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If you are new to the Auto industry or start exhibiting a keen interest in the industry, you might be now wondering what Scrappage Policy really means or you might even hear it. The Scrappage policy, also known as the Scrappage program, was touted with divergent names and has been introduced as a government budget program during the global recession in 2008 by many European countries. But, what can be the cause that led to governments enacting this law? This is the reason why I explored and conducted in-depth research about this topic. First and foremost, experts define this policy as a dual objective with the aim to stimulate the automobile industry and withdraw inefficient and more polluting vehicles from the atmosphere and roads to enlarge market demand with modern vehicles. In fact, over the life of an average vehicle, it can cause much of the environmental damage than none of us could ever imagine especially when driving and it is also greatly related with fuel consumption. Environmental impacts start with mineral extraction and the production of the raw materials assembled to make a car. The pollution coming from vehicles can differ depending on the standards they meet, how they are driven and maintained, and the quantity and quality of the fuel they burn.

Looking at the comforting prospects of this policy, this can be an economic stimulus and a budget for any government. The population, especially the buyers can be given some benefits from the manufacturers if they opt for scrapping their vehicles. Additionally, modern cars are likely to be less cost-effective compared to those that realize the overriding importance of maintenance and that target poorly conserved vehicles regardless of how old they are.

There is a saying that: “Auto Industry bets big on Scrappage Policy” and I think that this is probably due to the era in which we live. As stated by Matthew Parris “The era when you could love a car with all its faults, a car could love you back despite all yours, and you could grow old together and fall apart together, and face the graveyard and the scrapyard together is passing.” One country in which I believe that quotation could be used as an epitome is India. In the bygone years, India’s automobile industry has confronted a considerable challenge that resulted in a massive sales downturn. Subsequently, their automobile industries are pinning their hopes on the scrappage policy to reinvigorate demand for the already diminished sector. The sector has been detrimentally affected by several factors like stagnant wages and liquidity constraints. Therefore, the main problem that they experience the most in this sector is the stock management of unsold BS-IV vehicles and the inventory pile-up at the dealership. Now, this issue engenders other stumbling blocks such as job losses and the downswing of the industry’s production levels. India’s government policy tends to focus more on commercial vehicles even though insiders opined that the policy include both (passenger and commercial vehicles).

But, I think the real question is how can this specific policy impact the industry financially? According to data from Mint, the policy brought the highest monthly sales de-growth in the last nineteen years which is considered to be the most essential element in any impetus package for the automobile industry.

To discourage the purchase of old vehicles, some governments have already decided to charge twenty times more for their registration renewables, levy seperate road tax which will be more exorbitant for old vehicles, and require old vehicles to take a fitness certificate every six months.

Furthermore, India, the foremost country when you allude to the scrappage policy, is not the only nation that has enacted this law. Extensively, several countries have deployed the policy in light of China, Australia the United States, Germany, and other third developed countries. However, the epithet of the policy can vary from one country to another. Yes, the principal reason for this contrast is of course the spoken language that can differ. For example, in the United States, Cash for Clunkers is the name given to the scrappage program. Nonetheless, besides few country-specific features, the aim of the policy is expected to be similar.

The Cash for Clunkers scheme has already shown its impact on the lives of New Yorkers. New York for so long, has tortured love affairs with the gas-guzzler. Thanks to the policy, it is finally drawing to a close. The program, launched in July 2009 and passed by ex-president Obama promised anyone with a dilapidated old vehicle as much as $4,500 so long as they spent the rebate on a shiny new fuel-efficient model. It was such a success when it was set in motion in July that the initial $1 billion of taxpayers’ money dedicated to the scheme ran out in a matter of days and a further $2 billion was swiftly made

The scheme provided more than just money to the government and support for the automobile industry, it also assisted Americans in their pursuit of purchasing a car. It helped oil the wheels of the broken-down credit market. Today, the lack of available credit and the dramatic tightening of credit rules are one of the biggest hurdles that Americans face when trying to buy new cars and that exclude all but the most cash-rich customers. By putting $4,500 in the hand of a would-be car buyer, you are instantly helping him to qualify for credit.

In closing, automobiles affect the environment in many ways. Impacts begin when a vehicle is manufactured and end with its scrappage in a junkyard. We’ve looked at the facts, the benefits and the reason why governments from all over the world are enacting this policy. Some governments have funded to help drivers switch to cleaner vehicles to lessen air pollution. Doubtless, automobile industries are betting big on scrappage policy because it is the most possible way to arrest their falling sales, and most importantly it is a boost for the industry because the policy would encourage buyers to purchase modern cars which will be corroborated by incentives in lieu of their old vehicles.

Work Cited List:

American Council for an Energy-Efficient Economy. “Automobiles Cause Air Pollution.”

Pollution, edited by James Haley, Greenhaven Press, 2003. Current Controversies. Gale In Context: Opposing Viewpoints,

“India Is Looking to Bring in the Vehicle Scrappage Policy Soon – Here’s What It Means for

You.” Business Insider, 4 Nov. 2020,

“Scrappage Program.” Wikipedia, Wikimedia Foundation, 2 Feb. 2021,

Vaid, Rohit. “Auto Industry Bets Big on Scrappage Policy.” Mint, 18 Aug. 2019,


Contents By Nilidon On Cash For Cars

Faced with a massive sales downturn, India’s automobile industry is betting big on a scrappage policy to revive demand for the already dented sector.

Accordingly, automobile industry’s representatives have sought an ‘End of Life’ policy from the Central government as a measure to arrest the falling sales.

The policy, if implemented, is expected to encourage customers to go in for new purchases which will be backed up by government incentives in lieu of their old vehicles.

Significantly, the movie is considered to be the most vital element in any stimulus package for the industry which has recorded an overall decline of 18.71 % in off-take for July, the highest monthly sales de-growth in the last 19 years.

At present, the sector has been impacted by a consumption slowdown which is a culmination of several factors like high GST rates, farm distress, stagnant wages and liquidity constraints.

Besides, inventory pile-up at the dealership level and stock management of unsold BS-IV vehicles have become a problem for the sector.

Consequently, the industry’s production levels have also receded as demand plunged, eventually leading to job losses.

“A well-defined and sustainable scrappage policy will play a significant role in adding to the demand for vehicles,” Grant Thornton India Partner Sridhar V. told IANS.

“Typically, they should have an end of life in 10 to 15 years and if one were to look at the quantum it could add a few million new buys every year. Based on a recent study by CPCB, some nine million vehicles were obsolete in 2015 and this is expected to grow to 22 million.”

Industry insiders opined that an Australia-specific scrappage policy might include both commercial and passenger vehicles.

Apart from few country-specific features, the policy is expected to be similar to the US government’s program — Cash for Clunkers — that provided financial incentives for the purchase of fuel-efficient vehicles in exchange for their old vehicles.

Interestingly, the original version of the Indian program focused more on the commercial vehicle segment.

“A limited period cash incentive for replacing old commercial vehicles can rejuvenate the commercial vehicle market and have a positive impact on the volumes,” said Kavan Mukhtyar, Partner and Leader – Automotive, PwC India.

“Impact on passenger vehicles may vary based on the extent of incentive and nature of regulation.”

According to Rahul Mishra from A.T. Kearney: “Globally, several countries have deployed the scrappage program. Germany, US and China introduced short-term programs, while France and England adopted regulation-based retirement to compliment voluntary schemes.”

“Introduction of the much-awaited scrappage scheme in India will target the MHCVs and LCVs segments on priority. Therefore, given the state of the market, vehicle retirement will create a demand stimulus for these segments. Other segments are low on impact and have lower priority targets.”

Recently, all major OEMs consisting of passenger, commercial, two- and three-wheeler manufacturers have reported a massive decline in domestic sales.

As per SIAM figures, domestic passenger car sales in July plunged by 35.95 % to 122,956 units against 191,979 units sold in July 2018.

Overall, passenger vehicle sales declined 30.98 % in July to 2,00,790 units against 2,90,931 units in the year-ago month. In the commercial vehicle segment, sales were down by 25.71 % to 56,866 units.

In the case of two-wheelers, which include scooters, motorcycles, and mopeds, the sale edged lower by 16.82 % to 15,11,692 units.

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