Policy

Industry welcomes vehicle scrappage policy, says it will benefit both OEMs, customers

G Balachandar Chennai | Updated on March 18, 2021

The mandatory vehicle-recall regime comes into effect from April 1

The policy is also expected to bring down the cost of new vehicles, lower environmental pollution

With the Central Government announcing the fine print of the proposed Vehicle Scrapping Policy, industry representatives and analysts have welcomed the much-awaited scheme as they believe it will not only help in removing old and polluting vehicles from roads, but will also spur demand for new vehicles with better emission technology, resulting in optimum utilisation of the nation’s resources.

“The guidelines and advice announced today are in the right direction and now, the State Governments and OEMs have to join hands and make it a success,” said Vinkesh Gulati, President, Federation of Automobile Dealers’ Associations.

"The scrappage value of a vehicle is in the range of 4-6 per cent of the ex-showroom price, rebate of up to 25 per cent for PV and 15 per cent for CV by State Governments, a 5 per cent discount from OEMs on a new vehicle and waiver of registration fee will definitely help excite the customer and make him scrap his old vehicle. It will also revive the ailing CV segment and, in turn, boost the State exchequer’s revenue on sale of new vehicles," he added.

Anuj Sethi, Senior Director of CRISIL Ratings, said the Vehicle Scrapping Policy could help in three ways. “One, it will lower the cost of passenger vehicles by 8-10 per cent for most segments; two, encourage replacement of older, more-polluting passenger vehicles; and three, increase the availability of key raw materials such as steel, copper and aluminium, which could be recycled to lower the cost of production of new vehicles.

Satyakam Arya, MD & CEO of Daimler India Commercial Vehicles, had said recently that the proposed scrappage policy would create a chain that would spur demand for new and modern vehicles.

CARE Ratings pointed out that the policy would be a ‘win-win’ for all as it would help reduce India’s oil import bills by improving fuel efficiency, reducing environmental pollution and improving road and vehicular safety by getting rid of old and defective vehicles and boosting the availability of low-cost raw materials such as plastic, steel, aluminium, steel, rubber and electronics for OEMs.

It will also have the potential to increase the automobile industry’s turnover to Rs 10 lakh crore from the existing Rs 4.5 lakh crore, it said.

However, according to the rating agency, proper implementation of this policy is pivotal to its success, which may help India gain a competitive position globally and be among the leading automobile manufacturing hubs.

The headwinds for implementation would be in the form of infrastructure ce to build organised scrapping centres, which currently India does not possess. To further incentivise the consumer, there should be GST concessions on purchase of new vehicles, as tax rates in India on new automobiles is exorbitant, it added.

Published on March 18, 2021

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