The country’s vehicle scrappage policy does not offer sufficient incentives to accelerate fleet replacement, and stronger government intervention will be required to unlock scrappage-led demand, Shenu Agarwal, MD and CEO, Ashok Leyland said on Thursday.
“We thought it (current scrapping policy) would be enough, but apparently it is not. I can’t quantify exactly how much incentive is needed, but it has to be quite substantial,” Agarwal said.
According to Agarwal, there are currently no direct government incentives for scrapping. The only support comes from OEM-led incentives, as the government encouraged industry players to motivate older truck owners to shift to new vehicles. Ashok Leyland offers 1–3% incentives depending on vehicle weight, but Agarwal claims that this alone “seems…not enough.”
Reducing Logistics Costs
He said the government has two compelling reasons to accelerate scrappage—reducing pollution and lowering logistics costs. “Newer vehicles are more productive, carry more cargo at higher speeds, pollute less and operate at lower costs,” he said, reiterating that a stronger policy push could unlock significant pent-up replacement demand.
For efficient logistics operations, Agarwal noted that the average fleet age needs to come down to below eight years, compared with the current national average of around 11 years—the highest ever.
Ministry of Road Transport and Highways (MoRTH) data shows that as of December 2025, approximately 3.94 lakh vehicles have been scrapped under India’s Vehicle Scrappage Policy (also known as the Voluntary Vehicle-Fleet Modernization Program or VVMP).
Scrapping Infrastructure Status
There are fewer than 200 scrapping centres operational nationwide. Ashok Leyland currently has no fully active scrappage centres, but facilities are being set up in Ahmedabad, Chennai, Jaipur, and other cities.
On demand trends, Agarwal said the commercial vehicle (CV) market remained largely flat until September–October 2025, after which demand picked up sharply. A key trigger was GST 2.0, which, according to him, boosted consumption and freight demand beyond mere price reductions. “GST should not be read purely as a price vector. For our industry, it is an increase in consumption momentum,” he said.
He expects the growth phase to continue, signalling a possible structural shift in the industry after years of cyclicality.
Ashok Leyland, meanwhile, is focusing its investments on technology and product development rather than greenfield capacity in India. The company is also expanding overseas, including in the Middle East, and remains active across fuel technologies—from EVs and LNG to potential hydrogen solutions—guided by operating cost economics.
On cost pressures, Agarwal acknowledged that the automotive industry continues to face commodity and geopolitical headwinds. While some cost increases will need to be passed on, he noted that price hikes are typically staggered at 1–2% increments to avoid market disruption.
Regarding the country’s largest tender for electric buses under the PM E-DRIVE scheme, covering 10,900 vehicles, Agarwal said that while Ashok Leyland missed the previous opportunity, the company will participate in upcoming central or state tenders.