The recently announced vehicle scrappage policy is likely to give a major boost to the metal recycling business, said Grant Thornton Bharat.
Accordingly, in a report, Grant Thornton Bharat said that the policy is likely to affect major changes in the Indian automotive industry.
“Be it generating employment, reducing pollution, or accelerating demands for electric vehicles, the policy proves to be a win-win situation for the auto industry and various other stakeholders,” the report said.
The policy mandates that passenger vehicles older than 15 years and commercial vehicles older than 20 years will have to be scrapped mandatorily if they fail fitness and emission tests.
Moreover, the policy is likely to positively impact the sales of new cars and pave way for more opportunities for the Indian auto sector.
“One of the key opportunities that will emerge from the vehicle scrappage policy will be for the metal recycling business. It will also to an extent reduce the cost of production. Steel is a crucial component for automobile manufacturers, and its price has been growing up to almost 30 per cent in the last six months,” said Saket Mehra, Partner and Automotive Sector Leader, Grant Thornton Bharat.
“If you were to recycle the material and use the same for manufacturing, to an extent the prices will get rationalised. This is one of the biggest advantages. However, to what extent the price reduction will benefit the customer remains to be seen. At least to a certain point, there would be an impact on the lowering of the cost of production.”
As of April 2021, there were 1.7 million old medium and heavy commercial vehicles plying on the Indian roads according to the Ministry of Road Transport and Highways.
In addition, the report cited that industry believes that the policy has the potential to generate demand for new vehicles.