Tata Motors, Ashok Leyland pitch for incentive-based scrappage policy to revive CV segment

Tata Motors and Ashok Leyland have said a well-defined and financial incentives-based scrappage policy can help create demand in the commercial vehicles (CV) segment which has come come to a grinding halt.

A vehicle scrappage policy is in the works for some time now. The policy aims to put a cap on the life of vehicles in terms of years run.

With sales on a continuous decline for over a year now, first due to transition to BS-VI emission norms and now with the coronavirus pandemic, the industry is hopeful that if old vehicles go out of the system, it will help reduce pollution as well as help induce demand for new vehicles.

Tata Motors, which is the leader in the commercial vehicle segment, said the upcoming legislation should clearly define incentives as well as regulatory norms for disposing the old vehicles.

"A well-defined and effective scrappage policy is one of the key imperatives for driving demand of cleaner BS-VI vehicles and more appropriately so, in the current shrinking demand across end-use sectors," a Tata Motors spokesperson told PTI.

Reiterating that replacement demand will remain the key driver for the sale of new vehicles, the spokesperson contended that the policy needs to have a clear definition of ELVs (end-of-life vehicles) and inclusion of financial incentives.

"The government's proposed renewal of fitness certificates for vehicles older than 15 years every six months, instead of the current time frame of one year, is a welcome one," the spokesperson said.

The company, however, added that the upcoming legislation needs to define tangible incentives for customers, as well as regulatory norms for enforcing the disposal.

"In India, scrappage value chain is in early stages of development, and is only able to process lower double digit percentage of the total ELVs available on the road," the spokesperson noted.

Two reasons for doing that is clear definition of ELVs and also absence of any financial incentives/subsidies for customers to dispose their vehicles.

"Additionally, there is a need to address the criteria to define dismantlers and a mechanism to ensure adherence.India will need multiple environmental-friendly scrappage centres across the country to cater to the local needs of each region," the spokesperson added.

Current setups have certain challenges such as being limited to few clusters, thereby catering to local needs and devoid of capacity to scrap total ELVs on the road, the spokesperson noted.

Echoing the views, Ashok Leyland MD and CEO Vipin Sondhi said demand for commercial vehicles needs to be triggered.

Commercial vehicle sector, which was already struggling prior to the pandemic has now come to a grinding halt. As is well known, commercial vehicles are a life line to any nation's economy..it is imperative that demand for commercial vehicles be triggered," he added.

A scrappage schemewith incentives in the form of a rebate in GST, road tax or registration charges would help give demand a boost, Sondhi said.

Toyota Kirloskar Motor Senior Vice President (Sales and Marketing) Naveen Soni said incentivised scrappage policy will encourage decamping of old and polluting vehicles and is an urgent need of the hour.

"Given the current crisis, the policy will lead to a win-win situation for all, consumers would benefit from the scrap value, tax savings and added discounts while OEMs will gain from a much needed push to demand created by the monetarised benefits passed on to the buyers," he noted.

Also, early removal of vehicles running on prehistoric emission norms will have a more sustainable impact on the environment, Soni said.

"Especially in areas like NCR where studies have shown that 50 per cent of the vehicular pollution (pm 2.5) is caused by old and polluting vehicles," he added.

Union Minister Nitin Gadkari had earlier this year said that scrappage policy was in the final stages of getting Cabinet approval.