India's Vehicle Scrappage Policy

The said Scrappage policy has been anticipated for a few years now to stimulate demand in the automotive industry. It is seen that the sudden slowdown in demand in 2019 and the slump caused by the COVID 19 pandemic has led the Indian Government to come up with a new vehicle scrapping policy to boost the industry. Hence, every vehicle owner must know about this for their information. The vehicle Scrappage policy announced by the Finance Minister aims to reduce the population of unfit and old vehicles driving on the road nowadays. If your car is more than 20 years old you have to scrap it. Therefore, automatically, if you own a car from 2004, you have to scrap the car. The government is looking to promote the adoption of newer vehicles that are equipped with modern fuel-efficient and environmentally friendly technologies by removing these old vehicles from the road. So, the new policy has already been proposed and should come into effect by 2022 at the latest. Hence, the policy will target private and commercial vehicles above 20 years and 15 years of age. Once a private vehicle is 20 years old and a commercial vehicle turns 15 years old, the vehicle undergoes a fitness test conducted by a government-approved automated vehicle fitness testing centre and in case the vehicle fails the test three times, it has to be declared unfit and marked for mandatory scrapping.

Effect on the new cars vs. old cars:

So the immediate impact on the automotive industry will be a stimulus to the demand for new cars in India. On new cars, the policy will have a positive impact and it will even have a positive impact on the ailing automotive industry which has been suffering from a slump for the last two years. Whereas, on the used cars, we will enter more of a grey area as regards the proposed scrappage policy. So the old car market has a variety of cars of various ages. Hence, the most immediate impact would be an overall increase in the supply of used cars. In simple words, the cost price of second-hand cars will come down before stabilizing at appropriate prices. Therefore, after the new scrappage policy is put into effect, it will be good to buy a used car as they will continue to offer great value as compared to new cars. Pre-owned cars that are sold again are not used for more than 5 years so you will have a long time before you need to scrap the car.