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And, by 2015, it is intended that 85 per cent of a vehicle
goes the same way.
All the talk about implementation of the End of Life Directive
has revolved around the impact on vehicle and component manufacturers,
importers, dismantlers and reprocessors. In fact, the Government
has explicitly stated in its Regulatory Impact Assessment published
in June 2002, that these are the parties most likely to be affected
by reform.
Yet despite Government estimates that the total cost of administering
the directive by manufacturers and importers in the United Kingdom
will be between £24 million and £37 million per year
based on an estimated cost of disposal of £60 per vehicle,
no mention has been made of dealership.
Let's begin with the principle of 'last owner pays'. Next
year, vehicle owners will be responsible for the disposal of
end of life vehicles.
The theory is that owners will take their car or van to the
nearest licensed dismantler. If they are lucky and rapidly
diminishing scrap values do not bode well then they might
walk away with some cash. More likely they will have to hand
over the cash themselves between £70 and £80
if Government statistics are to be believed.
Critics have already voiced concerns about a rise in dumping
of vehicles by owners in a bid to avoid picking up the tab for
disposal.
In fact there is every reason to suppose that the general
effect on the market in the run up to 2007 will force down residual
values anyway. A disproportionate air of caution may lead to
predictive pricing fuelled by the combined effects of an 'End
of Life depreciator' and slumping scrap values.
So, a trade-in model nearing the end of its life, far from
retaining any value will cost the dealer money and the sale of
a newer vehicle in exchange for an ELV will mean eroded margins.
Under current thinking, manufacturers will take up the reins
of responsibility for disposal of their own manufactured vehicles
from this date.
There has been plenty of lobbying by the likes of the SMMT
to buy time for manufacturers. But, the impact on manufacturers
has overshadowed the potentially catastrophic effect of disposal
on independent dealers throughout the debate.
Manufacturers and importers as well as the big dealer
chains should be able to set in train the necessary administrative
chain of command required to implement the directive.
But what about the single owner operated dealership that constitutes
the majority of dealers in the UK?
First they will almost certainly have to accept the informal
role as a 'point of disposal' for 'End of Life' vehicles to avoid
losing potential customers. After all, consumers who are no longer
responsible for disposing of vehicles will undoubtedly expect
a dealer to take on the responsibility if they are purchasing
a new vehicle from them.
In these circumstances the dealer will be obliged to arrange
for dismantling. Something that is sure to involve a good deal
of administrative time and energy that will distract dealers
from concentrating on running their business.
And no doubt the tangible costs of disposal currently
expected to rest with the manufacturers - will form the basis
of any compensation for arranging dismantling of a vehicle.
Without a robust method of recouping costs, small businesses
like independent dealers could face cash flow headaches.
And the fact is that the Government has simply not considered
this. We requested statements from both the Department of Trade
and Industry's end of life policy unit and the Retail Motor Industry
Federation during research for this article but a statement was
not forthcoming which is not surprising.
The debate has concentrated on both ends of the spectrum
the manufacturers and disposal the dealers have been lost
in a maze of legislative wrangling.
The first phase of implementation will come into effect next
year but the longer-term view remains hypothetical and needs
clarification.
Dealers could well be left carrying a costly administrative
can for manufacturers with no defined process of recouping costs.
Dealers could well see margins under pressure as used car values
diminish as a result of the End of Life depreciator.
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