The Indian automobile industry is facing a potential bottom-line impact of approximately ₹25,000 crore in FY2025-26, triggered by an accounting clause set off by the Environment Protection (End-of-Life Vehicles) Rules, 2025.

According to PTI, an "innocuous looking" clause in the ELV Rules, notified by the Ministry of Environment, Forest and Climate Change in January 2025, has alarmed automakers after their auditors flagged the scale of its financial ramifications.

The rule triggers Indian Accounting Standard (Ind AS) 37, requiring manufacturers to book significant provisions for environmental compensation — covering vehicles sold over the last 20 years for private use and 15 years for commercial use.

Industry body SIAM (Society of Indian Automobile Manufacturers), in a letter to the ministry seen by PTI, warned that once the environmental compensation cost is notified by the Central Pollution Control Board (CPCB), automobile manufacturers may be required to make substantial cumulative financial provisions. Preliminary estimates put the one-time gross impact at approximately ₹25,000 crore, or around ₹9,000 crore on a discounted basis, for FY2025-26.

The financial burden is split between segments, with four-wheeler makers estimated to bear ₹14,623 crore and two- and three-wheeler manufacturers facing an additional ₹9,650 crore.

An industry official told PTI that the policy could affect manufacturers' ability to invest in new technologies and fund growth plans, as companies would be required to make provisions for Extended Producer Responsibility even for vehicles sold in the past, regardless of whether they intend to exit the market, effectively blocking capital and denting profits.