Tata Motors may enter vehicle scrapping biz
Tata Motors Ltd is planning to build vehicle scrapyards in Howrah, Karnal, Hyderabad and Greater Mumbai along with its dealers, two people aware of the matter said, as India’s largest truck-maker sets sights on an emerging business opportunity.
The company will provide technical knowhow and expertise for these dismantling units but may not invest directly in them, the people mentioned above said on condition of anonymity, adding that the investments will be brought in by the dealers themselves.
Tata Motors will start with these four units, but may expand the scrapping business later, one of the two people cited above said, creating a new revenue stream for its dealers.
“In the coming months, the company may also collaborate with public sector enterprises but, initially, they may choose to go on their own. The financial health of the dealers is a crucial factor here since many of them incurred losses due to the substantial decline in sales over the past few years. This investment, though, will be for the long term,” this person added.
India’s new vehicle scrapping policy directs mandatory scrapping of commercial vehicles after 15 years if they don’t meet fitness or emission criteria. This is likely to generate new sales for auto makers.
The government has proposed a road tax rebate of 15-25% and full registration fee waiver for the new purchase after scrapping, apart from a price discount of 5% from the manufacturer against a certificate of scrapping. Scrap yards will offer a price to the old vehicles being scrapped, which will be 4-6% of the price of a new vehicle.
Road ministry data show India has 1.7 million heavy and medium commercial vehicles older than 15 years, without a valid fitness certificate. The number of light vehicles older than 20 years is more than 5.1 million.
“Vehicle scrapping is expected to become a thriving business in the coming years. Hence, most automakers are interested, and the number of old vehicles, especially commercial vehicles, is staggering. So the potential is huge. Most automakers are expected to tie up with some other company to get the technology involved in the scrapping of vehicles. Tata Motors being the biggest commercial vehicle manufacturer is definitely going to benefit from this policy in the years to come,” the second person added.
A Tata Motors spokesperson said, “We do not comment on speculations.”
Top automakers are already considering similar scrapyards. Last year, Maruti Suzuki India Ltd announced a tie-up with Toyota Motor Corp’s subsidiary, Tshusho India, for setting up vehicle dismantling units across the country.
Mahindra Intertrade Ltd has partnered with MSTC Ltd, a public sector unit under the steel ministry, for opening such scrapyards.