Cero plans to set up at least 100 vehicle scrapping centers by 2025

"By 2025, the target is clear that we need to be in more than 100 cities," said Cero's director

Cero, a 50:50 joint venture between the Mahindra Group and government-owned MSTC, plans to establish at least 100 vehicle scrapping centers in India by 2025, according to its director, Sumit Issar.

Without revealing the exact amount, he stated that the company will need to make a “huge investment” to establish these centers. Currently, India has 13-15 registered vehicle scrapping centers, out of which nine belong to Cero, Issar told Business Standard in an interview.

In her budget speech last month, Finance Minister Nirmala Sitharaman said that replacing polluting vehicles is an important part of greening the economy, and the government has allocated adequate funds to scrap old vehicles of the Centre. The state governments will also be supported in replacing old vehicles and ambulances, she added.

Out of about 4 million new cars sold every year, the government buys about 10-15% of them. “The rest, about 3.5 million cars, are sold in the retail market. So, the retail sector has to participate in a big way,” he added.

“All vehicles, government and retail alike, over 15 years old should be scrapped. They should be allowed to scrap only through registered scrapping centers (approved by respective state governments),” he said. Currently, 99% of car scrapping is driven by the unorganised sector.

“Today, we have nine plants across the country: Noida, Pune, Chennai, Ahmedabad, Indore, Bengaluru, Guwahati, Hyderabad, and Chandigarh. We can service 36 cities which are within a 300-400 km radius around these nine plants,” said Issar.

India, he said, must have at least 200 centers to cover all its large cities. Issar is also the managing director of Mahindra Accelo. In 2017, the number of vehicles that were more than 15 years old in India was 28 million. In the next five years, this is expected to reach 46 million units, he noted.

“By 2025, we would have 100-150 centers across the country...Between us (Mahindra Accelo) and MSTC, we have decided that we will be in every big city. By 2025, the target is clear that we need to be in more than 100 cities,” Issar  said.

Each center will scrap about 2,000-3,000 units per month, and the capacity can be increased by adding lines or modules based on demand, he added.

The Ministry of Road Transport and Highways issued a vehicle scrappage policy called the Voluntary Vehicle-Fleet Modernization Programme (VVMP) in March last year. Under VVMP, owners of vehicles that are over 15 years old (for commercial vehicles) and over 20 years old (for private vehicles) are eligible for incentives to scrap their old vehicles and purchase new ones.

“The VVMP policy that has come from the government is a very welcome step. Consumers will benefit greatly. If you have a car that is more than 15 years old and you try to sell it in the unorganised market, you won't get more than Rs 30,000,” said Issar.

“But if you go through a registered scrapping facility, you will get a cumulative benefit of Rs 50,000, which includes Rs 20,000-25,000 in cash and about Rs 25,000 through waivers in road and registration tax while buying a new vehicle,” he added.

Issar said the state governments are at different levels of implementing the VVMP. “All state governments should adopt policies in line with the central government policy and incentivise end customers for recycling. Green tax in many states should be waived off for vehicles going for recycling,” he added.

Cero started operating in 2019-20 and has scrapped around 20,000 vehicles in the past two years. “One must be slightly patient in this business. It is a question of time. There will be a tipping point when one will see people coming forward and giving their vehicles proactively and doing it the right way,” said Issar.