The EU is pushing the motor industry towards greater accountability for the environment with its End of Life Vehicle directive.

ELV requires carmakers to assume responsibility from next year for the disposal of all future vehicles. From 2007, 'retrospective' legislation means they will need to have networks in place to dispose of every vehicle they have ever produced.

Manufacturers have argued that this legislation will further burden an industry already under pressure in Europe. Ford of Britain is expected to shortly reveal losses exceeding £400m, while General Motors' European operation is also leaking money.

The Government has yet to decide how it will implement the legislation into UK law, but has not ruled out bringing forward the 2007 deadline.

Two main options exist: To force carmakers to collect and transfer all end of life vehicles for treatment at the recycling plant; or to require authorised treatment facilities to provide free take-back for all ELVs, with carmakers responsible for meeting recycling targets. Sheila McKinley, head of the Producer Responsibility Unit at the DETR, said: “There is a need for accountability and incentive, not disincentive.”

Senior industry executives have met Tony Blair to highlight concerns. They told the Prime Minister ELV would cost an average of £300 per vehicle, though recycling experts put the cost at around £50-75.

But ELV also presents carmakers with a real opportunity to take control of the ownership process, creating a motoring solutions proposal that offers a 'cradle to grave' service. Several companies, including DaimlerChrysler, Honda, Citroen and Jaguar, have insurance schemes that tie customers to their franchised bodyshops for repair work.

Most also offer three-year warranties on new cars, which enable dealers to monopolise this part of the repair market.

ELV might now push manufacturers towards providing rather than selling cars, controlling the entire ownership experience.

Analyst Michael Jackson supports the idea that carmakers will eventually launch personal leasing schemes. The customer would no longer own the car, but would pay a monthly leasing fee for an all-in-one package that included insurance, MoTs and servicing costs.

“Customers would agree a monthly rental cost with the dealer,” he said. “Dealers could be paid a commission on each deal instead of a margin. The emphasis would be on offering quality service.”

However, personal leasing schemes are more likely to appeal to drivers of medium and lower sector models who have less affinity with their cars than, for example, Ferrari or Rolls-Royce owners. One solution would be a two-tier market, where prestige/ luxury cars were owned and middle/lower sector cars were leased.

Personal leasing would clearly affect dealers' role in the market. They would no longer be selling cars, but selling a package. Salesmen would still need product knowledge to attract potential drivers, but they would also need training to sell the benefits of their leasing scheme compared to rival products.

Products may be developed solely by carmakers or, more likely, in association with finance companies and insurers. Ford, with its acquisition of Warranty Holdings, is particularly well placed to exploit the new market.

Jac Nasser, Ford chief executive, wants his company to become a “total motoring solutions provider”.

Wolfgang Reitzle, chairman of Ford Premier Automotive Group, told a conference earlier this year that manufacturers had to move customers away from the psychology of buying cars to sourcing a personal motoring package.

The Society of Motor Manufacturers and Traders suggested several carmakers were looking at the benefits offered by personal leasing.

“It may be the way forward within an integrated transport policy,” said an SMMT spokesman. “Motorists could mix and match cars, for example, having a saloon for most of the year, but changing to a sportscar or convertible in the summer.”

Some carmakers have questioned whether the likely revision to Block Exemption would matter if they adopted a personal leasing approach.

“If consumers can be persuaded that personal leasing offers benefits over buying cars, than carmakers would regain control of the market,” said one source.

“This would eradicate the new car pricing issue, leaving dotcoms and other new entrants out on a limb. “Dealers would control the route to market by offering the facilities to display cars, enable test drives and deliver models. They would also provide servicing and repair facilities.”

The SMMT and senior carmaker executives have been talking to the UK Government to ensure an “environmentally sound but cost effective and responsible way” of implementing the ELV.

A Ford spokesman said: “We welcome the European requirements on the 2002 deadline, but we have a problem with the retrospective 2007 legislation because older vehicles were not designed with recycling in mind.”

Ford is concerned that the legislation would distort the market, leaving newer entrants like the Far East carmakers with a competitive advantage.

“Companies like Ford, which has a large car parc in Europe, would be affected more than the Far East manufacturers. We would have to invest more money in recycling retrospective cars, putting us at a disadvantage,” said the spokesman. “We favour shared responsibility with shredders and salvage operators, with recycling costs funded by contribution from future new car sales.”

One recycling expert said ELV would persuade manufacturers to move into recycling by acquiring salvage operators who were registered to handle end of life vehicles under the Waste Framework directive.

He said: “There is money to be made from recycling – manufacturers are being quiet, but they are formulating plans to move into this area as part of a strategy to control the entire motoring process.”

This would enable them to control the vehicle from 'cradle to grave', minimising costs and maximising income. Ford already operates vehicle recycling plants in the US and Canada under its Greenleaf subsidiary.

The SMMT supports the view that the recycling process could offer manufacturers a new profit opportunity. “There are arguments that the economic impact of ELV might not be as great as originally thought for most manufacturers – although it will be greater for companies like MG Rover which has a lot of cars on the road,” said the SMMT spokesman.

“There may be a commercial proposition as well that would make it attractive for carmakers to buy into the recycling business.”

ELV is unlikely to have much impact on the used car market. But the implications for accident repair remain unclear. The Motor Vehicle Dismantlers Association believes ELV will offer bodyshops an opportunity to source cheaper, recycled parts for accident repair.

This lower priced alternative would combat the growth in ill-fitting spurious parts, it said.