cars is likely to be at least partially due to the significant reduction in the value of ELVs which, in turn, has been attributed to the decline in steel prices.[16] The price of scrap metal has dropped from around £35 per tonne in 1998 to around £10 per tonne today. There are no national statistics on abandoned vehicles as yet. Local authority figures suggest around 350,000 cars were dumped in 2000. The DTLR's recent consultation paper on abandoned cars said: "there is no doubt that the number of vehicles being reported to local authorities has increased dramatically in recent years, often by a factor of four or five".[17] The consultation paper, published on 31 October 2001, sets out a number of measures intended to crack down on the growing problem of abandoned cars. The Government must aim, through a combination of the outcome of the consultation paper and an effective system for disposing of ELVs, to reduce, or even eliminate, the problem of abandoned cars.[18]

Processing of ELVs

12. ELVs may enter the processing chain through four principal sources: private individuals; garages; insurance companies; and local authorities (abandoned vehicles). ELVs may be handed over either to dismantlers or scrap metal processors. Dismantlers remove useable parts and higher value materials then pass on the remainder to the scrap metal sector or shredders. Scrapyards deal in bulk quantities of commodity metals. Shredders tear vehicles into small fragments. They often receive vehicles that have been flattened or crushed to enable easier transportation. A report for the MVDA estimates that around 70% of ELVs enter the processing chain via vehicle dismantlers; the rest are processed by garages and scrap metal dealers.[19] Initial sampling by the BMRA found that the average ELV feed to scrapyards was 51% dismantler and 49% from other sources such as households.[20]

13. The DTI consultation paper stated that there are around 3,500 dismantlers operating in the UK, around 1,500 of whom are operating illegally. [21] In oral evidence, Mrs Sheila McKinlay of DEFRA revised this down to around 3,000 operators with 700-800 operating illegally.[22] Whilst there is inevitably some uncertainty about the number of illegal operators, there is a large discrepancy between the figures used by DTI and those cited by DEFRA. We would hope that the implementation of the ELV Directive will not only reduce considerably the number of illegal dismantlers, but also that a more accurate picture of the market will emerge.

14. There are currently around 37 shredders operating in the UK, served by a number of feeder scrapyards.[23] The SMMT told us that their research shows that around 250 feeder yards cover 95% of the population.[24] Between 60-80% of the existing shredding capacity is with two shredders.[25] We raised our concerns over the competitiveness of the shredding market with the DTI. Dr Alastair Keddie told us they were "very aware" of the issue and were taking advice from the OFT on the matter.[26] We recommend that the DTI continue to monitor the competitiveness of the shredding industry after the Directive has been implemented to ensure that the market is operating competitively.

Value of ELVs


15. There are two key components to the value of ELVs: whether they contain any usable parts that may be removed and sold for profit; and whether the metals they contain can be profitably recycled. In general, PELVs are used to provide spare parts for reuse; NELVs only supply scrap metal. The MVDA said that PELVs "can usually be dealt with profitably" as the sale of the re-usable parts enhances the returns made on the metals recovered.[27] For NELVs, however, the MVDA argued that whilst there is still a market for the metals recovered "there is very little prospect of selling any significant volume of reclaimed parts".[28] Moreover, the situation has been exacerbated by the simultaneous rise in the costs of the disposal of fluids and tyres, resulting mainly from the collapse of the tyre industry, and the fall in value of recovered metals. Mr David Evans of the RMIF told us that in the past there was a vibrant market for scrap metal: "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".[29] The BMRA told us "the recent decline in global steel prices has caused a significant reduction in the value of ELVs". The BMRA argued that the market value of a NELV at the point of entry into the recycling chain is currently negligible, zero, or even negative.[30]

16. However, the SMMT argued that "the shredding and dismantling industries are currently handling ELVs profitably and there are significant opportunities to improve the efficiency and productivity of significant parts of these sectors".[31] The BMRA told us they make money converting cars into individual base metals which are commodity value products and are sold on the commodity market.[32] In oral evidence Mr Duncan Wemyss of the MVDA said: "it is an industry that is paying its way, it is probably not heavily rewarded, but it is holding its head above water and paying its way at the current level".[33]


17. Last owners may take their ELV direct to a scrapyard, dismantler or shredder. Currently, most scrapyards and shredders will take vehicles free of charge or pay a small premium; some dismantlers are already charging.[34] Mr Stuart Cottam of the BMRA remarked that it is all down to markets: at the moment shredders are not charging to take ELVs but in the second half of 1998 they were.[35] Mr Andrew Mason of the BMRA told us that, at his London shredding site, they are currently paying £3 a car to the last owner.[36]

Existing regulations


18. The motor vehicle dismantling and scrap metal recycling industries are regulated under the Scrap Metal Dealers Act 1964, the Environmental Protection Act 1990 (Part II), and the Waste Management Licensing Regulations 1994.[37] Small companies may have official exemptions. Mrs McKinley of DEFRA told us there are about 1,500 businesses currently operating under a Registered Exemption.[38] Compliance is monitored and enforced by the Environment Agency. The BMRA told us that they also operate under a duty of care relating to the shipment of waste legislation and the Packaging Directive.[39]

19. There has been some suggestion that the regulatory regime to date has not acted as an incentive for investment. There are fears that the ELV Directive will exacerbate this situation. Charles Trent Ltd told us:

     "the uneven playing field created by the inconsistent and inadequate regulatory system has probably been the single biggest factor preventing companies making the required investment; in the absence of improvements in enforcement action (and in the face of existing competition) it would simply be financial suicide".[40]

The SMMT noted there was "huge concern amongst treatment operators that there will not be adequate enforcement of the standards. This has prevented many from making the investments required to meet them".[41]

20. The new regulatory regime will only work if it is effectively policed: the role of the Environment Agency (EA) in monitoring and policing the terms of the Directive is crucial to its success. Valpak told us that their experience in packaging has shown that: "without effective enforcement some obligated companies may delay their participation and compliance with the legislation thus putting a greater burden on those companies that comply with the law".[42] The MVDA noted that whatever the disposal system adopted to deal with ELVs, it will have to be policed in a more effective manner than at the present time. They went on to say that the regulating authority "will need sufficient funds to ensure that unscrupulous operators are not able to short circuit the system and undermine both the Directive and those who invest to operate within it". [43] Whatever system is put in place to deal with ELVs, it is imperative that the Environment Agency has sufficient resources to be able to monitor treatment facilities and ensure compliance with the terms of the Directive.

8   2000/53/EC Article 2(2). (See DTI consultation paper paras 10.5-10.6) Back

9   Cars and light commercial vehicles. DTI consultation paper para 12.4 Back

10   Hereafter referred to as NELVs and PELVs Back

11   Impact of the End of Life Vehicle Directive on the Motor Vehicle Dismantling Industry in the UK, A study prepared by the Motor Vehicle Dismantlers' Association of Great Britain with the Centre for Automotive Industry Research at Cardiff Business School, Cardiff University, Executive Summary, part III. Hereafter referred to as MVDA Report  Back

12   Ev, p36 Back

13   Ev, p53 Back

14   Q24 Back

15   MVDA Report, p 22 Back

16   Eg see Ev, p24; Ev, p40 Back

17   Abandoned Cars: A Consultation Document, October 2001, Department for Transport, Local Government and the Regions, London, Department for Environment, Food and Rural Affairs, para 5 Back

18   'Abandoned' vehicles includes those that have been stolen and then abandoned. However, in this Report we are only considering abandoned vehicles as those that have been dumped by their last owner Back

19   MVDA Report, p25-6 Back

20   Ev, p26 Back

21   DTI consultation paper, para 12.35 Back

22   Q232 Back

23   DTI consultation paper, para 12.25 Back

24   Q71 Back

25   DTI consultation paper, para 12.25; Q112 Back

26   Qq235-244 Back

27   Ev, p34 Back

28   Ibid Back

29   Q9 Back

30   Ev, p24 Back

31   Ev, p14, para 48 Back

32   Q119 Back

33   Q172 Back

34   Q119 Back

35   Q121 Back

36   Q127 Back

37   Ev, p42 Back

38   Q228 Back

39   Q113 Back

40   Ev, p44 Back

41   Ev, p11, para 22 Back

42   Ev, p14 Back

43   Ev, p35 Back

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Prepared 6 December 2001