India's vehicle scrappage policy provides opportunities for new business models with traditional automotive ecosystems coming together with new players, such as small and medium enterprises to set up vehicle fitness testing centers, according to industry experts.
With the COVID-19 pandemic making the industry realise the vulnerability associated with the current value chain structure at both the consumer and the supplier end, the scrappage policy can give a positive push to start a new and nascent automotive ecosystem, said consultancy firm EY India.
Commenting on the policy which was launched by Prime Minister Narendra Modi last week, Deloitte India said it is also likely to attract additional investments and generate employment through registered vehicle scrapping facilities (RVSFs), with around 50-60 such centers likely to be set up across the country.
"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.
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, he added.
According to EY India, original equipment manufacturers (OEMs) are responding to the new dimensions of mobility -- connected, autonomous, shared, and electric vehicles -- new forms of ownership and an increased environmental focus across stakeholders.
"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," it added.
A scrappage policy can provide some obvious 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.
"Here is an opportunity to set up new business models where new players and the traditional automotive ecosystem come together in an organised manner to provide products and services to consumers," the consultancy firm said.
Deloitte India Partner & Leader, Government & Public Services Arindam Guha said in addition to reducing vehicular pollution and improving road safety, the vehicle scrapping policy is also likely to attract additional investments and generate employment through registered vehicle scrapping facilities (RVSFs), with around 50-60 such centers likely to be set up across the country.
"The policy also provides an opportunity for small and medium enterprises to set up vehicle testing centers for assessing the condition of old vehicles and issue fitness certificates," he added.
Expressing similar views, EY India Partner, Automotive sector Som Kapoor 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, Kapoor added.
Omega Seiki Mobility Chairman and Founder Uday Narang said the policy will not only help in removing 'unfit' vehicles on the roads but also help in recycling, creating new job opportunities, and would prove to be a sustainable solution to "the ongoing wrong practices of vehicle material scrappage".
Stating that the traditional vehicle scrapping method was one of the biggest loopholes in the auto industry, he said, "From buying a vehicle to its last stage of scrapping all the components -- the life cycle of the vehicle -- should be carried out in an organised manner. The scrappage policy is a perfect solution that will make the auto sector more organised."
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