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Vehicle Scrapping policy to boost automobile sales by 18%

September 12, 2023 | 1 min read | Industry News

India's automotive landscape is set to undergo a significant transformation with the implementation of the government's new scrapping policy, which came into effect on April 1, 2023. Nitin Gadkari, the Union Minister for Road Transport and Highways, announced that this policy is expected to boost automotive sales by a remarkable 18%, bringing about a new era of sustainable growth for the sector.

One of the key highlights of the scrapping policy is its emphasis on utilizing scrapped vehicle materials, which can lead to a substantial 33% reduction in raw material costs. This not only promotes eco-friendliness but also makes economic sense for manufacturers.

Union Minister stressed the potential benefits of this approach at the 63rd SIAM Annual Convention, highlighting that using scrapped vehicle materials can simultaneously increase new vehicle sales by an impressive 18-20%. However, he went on to request that automakers consider providing discounts for customers who choose to purchase new vehicles by scrapping their old ones.

To incentivize vehicle scrapping, the Central Government has allocated Rs 2,000 crore to state governments through the Special Assistance to States for Capital Investment 2022-23. This vehicle scrappage program is projected to generate an additional Rs 40,000 crore in GST revenue for the government.

Scrapping older vehicles will not only reduce India's dependence on imported metals like aluminium and copper but also decrease the need for rubber. This initiative aligns with the government's vision of creating a circular economy, which is pivotal for reducing waste and enhancing resource efficiency.

Gadkari also mentioned that the government is collaborating closely with the automotive industry to develop cutting-edge technologies for electric vehicles, electric highways, and sustainable utilization of mining wastelands.

In an effort to encourage the voluntary disposal of old vehicles, the Ministry of Road Transport & Highways is exploring the possibility of providing subsidies, in coordination with the Finance Ministry. This move is aimed at motivating individuals to contribute to the environmental and economic benefits of vehicle scrapping.

Shri Nitin Gadkari reiterated the government's commitment to reducing India's high logistics costs which is currently hovering between 14-16%. This will be achieved through the construction of new highways and the promotion of alternative fuels. As a result, the Indian automotive industry is expected to witness a reduction in operational costs, enhancing its competitiveness in the global market.

With the vehicle scrapping policy taking centre stage, India's automotive sector is poised for a remarkable transformation. The policy's focus on sustainability, resource efficiency, and economic incentives is not only expected to boost the industry but also aligns with global trends towards responsible and eco-friendly practices. As India strides towards a circular economy, the automotive sector is set to emerge as a key player in shaping a more sustainable and prosperous future.

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