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India’s ELV surge puts pressure on testing, scrapping capacity and the economics of formal recycling

India’s ELV volumes are rising faster than the formal system can process them, creating capacity and profitability pressure for authorised operators. The report highlights shortfalls in Automated Testing Stations (ATS) and Registered Vehicle Scrapping Facilities (RVSFs), low utilisation, and de-registration friction. Better enforcement, data flows, and EPR incentives are central to shifting supply from informal channels.

Scrap vehicles and mixed metal piles at a recycling yard, illustrating rising end-of-life vehicle volumes and the need for formal scrappage capacity in India. soc — Image credit: Shutterstock

India is heading into a decisive decade for end-of-life vehicles (ELVs). A new report for NITI Aayog warns that cumulative ELVs could rise from around 10 million in 2020 to nearly 23 million by 2025 and close to 50 million by 2030, making a scaled, formal scrappage ecosystem an operational necessity rather than a policy ambition.

For the auto recycling industry, the opportunity is clear: more feedstock, more recoverable steel and parts, and a stronger regulatory push for environmentally sound handling. But the report is equally direct about the bottlenecks that still divert vehicles to the informal sector: uneven infrastructure coverage, weak facility utilisation, procedural friction in de-registration, and limited consumer awareness of authorised routes.

A policy framework is emerging, but enforcement and throughput will decide outcomes

The report is situated within the context of India’s Voluntary Vehicle Fleet Modernisation Programme (VVMP), which is built around two linked levers: mandatory fitness testing through Automated Testing Stations (ATS) and formal dismantling/scrapping through Registered Vehicle Scrapping Facilities (RVSFs).

On the environmental side, it underlines why the shift matters. Informal scrapping typically lacks controlled depollution, posing risks from fuels, oils, coolants, batteries, airbags, and refrigerants, as well as from the uncontrolled disposal of automotive shredder residue (ASR). For professional recyclers, formalisation is both a compliance argument and a market argument: it protects material value and builds traceable supply chains.

Infrastructure is growing fast, but gaps remain

On paper, India is building capacity. As of September 2025, the report records 156 operational ATS across 16 states and union territories, concentrated in a few regions, including Gujarat, Andhra Pradesh, Madhya Pradesh, and Uttar Pradesh. The report assumes that each ATS can test approximately 30,000 vehicles per year and notes a likely shortfall relative to projected testing demand under the fitness regime.

A detailed annexe highlights the unevenness of the rollout: for example, the table shows Delhi with 1 ATS against an estimated requirement of 15, and Maharashtra with a 54-station gap under the report’s methodology. In response, it proposes practical planning rules, including a “one ATS per district” goal and public or public–private models in low-density areas where commercial viability is weak.

On the dismantling side, the report records 117 operational RVSFs across 21 states and union territories (178 approved, including non-operational). It estimates that India will need 227 RVSFs by 2027, implying a shortfall of 49 facilities relative to the approved numbers.

The key challenge is not just building sites, it is filling them

For recyclers and investors, one of the report’s most important points is utilisation. It models an RVSF with a capacity of 20,000 vehicles per year and estimates average capital expenditure at approximately INR 14 crore. In theory, the model can work: using an illustrative steel content of ~60% and scrap steel pricing assumptions, the report suggests viable margins at full throughput.

In practice, it indicates that many facilities operate at below 20% utilisation, extending payback to around a decade under a “business as usual” scenario. That is the commercial reality behind the policy debate: formal yards incur land, equipment, EHS, and compliance costs, whereas informal operators can often offer vehicle owners higher upfront prices by bypassing those costs and taxes.

EPR is designed to close the value gap, but targets and design details matter

India’s Environment Protection (End-of-Life Vehicles) Rules introduce extended producer responsibility (EPR) obligations tied to steel recovery. The report summarises the current targets as 8% (2025–2030), 13% (2030–2035) and 18% (2035 onwards), linked to the steel used in vehicles manufactured in relevant historic periods.

Crucially for authorised dismantlers, the report argues that EPR certificate revenues could help narrow the price differential relative to informal scrap collectors and improve the viability of RVSF. It also flags a policy risk: if EPR credits can be generated too easily from production scrap, incentives may dilute away from true ELV processing, undermining investment in dismantling capacity and traceability.

Data, de-registration and consumer awareness are operational bottlenecks

Beyond infrastructure and incentives, the report repeatedly returns to “friction” in the vehicle-owner journey. It recommends tightening systems so de-registration occurs only upon submission of a valid Certificate of Deposit (CoD), supported by improvements to the VAHAN and V-Scrap digital platforms and more automated enforcement (including automated penalty accrual).

It also calls for targeted awareness campaigns and VAHAN-based alerts to owners approaching ELV status, as well as clearer public information on authorised ATS and RVSF locations. For recyclers, this is a reminder that feedstock is not only a supply-chain issue but also an information and compliance issue.

What it means for recyclers

India’s direction of travel is toward a larger, more formal ELV market in which facilities compete on throughput, traceability, and compliant depollution, rather than solely on price. The report’s numbers suggest that the near-term winners will be operators who can secure stable ELV inflows, integrate CoD and de-registration workflows smoothly, and build revenue stacks that include parts reuse and EPR certificates alongside ferrous and non-ferrous outputs.

The strategic question is whether policy, enforcement and digital systems can move fast enough to redirect millions of vehicles from informal channels into authorised yards. If they do, India’s recyclers will be handling one of the world’s fastest-growing ELV streams, and the investment case for modern depollution, dismantling and material recovery will look very different by the end of the decade.

Read the full report here.