The scrappage policy should lead to reduction in emissions, act as a catalyst for vehicle sales, save on imported raw materials, and expand the overall automotive ecosystem
By Vinay Raghunath & Som Kapoor
The automotive industry has seen rapid introduction of new materials and electronics, all of which can potentially help a vehicle achieve greater levels of sustainability. There is an opportunity today to leverage the scrappage policy to create a new business model and extend the auto ecosystem.
The scrappage policy also provides an opportunity for the sector to transition into a circular economy, whereby the value embedded in ELVs’ (end-of-life vehicles) components and materials is recaptured through reuse, recycling and recovery. A well-established treatment route can help maximise the preservation of material quality and make automotive OEMs/suppliers rethink the ways vehicles and their materials are designed, constructed, used and handled at the end of life.
Governments around the world are looking to provide support to their automotive industries in response to the slowdown brought on by the Covid-19 pandemic. Stimulus packages that support decarbonisation of the vehicle fleet through increased efficiency and electrification can aid in these economic recovery efforts. In this context, several governments have been considering the implementation of a new generation of incentives and scrappage programmes to boost the local automotive value chain through vehicle sales, while increasing fuel efficiency and reducing greenhouse gas and air pollution emissions from road transport.
Internationally, 85-95% of the vehicle is recovered with vehicle designs being well suited for easy dismantling and disposal. As per the Directive on End-of Life Vehicle 2000/53/EC and Japan Automotive Recyclers Alliance, 2010, Europe and Japan have led the way and mandated 90-95% of vehicle recovery from 2015. India can learn from other nations and adopt a path that focuses on multidimensional aspects of recycling and remanufacturing components.
According to the Centre for Science & Environment 2020 report, air pollution from older vehicles requires urgent attention in India. A quick review of the emissions factors for different generation of vehicle technologies shows that there is a significant difference in emissions rates between old and new vehicles. For instance, old heavy-duty diesel trucks meeting BS1 norms can spew 36 times more particulate matter (PM) compared to BS6-compliant trucks. Replacement of old commercial vehicles having better performance will result in reduction of fuel bills. Reduction in oil imports is estimated to be `9,550 crore (2025).
Currently, the scrapping market in India is extremely unorganised and a reliable collection of scrap vehicles while also preventing illegal dumping becomes paramount. This risk can be reduced if organised players enter the ecosystem with a centralised management system for scrap vehicles (similar to VAHAN for vehicle sales).
While there is a lot more work to be done in the future, the scrappage policy does bring to the table many positives. It should lead to reduction in emissions, act as a catalyst for vehicle sales, save on imported raw materials, and expand the overall automotive ecosystem including fitness centres, new aspects of supply chain, scrapping centres and automation.
Raghunath is partner & automotive sector leader, and Kapoor is partner, automotive sector, EY India