Industry experts welcome vehicle scrappage policy; will nurture new ecosystem

The recently launched Vehicle Scrappage Policy provides opportunities for new business models in the automotive ecosystem alongside the traditional players, as per industry experts. Small and medium enterprises can set up vehicle fitness testing centres.

Prime Minister Narendra Modi recently launched the National Automobile Scrappage Policy as a significant milestone in the country's development journey. The scheme will likely attract additional investments and generate employment through registered vehicle scrapping facilities (RVSFs) as around 50-60 such centres will likely to be set up across the country, said Deloitte India.

As per consultancy firm EY India, the scrappage policy can give a positive push to start a new and nascent automotive ecosystem as well as innovative business models. "Automotive OEMs have an opportunity to revolutionise the recycling industry by evaluating interesting business models which would help them achieve both environmental and economic goals," EY India Partner and Automotive Sector Leader Vinay Raghunath said in a statement.

One can also potentially leverage the supply chain associated with recycled materials to reduce input material costs, impact vehicle prices positively, improve shareholder value and offer a choice to consumers, Raghunath added.

EY India highlighted that original equipment manufacturers (OEMs) are responding to the new dimensions of mobility that encompass ideas like connectivity, autonomous, shared and electric vehicles. It will help stakeholders to have an increased focus on the environment. "In addition, the COVID-19 pandemic has made the industry realise the vulnerability associated with the current value chain structure at both the consumer and the supplier end," the firm added.

The scrappage policy can also provide some benefits related to a reduction in pollution, reduction in the fuel import bill, improved recycle or reuse of parts, generation of replacement related demand, and providing impetus to structuring this part of the automotive ecosystem.

EY India Partner, Automotive sector, Som Kapoor stated that this was the emergence of a new business model that will extend the current auto ecosystem including both new and traditional players. The scrappage policy will provide novel opportunities for both new and existing players to build a robust go-to-market offering and provide consumers solutions to ease the end life of vehicle resale/purchase processes, Kapoor said in the report.

(With inputs from PTI)