VEHICLE SCRAP YARD (PV/CV – 90%/10%)

Vehicle recycling is the dismantling of vehicles for spare parts. At the end of their useful life, vehicles have value as a source of spare parts and this has created a vehicle dismantling industry. The industry has various names for its business outlets including wrecking yard, auto dismantling yard, car spare parts supplier, and recently, auto or vehicle recycling. Vehicle recycling has always occurred to some degree but in recent years manufacturers have become involved in the process. A car crusher is often used to reduce the size of the scrapped vehicle for transportation to a steel mill.

The process of recycling a vehicle is extremely complicated as there are many parts to be recycled and many hazardous materials to remove. Briefly, the process begins with incoming vehicles being inventoried for parts. The wheels and tires, battery and catalytic converter are removed. Fluids, such as engine coolant, oil, transmission fluid, air conditioning refrigerant, and gasoline, are drained and removed. Certain high value parts such as electronic modules, alternators, starter motors, infotainment systems – even complete engines or transmissions – may be removed if they are still serviceable and can be profitably sold on; either in “as-is” used condition or to a remanufacturer for restoration. This process of removing higher value parts from the lower value vehicle body shell has traditionally been done by hand. As the process is labour intensive, it is often uneconomical to remove many of the parts.

A technique that is on the rise is the mechanical removal of these higher value parts via machine based vehicle recycling systems (VRS). An excavator or materials handler equipped with a special attachment allows these materials to be removed quickly and efficiently. Increasing the amount of material that is recycled and increasing the value the vehicle dismantler receives from an end-of-life vehicle (ELV).

After all of the parts and products inside are removed, the remaining shell of the vehicle is sometimes subject to further processing, which includes removal of the air conditioner evaporator and heater core, and wiring harnesses. The remaining shell is then crushed flat, or cubed, to facilitate economical transportation in bulk to an industrial shredder or hammer mill, where the vehicles are further reduced to fist-sized chunks of metal. Glass, plastic and rubber are removed from the mix, and the metal is sold by multiple tons to steel mills for recycling.

Recycling steel saves energy and natural resources. The steel industry saves enough energy to power about 18 million households for a year, on a yearly basis. Recycling metal also uses about 74 percent less energy than making metal. Thus, recyclers of end-of-life vehicles save an estimated 85 million barrels of oil annually that would have been used in the manufacturing of other parts. Likewise, car recycling keeps 11 million tons of steel and 800,000 non-ferrous metals out of landfills and back in consumer use.

It is intended to prepare a Feasibility Report to install a Vehicle Scrap Yard Facility for Processing 20000 Scrap Vehicles per year as a Green Field Project.

Vehicle Scrappage Policy

The Vehicle Scrappage Policy, launched on August 13, 2021, is a government-funded programme to replace old vehicles with modern & new vehicles on Indian roads. The policy is expected to reduce pollution, create job opportunities and boost demand for new vehicles. Several countries including the US, Germany, Canada and China have introduced vehicle scrappage policies to boost their respective automotive industries and curtail vehicular pollution. Large automakers are on boarding this policy by launching scrappage centers including CERO by Mahindra & Mahindra (2018) and Maruti Suzuki Toyotsu by Maruti Suzuki and Toyota (2019). This policy also supports India’s ‘Green India’ mission, as it creates space for a cleaner fleet of vehicles.

According to the new policy, commercial vehicles aged >15 years and passenger vehicles aged >20 years will have to be mandatorily scrapped if they do not pass the fitness and emission tests. The policy does not treat a vehicle as scrap just because of its age, but considers other factors such as quality of brakes, engine performance and others. The objective is to phase out old cars, reduce urban pollution levels and stimulate automotive sales, which continues to record slowdown amid India’s post-COVID recovery phase. Additionally, the vehicle scrappage policy is also said to be a part of a larger stimulus package majorly requested by original equipment manufacturers (OEMs) to stir their demand.

Under the policy, automated testing stations and scrapping facilities will be set up in phases. Currently, 75 stations are proposed under Phase 1; this count will gradually scale up to 450–500 stations across the country. The government has also welcomed private players to invest in setting up such stations through partnership with the state governments. The government also plans to set up 50–70 facilities for scrapping vehicles in the next 4–5 years. An automobile industry body—the Society of Indian Automobile Manufacturers (SIAM)—has urged the government to allow dealer workshops to function as inspection and certification stations, as establishing new ones may not be commercially viable and delay the policy developments and implementation.

The Vehicle Scrappage Policy extends many obvious benefits, besides pollution control and improved road safety factor. Union Minister Mr. Nitin Gadkari has highlighted that raw materials derived from scrapped vehicles such as copper, rubber, steel, aluminium and plastic can be reused in new vehicles, which can help reduce the price of new vehicles and subsequently, boost sales.

Some incentives for scrapping old vehicles and buying new ones are as follows:

• Manufacturers can give up to 5% discount for buying new vehicles

• Zero registration fee for new vehicle purchase

• Owners can receive scrap value equivalent of 4–6% of ex-showroom price of new vehicles

• States can give up to 25% and 15% rebate on road tax for personal and commercial vehicles, respectively

According to the Ministry of Road Transport and Highways (MORTH), India is home to 2.1 crore vehicles that are older than 20 years, with the highest number in Karnataka (39.4 lakh), followed by Delhi (36.1 lakh), Uttar Pradesh (26.2 lakh), Kerala (20.6 lakh), Tamil Nadu (15.9 lakh) and Punjab (15.3 lakh). The policy will likely result in the following projected gains:

30% boost for the Indian automobile industry, from the current Rs. 4.5 lakh crore (US$ 61.46 billion) turnover to Rs. 10 lakh crore (US$ 136.59 billion) over the coming years.

Export component of Rs. 1.45 lakh crore (US$ 19.81 billion) in the current turnover is likely to go up to Rs. 3 lakh crore (US$ 40.98 billion)

Decrease India’s huge Rs. 10 lakh crore (US$ 136.59 billion) crude import bill
Attract new investments of ~Rs. 10,000 crore (US$ 1.37 billion) and create as many as 35,000 jobs

The Vehicle Scrappage Policy has been welcomed by most states. Most car dealers in Gujarat have expressed optimism at the new policy enforcements. Mr. Pranav Shah, Chairman, Federation of Automobile Dealers Associations (FADA) in Gujarat, believes that the scrappage policy will boost sales of new vehicles on the back of proposed discounts on new car purchases against vehicle scrappage certificates. Other experts in the industry have stated that the turnaround time of cars will reduce, generating more demand for new cars. The state of Maharashtra is outlining SOPs (that will be soon rolled out) for setting up digitized scrapping centers. The Delhi Government issued a public notice prohibiting plying of over 15-year-old petrol vehicles and over 10-year-old diesel vehicles. The owners of such vehicles have been advised to get their vehicles scrapped through authorized facilities at the earliest, failing which the vehicles can be impounded.

The Tamil Nadu govt. has reported mixed responses towards the scrappage policy, raising concerns of owners of second-hand or third-hand cars as they may have a tough time finding potential buyers. Additionally, some stakeholders from the state also believe that a well-maintained car fetches a good price irrespective of its age. Mr. Wilson Joseph of BRK Automobiles, who owns a used cars business in Chennai, expressed doubts over how the policy will cater to the second-hand cars market. The policy has received a similar response from lorry/truck owners in the state.

However, at a broader level, the policy has a good mix of incentives for new vehicle buyers and automotive dealers and hence, is anticipated to generate positive results in the near future. This will also pave the way for a whole new business segment—‘Scrappage Facility’—which will flourish in a well-organised manner. Additionally, the policy addresses the intent of all stakeholders from exporters, importers, car dealers, micro, small & medium enterprises (MSMEs), original equipment manufacturers (OEMs) and end consumers. Prime Minister Mr. Narendra Modi, while introducing the policy stated, “The policy is an important link to achieve the circular economy of waste to wealth. It will also energize India’s auto sector and metal sector under the principles of reuse, recycle and recover.” The Vehicle Scrappage Policy is expected to truly touch every aspect of the automobile industry in India, the result of which is expected to churn in the years to come.

Challenges

For the proposed policy to succeed, the most important step is to build an infrastructure of testing and scrapping centres quickly across the country. Due to the lack of a supporting infrastructure, implementation of the scrappage policy will be challenging. Currently, India has just seven automated fitness test centres and two authorised scrappage centres, which is inadequate to cater to the market. Further, the process to deregister vehicles also needs to be simplified. At present, deregistering vehicles is a dreadful experience for most owners who want to sell or scrap their old vehicles, thereby discouraging many interested in discarding old vehicles. However, to overcome this challenge, the Society of Indian Automobile Manufacturers (SIAM), stated that it will work with the government to create an infrastructure for vehicle testing and scrappage centres across the country.