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India’s Vehicle Scrappage Policy Paves Way for New Biz Models Opportunities in the SME sector

Industry experts claim that India’s vehicle scrappage policy is an extended opportunity for new business models inclusive of traditional automotive ecosystems to set up vehicle fitness testing centres by collaborating with new players like small and medium enterprises. 

According to the consultancy firm EY India, the scrappage policy is acclaimed to provide a positive push for starting and developing the automotive ecosystem since the industry realized its vulnerability to the current value chain structure at the consumer and supplier end in context with the COVID-19 pandemic. 

Key Points of Vehicle Scrappage Policy

Launched last week by Prime Minister Narendra Modi, the Vehicle scrappage policy will help attract additional investments and generate employment with the help of Registered Vehicle Scrapping Facilities (RVSFs), said Arindam Guha, Deloitte India Partner & Leader, Government & Public Services. The RVSFs are likely to set up 50-60 centres across the country. He further added that "The policy also provides an opportunity for small and medium enterprises to set up vehicle testing centres for assessing the condition of old vehicles and issue fitness certificates."

EY India Partner and Leader of the Automotive Sector Vinay Raghunath claimed that "Automotive OEMs have an opportunity to revolutionize the recycling industry by evaluating interesting business models which would help them achieve both environmental and economic goals."

He further claimed that the supply chain associated with recycled materials could be leveraged to reduce input material cost, influence vehicle price positively, improve the share-holder value, and offer extensive choice to the customers. 

Benefits Linked with Vehicle Scrappage Policy

The original equipment manufacturers (OEMs) have increasingly started responding to the new dimensions of mobility, namely connected, autonomous, shared, and electric vehicles, which generate new forms of ownership and increase environmental focus among stakeholders, said EY India. It further added that the industry had realized its vulnerability to the current value chain structure at the consumer and supplier end after the onset of the COVID-19 pandemic. 

The scrappage policy is said to bring certain advantages related to reducing pollution levels, improving the recycling or reuse of automobile parts, reducing the fuel import bill, generating replacement demand, and providing impulsion to structuring this aspect of the automotive ecosystem. 

EY India added that this is a great opportunity for new business models to emerge with the collaboration of traditional automotive ecosystems with new players to generate products and services for potential customers. 

With similar views, Som Kapoor, EY India Partner Automotive Sector, commented that we are at a point where the emergence of a new business model can be witnessed that further extends the current auto ecosystem allowing both new players and traditional players to be involved in delivering solutions to customers in an organized manner. This helps create a Robust market offering that provides customers solutions to ease the end life of the vehicle resale/purchase process. 

The policy aims to remove unfit vehicles from the road and helps generate employment, encourage recycling, and become a viable solution to the ongoing wrong practices of vehicle material scrappage, said Omega Seiki Mobility Chairman and Founder Uday Narang. He further stated that the traditional vehicle material scrapping method was criticized as the biggest loophole of the Automotive Industry. An organized vehicle life cycle pattern must be maintained until the last stage of scrappage, and the scrappage policy aims to improve and organize this process, he concluded.


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