The Economics Behind Vehicle Recycling

In India, where millions of old vehicles are still running on roads far beyond their ideal life span, a silent revolution is picking up speed—vehicle recycling. Thanks to the Vehicle Scrappage Policy, more people are beginning to understand the benefits of recycling their old, polluting vehicles. But beyond just being good for the environment, vehicle recycling is also a smart economic move.

So, let’s explore the economics behind vehicle scrapping in India—how it works, who gains, and why it matters for the Indian economy.

What is Vehicle Recycling?

Vehicle recycling, also known as vehicle scrapping, is the process of dismantling an old or unfit vehicle to recover useful materials like steel, aluminium, rubber, glass, and plastic. It’s not just about getting rid of junk—it’s about extracting value from every part of the car in an environmentally and economically responsible way.

With the Vehicle Scrappage Policy 2021, the Indian government aims to phase out old, polluting vehicles and create a structured recycling ecosystem. This is expected to boost car scrap companies in India, reduce polluation, and support a circular economy.

Current Landscape of Vehicle Recycling in India

India currently has over 1 crore vehicles that are older than 15 years. These vehicles, although still on the road, contribute massively to air pollution and consume more fuel than newer models.

To address this, the Ministry of Road Transport and Highways (MoRTH) has introduced a system where:

• Private vehicles older than 20 years

  
  

• Commercial vehicles older than 15 years

  
  

must undergo fitness tests. If the vehicle fails, it is recommended to be scrapped at a Registered Vehicle Scrapping Facility (RVSF).

Companies like CERO (a joint venture between Mahindra & MSTC), Abhishek Auto, and Tata Re.Wi.Re are among the growing list of car scrap companies in India driving this change.

How the Vehicle Recycling Process Works

Recycling a vehicle in India generally involves these steps:

1. Vehicle De-registration at RTO

   
   

2. Submission to Authorised Scrapper

   
   

3. Depollution – Removing harmful fluids and battery

   
   

4. Dismantling – Separating parts like tyres, seats, glass, and metals

   
   

5. Shredding – Crushing the vehicle to recover valuable materials

   
   

Materials recovered:

• Steel and Iron – used in construction and manufacturing

  
  

• Aluminium and Copper – reused in new cars or appliances

  
  

• Plastics, Rubber, Glass – repurposed or safely disposed

  
  

This entire process is eco-friendly and creates economic value.

Revenue Streams in Vehicle Recycling

Recycling a car doesn’t mean throwing it away—it means monetising its parts. Here's how the money flows:

1. Scrap Metal Sales

Steel and aluminium account for nearly 70% of a vehicle’s weight. These are sold at ₹20–₹45 per kg depending on market rates. A scrapped car can generate ₹15,000 to ₹40,000 just in metal recovery.

2. Spare Parts Resale

Engines, doors, tyres, batteries, and seats in good condition are refurbished and sold in the secondary market. These parts can fetch higher prices than the raw scrap.

3. Fluids and Rubber

Oils and coolants are safely extracted and either disposed of or reused. Rubber parts are recycled into mats or insulation material.

4. Recyclable Plastic and Glass

Used in manufacturing pipes, containers, or even furniture components.

These revenue streams create a profitable cycle for car scrap companies in India.

Cost Factors in Vehicle Recycling

Of course, like any business, recycling has its costs:

• Transport: Towing vehicles from cities to scrap yards

  
  

• Labour: Skilled and semi-skilled workforce for dismantling

  
  

• Equipment: Shredders, crushers, and depollution stations

  
  

• Licensing & Compliance: RTO registration, Pollution Board NOCs

  
  

• Land & Infrastructure: Setting up an RVSF requires significant capital

  
  
  
  

Despite these costs, the profit margins for organised players are healthy, especially when done at scale.

Government Incentives and Support

To make recycling attractive, the government is offering several incentives under the Vehicle Scrappage Policy:

• Road tax rebate of up to 25% on new vehicles

  
  

• Waiver of registration fee

  
  

• Discounts from OEMs (like Maruti, Tata, Mahindra) for scrapping your old vehicle

  
  

• Ease of doing business for car scrap companies in India, including a single-window clearance system

  
  

Also, Certificates of Deposit (CoD) issued after scrapping can be used to claim these benefits.

Benefits for Vehicle Owners

If you’re still holding on to your old car, here’s how recycling benefits you:

• Get Paid: Scrap value + possible bonus from OEMs

  
  

• Save Money: On road tax and registration fees for new vehicle

  
  

• Peace of Mind: Legal RC cancellation means no future liability

  
  

• Cleaner Environment: Reduced emissions and better fuel economy

  
  
  
  

All you need is to connect with authorised car scrap companies in India, many of which offer free pickup and on-the-spot payment.

Economic Impact on the Indian Economy

Vehicle recycling isn’t just good for your pocket—it’s good for the nation.

✅ Reduced Import Dependency

Recycling steel, aluminium, and copper reduces India's dependence on imported raw materials. For instance, India imports over 80% of its copper demand—recycling can significantly cut that.

✅ Boost to Auto and Steel Sector

Increased demand for new vehicles post-scrappage will revive auto sales and create fresh demand for raw materials.

✅ Job Creation

Every vehicle dismantled creates work in logistics, disassembly, resale, and recycling. According to NITI Aayog, over 35,000 jobs can be created by 2025 through this sector alone.

✅ Promotion of Circular Economy

Vehicle scrapping encourages reuse, resale, and repurposing—key principles of a circular economy, which is more sustainable than the traditional "use and throw" model.

Challenges in Vehicle Recycling India

Even with all the positives, there are hurdles to overcome:

• Lack of Awareness: Many people don’t know how or where to scrap their cars

  
  

• Unorganised Sector: Local kabadiwalas still dominate, often illegally

  
  

• RTO Delays: De-registration processes are often slow

  
  

• Infrastructure Gaps: Limited number of authorised scrapping centres, especially in rural areas

  
  

But the situation is improving rapidly with digitisation, policy support, and private investments.

The Future of Vehicle Recycling in India

• The vehicle recycling industry in India is projected to reach ₹43,000 crore by 2025.

  
  

• States like Gujarat, Maharashtra, and Tamil Nadu are setting up vehicle scrappage parks.

  
  

• Car manufacturers are entering recycling themselves – e.g., Tata’s Re.Wi.Re centres.

  
  

• Foreign players and startups are investing in technology for efficient dismantling.

  
  

This growth is creating massive opportunities for car scrap companies in India, especially those that are tech-enabled and environmentally conscious.

Final Thoughts

So, what does all this mean for you and me?

Well, if you own an old vehicle, don’t just let it rust. Through vehicle scrapping in India, you not only get paid but also contribute to a cleaner economy and a sustainable future. And with organised car scrap companies in India growing rapidly, the process is safer, smoother, and more rewarding than ever.

It’s no longer just about “disposing of” a vehicle—it’s about recycling responsibly and making a smart economic choice.