Vehicle Scrapping Policy to Grow Indian Auto Industry Sales By 22%

By - CEM Team

Indian road transport ministry has been working on the implementation of the vehicle scrapping policy. Nitin Gadkari - Road, Transport and Highway Minister mentioned that they made a presentation to Ministry of Finance 3 days ago and said at an Acma event on August 30 2016 “We will bring an elaborate scrappage policy. In the first phase, fifteen year old commercial vehicles will be eligible for scrapping. These vehicles account for 65 per cent of the pollution,”. He also said that the policy will be incorporated in a sequential manner. This policy once fully estimated is expected to give a boost to Indian Automobile sector sales by 22%, while benefiting the state and central government by almost 10,000 crore INR (1.5 billion USD) and 20,000 crore INR (3 billion USD) respectively. The resulted growth in sales is an expected outcome from the special incentives given to car owners in the form of concessions from the manufacturers, state government and the central government.

Adding to this, Indian government is further looking at creating an auto cluster in Kandla (Gujarat), with an area of 1 lakh acre for scrapping the old cars and selling aluminum, steel and coper to manufactures at a cheaper price. This would in turn help in indigenous supply of raw material, reducing the dependency on imports.

Indian Market has a traction of 20 million passenger vehicles over the last 10 years, excluding commercial vehicles and two wheeler. According to estimates by SIAM, Indian market has a potential to sell 6 million units by 2020. With no existing policy for over aged vehicles, owners ride their cars for 14-15 years though the normal life of passenger vehicles is 10-12 years. Owing to change in consumer behavior, increase in purchasing power, improving lifestyles and social pressure, easy financing options and competitively prices market is encouraging consumers to purchase a new car in 5-8 years now.

In such a potential market, a clear government policy for scrapping old vehicles, accompanied with fiscal benefits is certainly an effective measure to streamline this currently unorganized market and derive and deliver benefits to all - the industry, government and the end customer.  

Source : News, Industry Reports