Regulation flaw could lead to car firms paying for old models

At the root of the delay is a disagreement between ministry officials and representatives of car dealers and manufacturers. They have different opinions about who should foot the bill for recycling.
“At some points, the [End of Life Vehicles (ELV)] directive clearly delegates financial responsibility to car makers and importers, but there is uncertainty regarding the period until 2007,” said David McCall, development director of waste management company Ereco Rt.
ELV orders car manufacturers and importers to take responsibility for recycling cars they originally sold after those cars have reached the end of their lives and are withdrawn from circulation. As of next January, it will apply to cars sold in or after June 2002, while from 2007, it will apply to all abandoned cars.
In Hungary, debate currently focuses on who, between now and 2007, should finance the recycling of abandoned cars released before 2002.
According to officials of the Environment and Water Ministry, owners of outdated cars with two-stroke engines, which will be banned in the EU after June 2005, are unlikely to be able to finance recycling costs. Because of that, there are plans for the government to help financing, by channeling some part of the product fees it plans to levy on some new cars as of next January.
Carmakers and dealers have been heavily criticizing the government’s plans to introduce product fees on new cars.
According to Pál Lukács, executive director of the Hungarian Automotive Industry Association (MGSz), industry players are unhappy with the ministry’s proposals.
“We are fighting the proposals, and interestingly the Finance Ministry and [the Economy and] Transport [Ministry] are also against the environment ministry’s ideas,” Lukács said.
“The idea goes before Parliament in August, so we have some more time to argue our case, but I’m skeptical about the chances of changing their minds,” he added. “Owing to the cuts to ministries’ budgets through Draskovics’ austerity measures, the environment ministry needs the money and sees new car manufacturers as an ideal candidate to tax.”

Your body, too

According to Lukács, the environment ministry is proposing to extend the product fees on newly manufactured or imported cars to cover car bodies as well.
The fees would be according to engine mass.
Up to 1,000cc, the fee would be Ft 25,000 per car, while between 1,000cc and 1,500cc it would amount to Ft 30,000 per car. For vehicles with engines over 1,500cc, it would be Ft 40,000 per car. For small commercial vehicles, class N1, the fee would be Ft 50,000.
These fees will attempt to cover the costs between 2004–2007 of the dismantling of cars with no existing manufacturers, including Socialist-era cars such as Trabant and Wartburg, Lukács said.
He added that this even applies to Czech car brand Škoda. When VW bought Škoda, it signed an agreement with the Czech government meaning that it has no responsibility for cars produced previously. This even applies to cars in Hungary.
“The Socialist era cars were imported by a state company, Mogürt, and distributed by Merkur, also a state company. So we feel that, as an association of independent, private car manufacturers and importers, we have no responsibility to help dismantle these relics,” Lukács said.
“But if the environment ministry succeeds in levying the product fee on new cars, there is not a lot we can do about it,” he added. “It is a tax, and one that we will have to pay.”
According to Lukács, the environment ministry would like to impose a scale of responsibility on the ratio of newly manufactured cars to retakes of 20% in the first year, increasing year by year by ten percentage points. This means that if, in the first year, Opel Hungary sells 400,000 cars, it should decommission 8,000, and so on.
“We have come to an agreement and signed a letter of intent with the two nationwide wreckers, which states that they will scrap the cars for no cost,” Lukács said. “This is because at present, mainly owing to expanding industrial production in China, scrap metal prices are very high. But should prices decline, the manufacturers would have to pay the cost of recycling,” he said.

Who has priority?

The environment ministry would be able to reimburse companies responsible for products from their product fee receipts, but it is unlikely that it will pay any more than 50% back, and probably much less, according to Lukács. As a parallel case, he said that in 2000 the ministry took in Ft 4 billion in product fees based on rubber, but paid out only Ft 300 million to help pay the cost of rubber recycling.
Another concern he expressed is that from June 1, 2005, new regulations on emissions will mean the end of cars with two-stroke engines on Hungary’s roads. He said that the price of the necessary catalytic converters to make these cars legal is Ft 60,000– Ft 100,000 per car. Since these cars have practically no value, there will be very few owners willing to pay the cost, he said.
“We estimate that 300,000 Trabants and Wartburgs will then need to be scrapped. It seems unfair that the government is planning to collect taxes, in the form of product fees from new car manufacturers, to pay for wrecking cars they neither built nor imported,” Lukács said.

At your disposal

The first step in the creation of a recycling process will be creating a network of disposal points, where owners can return their cars to manufacturers’ representatives. The EU directive suggests that for any given motorist, there should be such a site available every 50 kilometers.
It will be up to affected companies to decide whether they want to run a system of their own, or join a wider-scale organization.
According to Lukács, the latter version is likely to be more popular in Hungary.
The EU directive prescribes strict environmental standards on how to clean up decommissioned cars. In addition, it specifies that manufacturers provide car dismantlers with a standard procedure on how to take the cars apart.
Many in the industry are skeptical as to whether scrapyards would be able to undertake clean-up tasks to meet EU standards. The number of scrapyards in Hungary is estimated at between 300 and 500.
In a recent statement, Henrik Balatoni, head of the National Association of Waste Management Firms (HOE), said that the local waste management industry would need investments to the tune of Ft 8 billion to comply with the ELV standards. This would involve buying shredding machines, which can separate various materials in car bodies.
Once the ELV directive comes into force, a minimum of 85% of the material of the vehicles will have to be recycled, increasing to 95% at a later date.
Currently, two companies operate shredders in Hungary. These companies are Ereco and Mü-Gu Kft. The latter is a subsidiary of the Austrian Müller-Guttenbrunn Holding.
According to McCall of Ereco, there is no need to panic, as Hungary already has enough shredding capacity.
“Hungary currently has shredding capacity of 30,000 per month, which is more than enough for the approximately 100,000– 150,000 tons of wreck created in the country a year,” McCall said.



by Judit Zegnál

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