Scrappage policy can boost OEM sales by 18-20%: Gadkari

Union Minister for Road Transport and Highways Nitin Gadkari has stated that domestic automakers could potentially increase their sales by 18-20 percent by investing in or supporting the expansion of vehicle scrapping centres.

"Germany has increased their sales by 12%, while the United States has increased their sales by 15%. Compared to European countries and the United States, I believe domestic auto industry sales in India will rise by 18% to 20%. This will provide an additional business benefit to all of you," Gadkari told at the SIAM 64th annual convention.

Gadkari emphasized that the auto industry's strategic focus on vehicle scrapping will be extremely beneficial, with a total positive impact on the industry.

The domestic auto industry offers a 1.5 to 3 percent or higher incentive for vehicle scrapping to promote fleet modernisation and support the circular economy by encouraging junking of end-of-life vehicles.

The Government of India's Vehicle Scrappage Policy 2021, also known as the Voluntary Vehicle-Fleet Modernisation Programme (V-VMP), is a scheme for removing old and unfit vehicles. Cars older than 20 years and commercial vehicles older than 15 years are no longer eligible for re-registration and are made fit to be scrapped.

DigiELV is currently an online platform that facilitates the trading of Certificates of Deposit (CD) for various vehicle categories, as authorised by the Ministry of Road Transport and Highways (MoRTH). Anyone who already owns a Certificate of Deposit (CD) can sell it using the platform. When a user drops off a vehicle for scrapping at an RVSF, a CD is issued to them.

The auto industry has also responded in kind to the government's push, with automakers ranging from luxury to medium and heavy commercial vehicle makers offering rebates ranging from 1.5 to 3.5 percent on vehicle scrapping.

For example, Mercedes-Benz India is offering a discount of Rs 25,000 on new vehicle purchases, with the condition that customers link scrapped vehicle details to the Vahan system. Tata Motors, India's leading passenger car manufacturer, is offering a 3% discount on new commercial cargo vehicles with GVW over 3.5 tonnes.

Volvo Eicher Commercial Vehicle provides a 3% discount on new commercial cargo vehicles with GVW over 3.5 tonnes. Ashok Leyland also provides a 3% discount on the same.

Despite automakers' emphasis on providing incentives to consumers for vehicle scrapping, Gadkari highlighted the difficulty of establishing new centers, citing a lack of fitness facilities.

Industry experts estimate that India requires approximately 400 fitness centres to certify vehicles for scrapping.

Speaking at the SIAM convention, Gadkari informed that there are only 63 operational scrapping centers, with nearly 600 centers in the works and 78 currently under construction.

Speaking about the the need for more vehicle scrapping facilities, he stated that he has appealed to the auto industy to take the initiative in this regard.

"It will be a win-win situation for both manufacturers and the government, boosting our economy and creating more jobs while increasing profits," he said. 

The Union Minister for Road Transport and Highways stated that "scrapping can result in a nearly 90% recovery of raw materials, allowing India to reduce steel imports by 65 lakh tonnes, create 35,000 new jobs, and attract overall investments of close to 10,000 crore."