India’s ELV rules leave auto sector 70% short of FY26 scrappage target

India’s ELV rules have left automakers 70% short of their FY26 scrappage target, exposing a gap between policy ambition and available end-of-life vehicle volumes. For recyclers, the shortfall highlights the need for stronger ELV collection, clearer compliance routes and a phased framework that reflects the maturity of the formal scrappage network.

Aerial view of vehicles at a recycling yard, illustrating India’s ELV scrappage and EPR compliance challenges. — Image credit: Envato Elements

India’s vehicle manufacturers fell around 70% short of their FY26 scrappage obligations under the country’s end-of-life vehicle rules, with industry executives warning that the policy has made the automotive sector effectively non-compliant.

The Ministry of Environment, Forest and Climate Change notified the Environment Protection (End-of-Life Vehicle) Rules, 2025, in January last year. The rules came into effect on 1 April 2025 and introduced extended producer responsibility (EPR) obligations for vehicle manufacturers.

Under the framework, automakers are required to meet EPR targets based on the weight of steel recovered from scrapped end-of-life vehicles (ELVs), or from other steel scrap materials processed at registered scrapping facilities.

However, a draft amendment issued by the ministry on 27 March 2026 removed the use of “other steel scrap materials” for EPR certificate generation. This means only steel generated from scrapped vehicles can now be counted towards compliance.

OEMs fall well short of first-year obligation

The rules require manufacturers to account for ELVs sold in the domestic market 20 years earlier for private vehicles and 15 years earlier for commercial vehicles.

For FY26, manufacturers were required to scrap a minimum of 8% of the steel equivalent of vehicles sold in FY2005-06 for private vehicles and FY2010-11 for commercial vehicles.

This equated to 95.2 lakh vehicles eligible for fitness testing in 2025-26. Of these, 7.62 lakh vehicles needed to be scrapped to meet the 8% target.

However, the number of old vehicles actually received at registered scrappage centres was significantly lower.

“The actual old vehicles received for scrapping at scrappage centres were just 2.42 lakh in FY26, and there was a shortfall of 5.2 lakh vehicles,” an industry executive said on condition of anonymity, citing official data.

“So, for the entire auto industry, there was a shortfall of 70 per cent,” the executive said.

Removal of wider steel scrap route raises compliance pressure

Industry sources said the March 2026 amendment had made compliance far more difficult because many OEMs had expected to meet their obligations through a combination of vehicle scrappage and other qualifying steel scrap.

“What has made the condition worse for the auto industry in meeting the EPR obligation was the prohibition of counting ‘other steel scrap materials’ in the March 2026 amendment to the rule,” said another industry official.

“Most OEMs had planned to meet targets with both vehicle scrapping and steel scrap from other sources. However, after the removal of that clause, meeting these targets has become nearly impossible,” the executive said.

Another industry executive described the “policy as unrealistic”, adding: “This has resulted in the auto industry falling way short of the target set for scrappage. As such, there were not many ELVs coming to scrapping centres.”

Limited ELV volumes expose gaps in India’s scrappage ecosystem

For auto recyclers and registered scrapping facilities, the issue highlights a practical gap between policy ambition and available ELV supply.

While the rules are intended to support formal vehicle scrappage, higher steel recovery and improved traceability, operators currently depend on a steady flow of eligible vehicles. Industry executives argue that those volumes are not yet reaching the formal scrappage network at the level required.

The Society of Indian Automobile Manufacturers (SIAM) has also written to the ministry raising concerns about the limited availability of ELVs for meeting EPR targets.

SIAM is understood to have highlighted that automated testing stations are generating negligible ELV volumes. The industry body has urged the ministry to allow other automotive steel scrap to be used for EPR compliance in the initial years, alongside a phased transition framework until the ELV ecosystem matures.

Why this matters for recyclers

In practice, the shortfall creates uncertainty for registered vehicle scrapping facilities that have invested in capacity, compliance systems and formal processing infrastructure.

If ELV supply remains below target levels, recyclers may struggle to operate at viable volumes, while OEMs face rising compliance exposure. At the same time, the removal of alternative steel scrap routes places more pressure on the formal ELV collection chain, making vehicle inflow, documentation, testing and deregistration processes critical to the success of the policy.

For compliant recyclers, the situation also reinforces the importance of a level playing field. Unless more ELVs are channelled into registered facilities, informal dismantling and untracked vehicle flows could continue to undermine both recovery targets and the economics of the formal sector.

Industry calls for policy rethink

Industry executives warned that the shortfall could become more severe over time unless the rules are adjusted.

One executive said the EPR gap can only be addressed by allowing the use of “other steel scrap materials” in addition to old vehicles, arguing that the shortfall will increase after each five-year cycle.

The 8% target remains in place for five years until 2029-30. It then rises to 13% for 2030-31 to 2034-35 and 18% from 2035-36 onwards.

Industry representatives are therefore calling for a relook at the policy, with a more gradual compliance pathway that reflects the current maturity of India’s ELV collection and vehicle recycling ecosystem.

Source www.economictimes.indiatimes.com