EU Scrap Curbs Test India's Auto Recycling Chain

India's automotive material supply chain is likely to face tighter access to imported recycled metal after the European Commission proposed dropping the country from its list of non-OECD markets authorised to receive EU metal waste. If adopted, the exclusion would take effect from May 2027.

The draft delegated regulation, published on 18 September, credits India with managing several categories of non-hazardous waste well, including paper, wood, rubber, textiles, glass and mineral waste. However, on metal waste, the Commission's conclusion is more critical. It says India has not demonstrated that the material would be managed in an environmentally sound manner, and recommends that metal waste exports to the country should not be authorised. The proposal still has to clear the EU's adoption process. The first authorised country list is due by 21 November 2026, and the new export regime takes effect on 21 May 2027.

For Sanjay Mehta, president of the Material Recycling Association of India, the process has highlighted how little leverage Indian recyclers have in the negotiation. "We don't have any choice. We are going to be the beggar, let me be honest with you," he said.

That statement reflects how the current arrangement came about. According to Mehta, the EU sent Indian authorities a list running to roughly 5,600 HS codes in February 2025, covering the waste items being shipped to India, and asked for confirmation that the country wanted to keep receiving them under new compliance terms once the regime changes. He said MRAI represented the trade to the environment ministry and confirmed India's interest on its members' behalf. Compliance requirements for the facilities receiving that material are still being worked out in Brussels, he said, and are expected to include a multi-layered audit of Indian recyclers once the new regime takes effect.

For now, access remains open. "As of today, till May 2027, anyone can import scrap from Europe. There are no such stringent compliances," Mehta said, adding that only recyclers who clear the coming audits will keep that access once the deadline passes.

India applied for continued access in February 2025 and supplied additional information to the Commission in November 2025 and January 2026. The Commission's assessment indicates that India met the requirements for a range of non-metal waste streams but did not provide sufficient evidence for metal waste. The draft can still be amended before the final list is adopted.

The two measures under discussion in Brussels differ in mechanism. The Waste Shipment Regulation does not impose an audit on individual Indian recyclers as a condition of access. It first requires a non-OECD country to demonstrate that a given waste stream will be managed in an environmentally sound manner, with separate requirements applying to the facilities that receive the exported waste. India's current problem sits at the country authorisation stage for metal waste specifically, rather than in a blanket failure of individual recycling plants.

A sector built on secondary metal

The exposure for India's automotive industry is significant because aluminium scrap feeds the domestic secondary aluminium industry, on which the sector heavily depends. India's imports of aluminium scrap from the EU were about 3,66,000 tonnes in calendar 2025, according to Reuters, citing industry estimates. European Aluminium put the 2024 flow at about 3,45,600 tonnes, making India the EU's largest direct destination for the material that year.

The Society of Indian Automobile Manufacturers' August 2026 commodity monitor puts automotive production's share of aluminium use at 21%, and its share of hot-rolled steel consumption at 9%. Reuters reported that automakers consume about 60% of domestically produced secondary aluminium. India produces nearly half of its 4.2 million tonnes of aluminium through the secondary sector, and relies heavily on imported scrap from the European Union, the United States and the Middle East.

A second EU measure aimed more directly at that dependence has already been dropped. The Commission had considered a 15% export duty on aluminium scrap but abandoned the proposal in September after concerns over its implications for trade with India. Primary and secondary aluminium producers within the EU had pushed for the duty, arguing they needed the material for their own expansion. MRAI's counter-argument leaned on the EU's own production numbers. "Out of 6 million tonnes of aluminium production in Europe, only 1.2 million tonnes goes out of Europe. The remaining 4.8 million tonnes is consumed within Europe itself," Mehta said, arguing that the grades being exported were largely those European industry did not use.

That fight leaves the Waste Shipment Regulation as the more immediate policy risk for Indian buyers.

India's own recycling network still underused

That external supply risk comes as India is still building its domestic vehicle recycling network. The Environment Protection (End of Life Vehicles) Rules, 2025 were notified on 6 January 2025. The framework places extended producer responsibility on vehicle manufacturers and sets annual scrapping targets from FY2025-26. Registered Vehicle Scrapping Facilities are responsible for receiving end-of-life vehicles and carrying out depollution, dismantling, segregation and scrapping.

The formal network has expanded, but remains underused. A January 2026 NITI Aayog report, using Ministry of Road Transport and Highways data, found 117 RVSFs operational across 21 states and Union Territories, with 178 approved as of 1 September 2025. It estimated that 227 facilities would be required by 2027, and put current RVSF utilisation below 20%.

The economics help explain the gap. NITI Aayog's analysis assumes an average 1,500 kg vehicle contains about 60% steel, or roughly 900 kg, and uses a steel scrap price of ₹35,000 a tonne in its model. At full capacity, the report found the RVSF model commercially viable, but said low utilisation materially weakens financial performance. Mehta framed the issue more simply. "The industry will work only on economics. There has to be profitability, the cycle has to run properly, and then only the system will work," he said.

The informal sector continues to handle substantially more vehicles than the formal one. A NITI Aayog survey covering more than 200 informal scrapping units across 17 states and Union Territories estimated annual informal scrapping capacity at 2-3 lakh end-of-life vehicles, against about 72,000 vehicles processed by RVSFs in FY2024-25. Its sample analysis also found an informal operator could offer around ₹38,000 for a Swift Dzire-equivalent vehicle, against about ₹23,000 from an RVSF.

The government has tried to close that gap through EPR certificates. NITI Aayog says transactions between RVSFs and vehicle manufacturers are intended to provide a financial buffer to formal facilities, while the current EPR framework creates compliance-driven demand for those certificates. The report also argues that existing targets remain too low to generate enough certificate revenue to make many facilities economically viable.

For Mehta, that points to where responsibility ultimately sits. "There is a responsibility of the OEM as well. As producers, they have to build the ecosystem that will eventually help them sell more cars. The benefit will show in three to five years, but they have to invest now, the same way it is done abroad. Only the mindset has to change, and that has to happen in India," he said.

India has spent years building secondary aluminium capacity around a global scrap market, while its formal end-of-life vehicle system is only now being scaled up. If the draft survives unchanged, the proposed EU restriction would remove a major source of that imported feedstock. For automakers, the question is becoming one of supply chain design: how much recycled metal can be recovered domestically, how quickly formal vehicle recycling can scale, and how much dependence remains on imported scrap as access to overseas supplies grows more restricted.