Time is ripe to introduce the Scrappage policy to achieve multiple benefits: EY India report

G Balachandar Chennai | Updated on June 29, 2021

The policy can provide benefits related to reduction in pollution, fuel import bill, improved recycle or re-use of parts, the report said

Time is ripe to introduce a scrappage policy in the country as it will bring a lot of positive factors — cut in emissions, could act as a catalyst for vehicle sales increase and expansion of the automotive ecosystem with tangible benefits on raw material front, says a EY India report.

As car ownership continues to increase at a global scale, an important aspect of aggregated emission reduction is to increase circularity across the automotive industry’s value chain including new processes and operating models related to end-of-life vehicles (ELVs).

In this context, a scrappage policy can provide obvious benefits related to reduction in pollution, fuel import bill, improved recycle or re-use of parts, generation of replacement related demand and providing impetus to structuring this part of the automotive ecosystem, it said.

“Automotive OEMs have an opportunity to revolutionise the recycling industry by evaluating business models which would help them achieve environmental and economic goals. They can leverage the supply chain associated with recycled materials to reduce input material costs, impact vehicle prices positively, improve shareholder value and offer a choice to consumers,” Vinay Raghunath, Partner and Automotive Sector Leader, EY India, said.

There is an opportunity to set up new business models where new players and the traditional automotive ecosystem come together in an organised manner to provide products and services to consumers.

Centralised system

Currently, the scrapping market in India is unorganised. Hence, reliable collection of scrap vehicles and preventing illegal dumping becomes paramount. This can be reduced after the advent of organised players in the ecosystem and having a centralised management system for scrap vehicles (similar to VAHAN for vehicle sales). From the technical aspect, standardised processes for complete vehicle scrapping would help bring clarity.

Industry at a point where there may be emergence of a new business model that extends the current auto ecosystem, where both new players and traditional players can be involved to deliver solutions in an organised manner.

“The scrappage policy will provide novel opportunities for both new and existing players to build a robust go-to-market offering and provide consumers solutions to ease the end of life of vehicle resale / purchase processes,” said Som Kapoor, Partner, Automotive sector, EY India.

While there is a lot more to be done in the future, the scrappage policy does bring to the table a lot of positives. It should lead to reduction in emissions, act as a catalyst for vehicle sales, drive savings on imported raw materials and lead to an expansion of the overall automotive ecosystem including fitness centers, new aspects of supply chain, scrapping centers, and automation.

Internationally, 85-95 per cent of the vehicles are recovered with the vehicle designs being suited for easy dismantling and disposal. Europe and Japan mandated 90-95 per cent of vehicle recovery from 2015. India can also take learnings from the other nations and choose and adopt a path toward recycling or remanufacturing the components, that indeed seems to be the need of the hour, said Kapoor.

Published on June 29, 2021

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