The Mahindra Group is seeing a new, big and emerging opportunity in the growing population of old vehicles. Almost in tandem with the government’s plans to lay out end-of-life norms for vehicles, Mahindra Group company Mahindra Intertrade is scouting for a place in Maharashtra or Gujarat to set up the first vehicle scrapping plant, through its 50:50 joint venture with MSTC Ltd (a government of India enterprise).
Speaking to Autocar Professional, Sumit Issar, MD, Mahindra Intertrade, says that the first plant should be operational by April next year. “The investment amount we have taken is a very sizeable amount for this portfolio. It’s not just one plant. We are looking at huge investments across the country. We are now expanding our reach of collection for the vehicles across the country. So, a lot of centres will be coming up across India,” he says. The investments will be “huge” as the company sees a very strong business potential in breaking down vehicles. In 10 years or so, the market size could be US$4-5 billion, according to Issar.
The Ministry of Road Transport and Highways (MoRTH) of the government of India is batting for the scrappage policy. It wants to put a standard operating procedure in place for the first scrappage policy of the country. Three key pillars for it would be easier deregistration of vehicles to be scrapped, environment-friendly processes of breaking down vehicles, and an efficient recycling process.
Currently, the vehicle scrappage business is highly unorganised. The entry of players like Mahindra Intertrade and MSTC will not only help it become organised but also facilitate the growth of another industry – refurbished components. In addition, the scrapped metal could become raw material for the steel industry. “Every tonne of new steel manufactured from scrap steel saves a substantial amount of iron ore, coal, electricity and limestone. This initiative would also lead to forex savings. Secondly, steelmakers in India import more than five million tonnes of scrap a year for recycling into finished steel,” says Issar.
Promise of better resale value
Mahindra Intertrade plans to leverage the strong presence of M&M’s mobility, farm equipment and CV businesses to scale up the new initiative, even as it will buy vehicles of all brands to scrap. “Our advantage is the number of dealerships and contact points we have across India. You can’t get into this business if you are not scalable,” says Issar.
Mahindra Intertrade will also pitch its scrappage channels to users of old cars as a better way to dispose their cars. It plans to offer more than what an unorganised scrap dealer would offer. This approach is expected to “pull” customers towards the scrappage centres of Mahindra Intertrade. As compared to the conventional scrappage centres, where the process of breaking down vehicles is manual and time consuming, the Mahindra Intertrade-MSTC centres will have equipment that will do the job faster and more efficiently. The shredding machine is expected to the job of breaking down a vehicle, in half an hour or so. The process factor aside, how will Mahindra Intertrade offer a better value to the customer of an old car? “The cost per car of crushing and making into recycling will be much lesser for us. But the kind of materials we can get out of that car and what we can recycle, will give us an extra value,” shares Issar.
Vijay Arora, vice-president, Mahindra Intertrade, also sees the new business as a pitch to customers as a good way to buy peace of mind as there’s no scope of any misuse of their cars.
With all plans in pace, if things go as planned, Mahindra Intertrade sees a network of 8-10 scrappage centres across the country. MSTC will have the “first right of joining” in the expansion plans. But what if the policy implementation gets delayed, or doesn’t turn out to be as expected? “As it stands today, we know there is no policy. We do have a backup plan B and backup plan C ready. We know that we can’t just rely on the policy. It will be really great to have it but surely we have a plan B and plan C ready,” concludes Issar.
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