Ministers have not fully addressed changes to the law which will have a significant impact on the motor industry, according to a new report.

A committee of MPs said they were alarmed that the Department of Trade and Industry had not made clear who would foot the bill when an EU directive governing the scrapping of cars comes into effect next year.

They said manufacturers would have to make specific provision to cover the cost of disposing of cars and that it was likely that original car prices would rise.

The End of Life Vehicles (ELV) Directive will:

Require EU member states to ensure ELVs can only be scrapped by authorised dismantlers who must meet tightened environmental standards

Require economic operators (including producers, dismantlers and shredders) to establish systems for the collection of ELVs

State that last owners must be able to return their vehicles into these systems free of charge from January 2007

Require producers to pay "all or a significant part" of the cost of take-back and treatment from 2007

Set rising re-use, recycling and recovery targets which must be met by operators by 2006 and 2015

Restrict the use of heavy metals in new vehicles from July 2003.

The committee called on Trade and Industry Secretary Patricia Hewitt's department to monitor the situation to ensure the directive is implemented efficiently to minimise confusion and disruption.