Union Budget 2021-22| New Vehicle Scrappage Policy: Indian Auto Industry reactions

The Indian automotive industry has welcomed the new proposal of the old vehicle scrapping provision to be included in the Union Budget 2021-22. The new vehicle scrappage policy is said to help boost demand for new vehicles after removing old unfit vehicles currently plying on Indian roads. Additionally, it is expected to help reduce air pollution caused by older vehicles. This is a compilation of how automotive component manufacturers, union bodies and other involved parties have reacted to the new announcements made by India’s finance minister – Nirmala Sitharaman.

Kenichi Ayukawa, President, Society of Indian Automobile Manufacturers (SIAM)

In a visionary budget, the government has adopted an expansionary stance with a thrust on infrastructure building with measures for efficiency improvement and increasing competitiveness. Good macroeconomic growth will translate to good auto sector demand. Specifically, the vehicle scrappage scheme has a good intent and the auto industry would be keen to work with the Government on suggestions for maximizing benefits to environment and society.

Vinkesh Gulati, President, Federation of Automotive Dealers Association (FADA)

“FADA is happy to note that the Hon’ble Finance Minister has finally announced the much-awaited Scrappage Policy, though voluntary to phase out old vehicles. If we take 1990 as the base year, there are approximately 37L CVs and 52L PVs eligible for voluntary scrappage. As an estimate, 10% of CV and 5% of PV may still be plying on road. We still need to see the fine prints to access the kind of incentives which will be on offer and thus have a +ve effect on retail.

The 6,575 km Highway works proposed in Tamil Nadu, Kerala, West Bengal and Assam and another 19,500 km work for Bharat Mala project will definitely add fillip to a much-needed revival of Commercial Vehicles especially M&HCV segment.

Government’s reduction of customs duty on steel products to 7.5% will benefit Auto OEMs. We hence expect the benefit to trickle down to end customers thus helping in boosting demand.

While we expected disposable income for individuals to increase with enhancement of IT slabs and depreciation benefit on vehicles for individuals, the same has not been taken into consideration.”

Deepak Jain, President, Auto Component Manufacturers Association (ACMA)

“The vision of an Aatma-nirbhar Bharat enshrined in the Union Budget, coupled with the ‘Sankalp’ of ‘Nation-First’ will be the bedrock to propel us further as we redefine our economy in a post-pandemic world. Significant outlay for vaccination in the country will add to the confidence of a resurgent India.”

Announcements with regards increased spend on road infrastructure, voluntary scrappage policy, Research & Development and PLI among others, augur well for the automotive sector. Further, continued focus on building rural and agricultural infrastructure and prioritizing agriculture credit growth will have long-term positive impact on rural demand for vehicles.

Increase in basic customs duty on select auto components will encourage local manufacturing of such items. It is also heartening that the budget outlay for the MSME sector has been doubled compared to last year. The auto component industry is dominated by MSME and this will provide them the necessary succour as the industry recovers.”

Sohinder gill, Director General, Society of Manufacturers of Electric Vehicles (SMEV)

“We thank the Hon’ble Finance Minister for announcing the Scrappage policy, which would help in encouraging the adoption of greener vehicles. Though we are awaiting more details on the policy but hope that it would be designed in such a way that would automatically push the adoption of electric vehicles.

For Clean Air, setting aside an amount of Rs 2,217 crores for 42 urban centres with a million-plus population is a good move. The fund could be utilized to spread awareness about the benefits of using e-vehicles to the environment and its contribution to make the air clean.

The government’s plan for strengthening the public transport sector under PPP models with an outlay of  Rs 18000 crores for operating 20000 buses is encouraging for the EV industry. The scheme could strengthen the EV industry if more number of e-buses could be supported through the scheme. We urge the government to mandate procurement of E-Buses under the scheme which would help us fight the issue of air pollution.”

Dr Raghupati Singhania, Vice-President JK Organisation, and,Chairman &  Managing Director of JK Tyre & Industries Ltd.

“The Hon’ble Finance Minister has presented a ‘pro-growth’ budget in these unprecedented times, which will give a boost to the Indian economy which is on path to recovery. Rightly, there is a huge emphasis on infrastructure, which will help revive economy as well as generate employment. Finally the much awaited scrappage policy has been announced, which is a welcome step. This will increase sale of new vehicles and in turn boost tyre demand. Refocus on healthcare and skill building are very critical for a healthy growth of Aspirant India. The key however is faster implementation of the various important measures announced, which will have a meaningful impact on economy”

Tarun Mehta, Co-founder & CEO, Ather Energy

“The voluntary vehicle scrappage policy announced to phase out old and unfit vehicles will encourage the sales of new vehicles. It is good to see that the government is looking at addressing the concerns regarding GST inverted duty structure. We look forward to more details on the inverted duty structure and the Production-linked incentive (PLI) scheme announced by the Finance Minister.”

Rushi Shenghani, CEO & Founder, Earth Energy EV

“We wholeheartedly welcome the progressive budget by the government this year. The focus on the Atma Nirbhar package will lead to sustained recovery for indigenous brands. We are pleased to know that after keeping Scrappage policy unclear for so long, our Govt is placing voluntary scrapping policy ahead this year- the industry is going to get a major boost and create demand for energy efficient vehicles. With the continued Govt support Indian OEMs and manufacturers will grow India self reliant towards Green mobility.”

Rahul Mishra, Partner, Kearney

“The overall budget seems to be targeted to put the automotive industry back on the path of revival and growth. The marquee announcement has of course been the vehicle scrappage policy. As Kearney, when we had supported the design of policy we had clearly envisaged the benefits this policy could deliver to the industry and vehicular pollution. Now that the policy will be a reality after a long wait, the industry should benefit from this. This will however still require the setup and scaleup of scrapping infrastructure in the country.  Other announcements around duty changes especially duty cut in steel, production linked incentives, focus on domestic capability development and the large push on infrastructure spending will ensure an overall uptick for the industry.

Rajeev Singh, Partner, Automotive Leader, Deloitte India

“We welcome the announcement on voluntary scrappage policy and it’s likely to increase demand for new commercial vehicle (CV)and Passenger vehicles(PV). Scrappage policy though voluntary will likely become mandatory as fitness certificate will be made mandatory.  It’s a soft step towards coming up with mandatory. In dearth of proper infrastructure, just introduction of a fitness certificate may not be enough. The government will also need to build the necessary infrastructure to get this to action on ground. A strong push in Infrastructure building – roads, railways, economic corridors will help boost demand for heavy & medium duty CV’s. With governments higher focus on metro and increase in outlay for Urban transport we are likely to see the much-needed demand for buses and smaller vehicles for last mile connectivity”.

Prashanth Doreswamy, MD, Continental Automotive India.

“We are pleased to hear the government’s decision on allocating Rs.1.97 lakh crore for PLI schemes, the industry will benefit from the increased local manufacturing. The voluntary vehicle scrappage policy is a positive sign. We await further details that could give an idea of the actual impact of this policy”

Ashok Minda, Chairman & Group CEO, Minda Corporation Limited.

“I am pleased to see the Budget 2021, which has been delivered by our Hon’ble Finance Minister Shrimati Nirmala Sitharaman, who has committed Rs 50,000 crores  for Research & Development for National Research Foundation. The foundation will ensure that the research ecosystem on the Country is strengthen and focus on identified national-priority thrust areas.   We feel that green economy and better air quality is a national priority and in a decades time, when India is eyeing to Electric Vehicle Eco System, the budget of R & D will further enhance its development and localization.  This will benefit the Auto manufacturing sector as a whole. This will additionally supplement  Aatmanirbhar Bharat and Make in India”

Suresh KV, President, ZF India

“Union budget presented by our Honourable finance minister, as expected, is in line with the government’s vision for Atmanirbhar Bharat.

We welcome the announcement of a voluntary scrappage policy. This will induce the demand for new commercial vehicles (CV) and passenger vehicles (PV). Though the scrappage policy is voluntary, this could be seen as significant step in view of the fact that the scrappage would be dependent upon the fitness certificate. This policy backed up by an effective implementation plan would really boost the growth of the industry.

Announcement of allocation of 1.18 lakh crores to improve the public transport in Indian cities and the procurement of 20,000 new buses will provide an impetus to the bus segment. Such a strong push in infrastructure building including roads, economic corridors and railways will become instrumental for enhancing the demand for heavy and medium duty commercial vehicles which in turn will have a positive impact on the employment opportunities.

It is also heartening to see the allocation of 1.97 lakh crores, over next 5 year, towards the production linked incentive scheme (PLI). This will boost manufacturing in India and further propel the growth of the Indian automotive industry.

Overall this is a progressive and well-balanced budget and with the continued government support, we hope to see all industry segments returning to the path of growth in the coming year and beyond!”

Amit Kumar, CEO, OLX Autos India

This time the budget will go a long way to assuage concerns regarding the economy. For the automobile sector, voluntary scrapping of old vehicles is a welcome move as it will boost supply and demand for pre-owned vehicles. Doubling the tax audit limit to Rs 10 crore will improve ease of conducting business for micro and small enterprises and will benefit the used car dealer ecosystem, many of whom are small to medium-sized entrepreneurs themselves. A heightened focus on developing highways and transporation infrastructure will augur well for the automobile sector as this would boost the need for personal vehicles for last-mile and first-mile connectivity.

Yogesh Bhatia, Founder, Detel

“We appreciate the Government’s vision of Atma Nirbhar Bharat post the most unprecedented year of 2020. Many domestic players were badly affected and expecting some strong moves by the government. The thrust on automobile sustainability by introducing voluntary scrappage policy will progress the auto sector significantly and curb pollution issues and soaring crude oil bills. This announcement will replace the 15-20 years old pollution causing vehicles and generate massive demand for e-vehicles in the market. We welcome the Indian government’s move on long-awaited scrappage policy and focus on better road infrastructure. We eagerly await for more details by the government”.

Sandeep Aggarwal, Founder & CEO, Droom

Government extending the life of passenger vehicle and commercial vehicle by 5 years each is a good catalyst for the automobile industry.  The vehicle is among the top 3 big-ticket items for any human being and larger economic life for it only means better ROI for the users. This also means the used automobile industry in India will be more robust in decades to come.  Government allocation of Rs. 18,000 crores for infrastructure will certainly boost the automobile industry. Also, India adopting global standards for scrapping vehicles will only create a more holistic ecosystem for the industry.  No country has ever achieved economic freedom until it has fully democratized transportation and its reach.  From the USA to Western Europe and China to Japan all have unleashed their economic growth due to the adaptability towards automobiles and world-class road infrastructure.

Rasik Pansare, Co-Founder & CMO, Get My Parking

“The Vehicle Scrapping Policy will encourage the transition to newer cleaner vehicles on road. Because most of the new vehicles are smart and connected vehicles, this will indirectly lead to accelerated transition to smart mobility.

Augmentation boost for public transport will result in better infrastructure at transit hubs hopefully including the often ignored parking lots.

The reduction of red tape for OPC (one person company) will give a boost for solo founder startups. This will incentivise the entrepreneurs to quickly incorporate without worrying about paid-up capital and turnover and focus on the execution of their idea. Later when their venture gains traction, they will enjoy the freedom to convert the OPC to any other legal entity and add more directors (co-founders or investors).”

Ruchit Agarwal, Co-founder and CFO, CARS24

“The 2021 Union Budget is a big booster for spearheading the economy’s growth. We are glad the Government has announced investment in road infrastructure coupled with announcement of scrappage policy. These will bode well for the auto industry as they will help it achieve the twin objectives of boosting demand whilst recycling old and polluting vehicles in our country. While we look forward to the minute details of the policy, ensuring seamless execution will be key.

Additionally, with the government allowing one man companies and increasing the threshold for the definition of small companies, we expect and hope that used car dealers in India will consider shifting from sole proprietorship to companies. This will make them further organized and open up different forms of financing markets for them. Extension of one year tax holiday will also prove to be a welcome move for start-ups in India.

We are sure that the announcements made under 2021 Union Budget will help sustain the pace of growth witnessed in the last few months in the auto industry.”

Ashwath Ram, Managing Director, Cummins India

“At first glance, it appears to be a progressive budget. There is a focus on the socio-economic development of the country with an emphasis on Railways, the Power sector, infrastructure, healthcare, and enhanced digital connectivity. The voluntary policy on the scrapping of vehicles will have a positive impact and will drive the commercial vehicle and auto sector forward, the industry wanted an incentive-based scheme so we are still seeing the details. In addition, MSMEs and other user industries have been severely affected by the recent sharp rise in iron and steel prices. The industry will definitely receive a push by the decision to double the allocation of MSME and reduce the customs duty on some of the steel products. The focus on highways and the infrastructure investment plan will definitely give the necessary impetus to the CV and construction equipment businesses.”

Manish Bhatnagar, Managing Director, SKF India

“Concentrating on the revival of the economy, this budget is totally one of its kind. Along with bringing cutting edge technology, increasing the demand for new commercial vehicle (CV)and Passenger vehicles(PV), creating new jobs, schemes like the PLI and voluntary scrappage policy are likely to to nurture and boost the Indian manufacturing industry to become an integral part of the global supply chains.

Furthermore, ensuring liquidity in the economy and unhindered flow of capital, the package for roads and railways infrastructure is bound to give an impetus to the covid-hit economy. The robust push to infrastructure including economic corridors, manufacturing and MSME’s collectively, is likely to help boost demand for heavy & medium duty CV’s”.

Farrokh Cooper, Chairman & MD, Cooper Corporation Pvt. Ltd. 

“Budget 2021 is optimistic, driving the country towards Aatmanirbhar Bharat by putting significant stress on Railways, Power sector, infrastructure healthcare, banking, insurance, and agriculture, which will not only enable the country to revive its economy but will also stimulate growth. Voluntary policy on the scrapping of vehicles would have a positive effect and will move the commercial and automobile industries ahead. The industry would definitely be encouraged by the decision to double the allocation of MSME and to reduce the customs duty on steel. Focusing on highways and the investment plan would certainly give the CV and construction equipment the requisite impetus. The government’s increased focus on the infrastructure sector will certainly bring in positive impact”

T R Srinivasan, Group CFO, Varroc

“The Government’s commitment to enhance the infrastructure by building national highways, improving urban infrastructure, and developing public transportation will, directly and indirectly, encourage the demand for the auto industry. The voluntary vehicle scrappage policy will encourage the demand for newer, safer, and lesser emitting vehicles, which will improve the outlook for the Commercial and Passenger Vehicle sectors. Additionally, the allocation of INR.1.97 lakh crore for PLI schemes and the changes in import duties are expected to support the growth of domestic manufacturing. Overall, the Union-budget for FY 21-22 is expected to be positive in the long term for the auto industry.”

Sidhartha Bhushan Khurana, Managing Director, Studds Accessories Ltd

“Finance Minister Nirmala Sitharaman has delivered a positive, pro-growth budget for 2021-22. We welcome the long-awaited voluntary scrappage policy that will definitely give a boost to the sector by phasing out older, inefficient and polluting vehicles and the use of more environment-friendly vehicles. While we are waiting for the details of the policy to come out in the next few days, we are hoping that the government has adopted the incentivised model for this policy.

The announcement of capital investment of Rs. 5.54 trillion in infrastructure development will lift-up the demand for not just commercial but for private vehicles as well.”

R Sridhar, Executive Vice Chairman & CEO, IndoStar Capital Finance

“There are approximately one million commercial vehicles in India, which are more than 15 years old. Scrapping them and creating a replacement demand will modernise the fleet and has the potential to add approximately $15 billion to the sales of new commercial vehicles. This replacement demand is nearly 1.5 times the average annual sales of new commercial vehicles. The biggest beneficiaries of the huge replacement market will be vehicle manufacturers, ancillaries and vehicle financiers. Not only will this policy encourage fuel efficient and environment friendly vehicles, there will also be a marked reduction in our fuel import bills. The nation’s logistics infrastructure will see a tremendous boost in the form of reduced travel times and safer national corridors. While the finer details of the policy are awaited, this is a much awaited and very welcome reform announced by the government. The execution of the scheme will be key and if the government provides for an additional incentive by way of an upgrade discount, the scheme will be extremely successful and truly modernize India’s fleet of vehicles.”

Sunil Gupta, MD & CEO, Avis India

We welcome the Union Budget tabled by the Finance Minister today, especially the announcement of voluntary scrapping policy. This comes in as a big support to automakers, who will benefit from this policy. Moreover, personal vehicles older than 20 years and commercial vehicles older than 15 years to undergo a fitness test is indeed focused on phasing out older vehicles. It will in turn promote the use of more eco-friendly vehicles. The specifics of the policy will be announced by MoRTH in the days to come. The annual budget brings in good news for commercial vehicles as well with 18,000 crore to be allotted for procuring and maintaining 20,000 buses as well as the construction of road infra to support the sale of commercial vehicles. It is therefore the highest ever allocation of 1.08 lakh crore to MoRTH for capital. We further welcome the FM’s move on increasing custom duties on some auto parts by 15%.

Harsh Didwania, Co-Founder & Director, EeVe India

The budget is a very forward-looking one – the focus on infrastructure & spending will boost the job market and build confidence in the industry It’s a step towards a robust economic reform agenda, the budget did not talk much on the automobile sector specifically on EV, Raising on custom duty will result in an increase in the cost of EV, Overall 2020 has ended up disappointing the EV sector.

Uday Narang, Chairman, Omega Seiki Mobility

“The Union budget for 2021 is dynamic as well as promising and gives heavy weightage to social and economic development of the country. In order to help create demand for new vehicles, the Union budget for the coming financial year is said to include the much-awaited vehicle scrappage scheme which was a welcome move.

In a major push to Make in India, the allocation of INR.1.97 lakh crore to PLI schemes and improvements in import duties would boost domestic manufacturing growth. The voluntary vehicle scrapping strategy would encourage demand for vehicles with cleaner and lower emissions. In addition to this commitment of the government to improve infrastructure through the construction of national highways, the improvement of urban infrastructure and the growth of public transport will encourage demand for the automobile sector”

“Auto OEMs would also benefit from the government’s reduction of customs duties on steel goods to 7.5 percent. We therefore expect the advantage to flow down to end users, thereby helping to increase demand.”

Vikas Bajaj, President, AIFI(Association of Indian Forging Industry)

“This year’s Union budget is positive, as well as a progressive one with a strong drive towards the country’s socio-economic growth. It focuses on the Railways, Power, Health Infrastructure, Banking, Insurance and Agriculture sectors. Voluntary policy on the scrapping of vehicles will definitely have a positive effect and will drive the commercial and automotive industries forward. Furthermore, a recent sharp rise in iron and steel prices has affected MSMEs and other user industries severely. The positive step of reduction in customs duty uniformly to 7.5% on semis, flat, and long products of non-alloy, alloy, and stainless steels would certainly contribute to better raw material prices and reduced input costs. Also, no new corporate tax has been added which is positive news as it is a tough time for the industry. The increased government attention on the highways and infrastructure sector would definitely contribute to a significant impact on the manufacturing and Auto industry and help in employment generation which is the most critical need to revive the economy.”

Nikunj Sanghi, Chairman ASDC

“The Union Budget 2021 has given due importance to skilling and education which is a welcome move in today’s skill-driven industry. The government’s focus on supporting local manufacturing, skill development, and a heightened emphasis on job creation will lead to greater opportunities for the youth of the country.

In addition to that, the partnership with the United Arab Emirates and Japan to promote industrial & vocational skills, techniques, and knowledge is a major boost for the sector. Also, since automotive is the biggest organized employer in the country, hence the realignment of the existing scheme of national apprenticeship training scheme for providing post-education apprenticeship training of graduates and diploma holders in engineering over 3000 crores is also a positive sign for automotive skilling.

Overall, we believe that this renewed push on providing quality education and enhancing the skills of our youth will help India to achieve its objective of Atmanirbhar Bharat and will play a lead role in shaping the global economy in the future”.