Scrappage policy paves way for automotive circular economy

Scrappage policy paves way for automotive circular economy

New Delhi: The scrappage policy can give a positive push to start a new and nascent automotive circular economy whereby the value embedded in End-of-Life Vehicle (ELV) components and materials is recaptured through reusing, recycling and recovery.

In its latest report, Ernst & Young (EY) has highlighted the importance of removing old vehicles, particularly old diesel vehicles, from the fleet to substantially reduce direct exposure emission on roads.

“The benefit of scrappage policy can be maximised if old heavy duty diesel commercial vehicles are taken off the road. However, it is extremely difficult to quantify legacy fleets in India, as there is no record of vehicle expiry and scrappage,” it said.

In 2016, a joint study by the Central Pollution Control Board (CPCB) had estimated that about 8.7 million vehicles had reached end-of-life by 2015. The ELV count would be nearly 22 million by 2025, and it would be 28 million by 2030. “This number is bound to grow as consumer needs and aspirations increase,” EY said.

The consultancy firm pointed out that pollution control is not the only reason why the Indian government needed to drive scrappage policies. “Replacement of old commercial vehicles with those having better performance will result in reduction of oil import bill which is estimated to be INR 9.550 crore in 2025,” it said.

EY added that currently, India has a deficit of scrap material and is importing scrap, which is expected to accrue a bill of INR 6,550 crore by 2025. To fill its demand, India also imports steel scrap for the production of new materials.

Vinay Raghunath, partner and automotive sector leader, EY India, said, “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. They can 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.”

Som Kapoor, partner, automotive sector, EY India, said, “We are at a point where we could see the emergence of a new business model that extends the current auto ecosystem, where both new players and traditional players can be involved to deliver solutions in an organised manner. 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 of life of vehicle resale / purchase processes”.

Recycling process

According to the EY report, the recycling flow of ELVs turned out to be almost identical in many countries, regardless of the existence of a legislative management system. The process of ELV recycling starts with dismantling where components containing hazardous substances such as lead batteries, mechanical oils and refrigerant gases are collected first, and then recyclables and valuable materials for secondary use, including engines, tyres and bumpers are collected.

In Japan, the collection of refrigerant gases and air bags are legally mandated. In the US, voluntary collection of components containing mercury, such as switches, is operated during the dismantling stage.

In China, components collected at the dismantlers are very often re-sold or recycled as secondary products. Car hulks left after the dismantling process are put into shredders. The shredded materials are separated by air classifier, and Automotive Shredder Residue (ASR)-Light is taken out. Subsequently, irons and non-ferrous metals are separated by magnetic separators or non-ferrous metal collectors. The remnants of these processes are ASR-Heavy.

In the EU, ASR is in many cases filled at the final landfill sites. It was a similar situation in Japan prior to the enactment of the Law for the Recycling of ELV. However, after the enforcement of the said Law, which mandates the recycling of ASR, material separation of secondary resources, collection of slag by melting furnaces, and energy recovery have become common.


The biggest challenge, as per EY, would be disseminating correct and complete information about dismantling and hazardous material handling. OEMs need to ensure that proper guidelines for these are established, educated to the stakeholders as well as the common man.

Secondly, the scrapping market in India is extremely unorganised. Hence, reliable collection of scrap vehicles and preventing illegal dumping becomes paramount. This risk can be reduced after the advent of organised players in the ecosystem and having a centralized management system for scrap vehicles (similar to VAHAN for vehicle sales). The centralized system would also enable the government to have a view of the true vehicle part of each emission standard across the country, and develop a policy/subsidy framework targeting specific high emissions generating categories to encourage vehicle scrapping.

News source- Economic Times

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