Ind-Ra: Proposed Scrappage Policy Likely to Increase Used Commercial Vehicle Value

The proposed vehicle scrappage policy, which, if adopted, is likely to be effective from April 2020, could increase the market value of commercial vehicles (CVs) below 15 years of age, says India Ratings and Research (Ind-Ra).

According to Ind-Ra, the replacement demand for the scrap of 20-year-old CVs could migrate to used CVs with a vintage of less than 15 years. Hence, resale prices in this segment could improve. As a result, demand for new CVs compared with used ones could be marginal.

The proposed policy would contribute little to its primary objective of controlling emissions nationwide, considering fuel- and emission-efficient Bharat Stage-IV CVs constitute an extremely small proportion of the total vehicles on road. However, it would boost the scrappage industry, which is highly unorganised and fragmented. Proper government guidelines and scrappage infrastructure would encourage participation from large-sized companies and, thus, would enable the formalisation of the industry.

The adoption of the proposed policy would depend on government support or incentives. Options such as a reduction in tax rates and discount on new CV purchase are being considered by the government.

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