InvestorQ : Do you see positives for the auto industry from new Scrappage policy proposed?
diksha shah made post

Do you see positives for the auto industry from new Scrappage policy proposed?

2 years ago

It is believed that the green vehicles policy and the scrappage policy could be sort of game-changers for the Indian auto industry. While it is yet to be finalized, the government has proposed a green vehicle policy for old vehicles as well as a scrappage policy. The scrappage policy, to begin with, will apply to central and state government vehicles only.

However, the concept of green tax will apply to all vehicles across India, irrespective of whether they are private or government owned. Under the green tax proposal by the government, private vehicle that are more than 15 years old and transport vehicles older than 8 years would be mandatorily subjected to a special levy of green tax.

In a way, this is a way of ensuring that the green tax will be levied specifically on polluting vehicles, as older vehicles are a lot more polluting than new vehicles. This will also be used to finance the cost of polluting the environment. Clearly, India is a signatory to the Paris Accord and it takes its commitment to the green framework quite seriously.

However, this scrappage policy and green tax also has a larger logic. Normally, in any economic slowdown, people are wary of committing fresh funds to new vehicles as slowdown makes them conservative. However, a well designed scrappage policy can help boost consumption demand for new vehicles, and that could be a boost for auto stocks.