Select Committee on Trade and Industry Appendices to the Minutes of Evidence


ATTACHMENT

ELV PARC ANALYSIS

  The May 2000 purchase by the Phoenix consortium of the MG Rover parts of the BMW owned Rover Group Ltd, preceded the enactment of the EU ELV Directive by some six months.

  If the directive is implemented in the way currently indicated by the Government, the Company will remain liable for the disposal costs of all makes of vehicles which were manufactured by its ancestors. This will include both vehicles which the company continues to own the marque (eg MG, Austin, Wolsely, Morris), and vehicles which the Company's marque ownership has ceased (eg Mini, Triumph). In fact, even the core "Rover" marque is now licensed from BMW.

  Referring to the chart below, in 2002 MG Rover forecasts around 100,000 new car sales, four per cent of UK market. The total numbers of cars registered in the UK is 29m. In 2002, approximately 3m (ten per cent) of this 29m parc will be legacy brands to MG Rover. Similarly, of the 1.8m ELVs/year arising in the UK for that year, around 250,000 (14 per cent) will be brands assigned to MG Rover. Projections for 2007 and 2015 are shown assuming MG Rover UK sales remain the same.

  The growth of the new MG Rover parc can be provisioned for in ELV terms. However, presence in the Pre-2002 "old parc" will only diminish to around 1.75m (six per cent) by 2007, ie there will still be a significant 220,000 ELVs arising per year from previous company ownership sources. These will have to be carried by projected UK sales of around 100,000 pa, and as illustrated below, this legacy will remain with MG Rover well into 2015.

  At say £100 per ELV to cover cost free take back, this will involve costs in the UK alone of £22m pa from 2007 for the old parc. This is on top of the £12.5m per year provision from 2002 for new cars at say £125 per ELV to cover higher recycling targets from 2015 onwards. Together, this represents 2.3 per cent of the company's £1.5b turnover which for a single piece of legislation is unprecedented. If these costs were to be recovered from new car prices, a price rise of approximately £500 per car would be required from 2007 once VAT and dealer margins, etc, are taken into consideration. From 2002 the price rise would be £40 per car higher due to the bigger "old parc" ELV arisings. All of this is just for the UK market with further potential liabilities existing for European and some international markets.

  UK ELV Parc Analysis

  MG Rover Vehicles only


Year
Memo

(Vehicle 000's)
2002
share
2007
share
2015
share
1990
share
1995
share
Annual Sales
100
4%
100
4%
100
4%
269
13%
212
11%
Pre Jul02 ELVs Arising pa.
250
14%
220
12%
50
3%
Post Jul02 Parc
50
0%
540
2%
1040
4%
Pre Jul02 Parc
2890
10%
1740
6%
100
0%






 
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Prepared 6 December 2001