In the prevailing economic climate, the challenges facing the vehicle dismantling and salvage industry, although considerable, are in many respects no different from those facing many other sectors. The costs of fuel, energy, employment, insurance, finance, compliance and stock purchase continue to rise.
However, above and beyond these, perhaps the main challenges facing the industry arise as a result of changes in the marketplace and poor regulation. While the aims and objectives of better regulation of the industry are to be welcomed in many respects, a healthy and professional vehicle salvage/recycling industry has a major contribution to make to the economy and in effectively managing finite resources.
Perhaps the single most significant failure of regulators has been the Certificate of Destruction (CoD). The situation exists where Authorised Treatment Facilities (ATFs) are required to issue CoDs and to provide these to the last owner. But CoDs themselves appear to have little or no significance to the public, the motor trade or, judging by its website and publications, the DVLA itself. In addition, other legal requirements are hung on these, such as the need to achieve recycling targets.
Consequently, the number of CoDs issued continues to be around half the number expected. The public is not aware of, nor do people have any motivation to acquire, a CoD or take it to a facility with the ability to issue a CoD because it provides no benefit to them: they cannot use it to demonstrate cessation of road tax liability, for example. So it would appear that large numbers of vehicles continue to ‘disappear’.
Legal requirement on targets
The DVLA is now seeking to employ reverse logic to justify this position by saying that the initial estimates of the number of vehicles scrapped were inaccurate. What this suggests is that the UK vehicle tracking system is in disarray, with the DVLA
having no clear idea what is really going on. Sadly, initiatives that could have provided clarity appear to have fallen by the wayside, such as Tracking Vehicles Through the Trade.
Linked to the issue of the CoD is the legal requirement for ATFs to achieve the 2006 recycling/reuse target of 85%. Although the UK as whole has narrowly failed to achieve this, some individual organisations have met the targets in every year since 2006. While a number of other organisations have clearly made an effort to comply and may have missed the target marginally, at the other extreme there are ATFs that appear not to have issued any CoDs or reported on progress towards achieving the target.
All of this has significant financial implications for those organisations that are bearing costs not borne by others. Frustratingly, four years after the legislation came into force, there have still not been any prosecutions. So where is the incentive to comply?
Similarly, the Annex 1 depollution requirements of the End-of-Life Vehicle (ELV) Directive were clearly flagged well in advance of it becoming a legal requirement in November 2003. Yet the lack of early enforcement allowed non-compliant operators to continue with their illegal activities for many years after this, to the detriment of those that had made the necessary investment.
Now the industry is faced with yet another set of ongoing costs: Technically Competent Management (TCM) arrangements. How long will non-compliant operators be allowed to continue this time?
The Environment Agency (EA) has come in for wide criticism; indeed it is hard to find anything positive to say about the EA. Consider, for example, the length of time it took to obtain agreement on the definition of when a vehicle becomes waste: an issue only finally resolved in 2010. Similarly, the intentions of a unified permitting system may have been admirable in concept, but in practice have become incredibly complicated, confusing and expensive.
Industry practitioners with decades of experience of waste management licence applications/variations/surrenders now find themselves aghast at the explosion of jargon and contradictory instructions - even to the extent where it is difficult to locate EA staff able to comprehend and assist. Under the new Environmental Permitting rules, even relatively minor modifications in permit conditions can now routinely cost a small operator £10,000.
The new arrangements for demonstrating TCM for ATFs and metal recycling facilities also underlines the arrogance of the regulators in their regard for and their complete lack of understanding of the industry. The change was introduced into a sector not renowned for academic achievement, without any meaningful consultation with the relevant industry and in the absence of clear guidance or even a syllabus. Indeed, even the way the questions are weighted and constructed was fundamentally flawed.
It has only been through the efforts of trade associations, the Motor Vehicles Dismantling Association (MVDA) and the British Metals Recycling Association, that some sense has finally prevailed, although there is still much work to be done.
It would be unrealistic to lay the blame for the current state of the salvage/dismantling industry at the door of the regulators alone. That sector of the industry with traditional views has contributed disproportionately to its under-performance, but remains effectively supported by poor enforcement.
Luckily, the MVDA, after years in the wilderness, pulled itself together before the implementation of the ELV Directive, in no small measure through the efforts of professional people such as the current association secretary and the recently deceased and sadly missed former chairman John Hesketh.
It would also be churlish to suggest that it is all doom and gloom in the industry. There have been high points recently.
At a time when the number of insurance total losses coming through to salvage agents declined considerably, the scrappage scheme introduced by the Labour Government is widely thought to have kept much of the UK’s vehicle salvage/dismantling industry in business through a very difficult period. But even this highlighted regrettable weaknesses in the relationships between some vehicle manufacturers and their contracted ATFs. Scrap prices, although volatile, have remained healthy.
Although changes in sales channels, such as internet auctioning of salvage and parts, have increased the visibility of the stock entering the marketplace, there has been a net decrease in the total amount of stock arising and available to legitimate operators. This is due to reductions in the number of vehicles being written-off by insurers - a consequence of reductions in motor vehicle use/mileage and damage claims, and the need for insurers to keep their repair shops at capacity.
Opportunity in used parts
But in an atmosphere of austerity, owners are not only using their vehicles less but also delaying anything non-essential, including servicing and repairs. And, of course, people are changing their vehicles less frequently: UK new car sales have been declining steadily since the end of the scrappage scheme. The need for people to keep their vehicles usable for longer does provide a huge opportunity for vehicle dismantlers by supplying used parts, and the amount of used parts sold through channels such as eBay has increased dramatically.
The demand for ‘green parts’ is enormous and has huge scope for further development. But the fragmentation of the industry has meant that the full implications of technology developments have yet to be realised and no agreement has been reached on mechanisms, such as standards, that would support market development. This is an issue the industry should resolve as a matter of urgency.
The rapid development of the internet as a sales channel, has increased accessibility of used parts to potential customers. With the internet presence of long-established parts-locating organisations, finding the required green part has never been easier. Matching the buyer to the seller has always been one of the major barriers to increasing usage, so this is incredibly good news.
Customers now have much less concern about shopping online. However, on the negative side, it is widely believed that online sales channels have made it much easier for illegal and inappropriate operators to benefit.
All the major salvage players now use internet auctioning as the means to dispose of their vehicle stock. As a consumer this is to be welcomed. Although this may have maintained salvage returns, in the wider context of increasing cost and reducing vehicle residuals, it has had the unintended consequence of facilitating the movement of whole vehicles overseas. This in turn has reduced stock availability for many domestic operators, but at the same time the intense competition for product has contributed to maintaining domestic salvage prices.
Dr Charles Ambrose is compliance director and company secretary at vehicle recycler Charles Trent