THE war between rival motoring organisations stepped up a gear yesterday when a new player appeared on the scene and claimed it would offer a breakdown and recovery service up to 50% cheaper than the market leaders.

Direct Line said it was throwing down the gauntlet to the AA and RAC and would be targeting their 70% breakdown and recovery market share by giving consumers cheaper, more flexible alternatives.

However, the threat of losing customers was dismissed yesterday by the two major motoring organisations who said that, while they welcomed any new competition, they were in no doubt the services provided by them would stand the test of time.

Ms Miranda Seymour, of Direct Line, said the company believes its service will shake up the market in the same way that it helped to revolutionise motor insurance.

She said: ''We've built our reputation, and our business, on a commitment to offering the highest standards of customer service combined with value for money products.

''At the moment, you have two main players in this field, the AA and RAC, which have the majority of the market between them.

''Our view is that it's a market that is ripe for a shake-up and a new player to come in and provide an extremely competitive product. We are now throwing down the gauntlet and will be taking them on directly.''

Direct Line revolutionised the motor insurance market by using telephone selling to bypass the middlemen and offer attractive rates to customers.

It was set up in 1984 by Scotsman Peter Wood with #20m capital from the Royal Bank of Scotland. He parted company with the bank 13 years later. Over the years, his salary and bonuses have excited many people - he was particularly criticised in 1993 because of a #24m bonus scheme pay out.

Despite the RAC running into difficulties recently with some of its members over large windfalls for some but not all because of its proposed takeover by a US company, it said it was not fazed by the new competition.

Scottish spokeswoman Margaret Moore said: ''Certainly there is a lot of optimism in the organisation for the possibilities that the takeover will bring. We are going to continue providing the best possible service for our members just like we have been doing for the past 100 years.''

The AA said it welcomed any competition in the breakdown market. However, a spokeswoman added: ''Direct Line is joining a market in which there is already 40 organisations offering some form of breakdown assistance. Despite this rapid growth in competition over the past few years, the AA membership has risen to an all time high of 9.4 million.''

Among the services offered to the consumer by Direct Line will be five different levels of assistance, ranging from roadside to European cover, 35-minute breakdown response, no-claims discount, and all services covering the policyholder's vehicle no matter who is driving.

The company claims this new service is ''up to 50% cheaper than services provided by traditional motoring organisations''.

Mr Bill McCall, of merchant bank Singer & Friedlander in Edinburgh, said that what Direct Line had learned and built up through its motoring and home insurance services should be a good foundation for the venture.

''The market in this area is growing very, very quickly with three major players - the AA, RAC and Green Flag - and a whole raft of independents. The market is very fragmented. I suspect there is an opportunity here for someone like Direct Line, which already has a database of customers,'' he said.