Minister Gadkari: Scrap Your Car, Get 25,000 Rupee Discount On New Car

The government of India has been pushing all old car owners to scrap their vehicles and buy new ones. Now, in order to incentivize the scrapping of old cars, a recent meeting was held by the Union Minister of Road Transport and Highways, Nitin Gadkari, and the CEOs and top executives of numerous carmakers in India. Following the meeting, it was announced that all automakers would be offering Rs 20,000-25,000 discounts on ex-showroom prices of their vehicles. This will be done after the submission of a valid old car scrappage certificate.

📍𝑩𝒉𝒂𝒓𝒂𝒕 𝑴𝒂𝒏𝒅𝒂𝒑𝒂𝒎, 𝑵𝒆𝒘 𝑫𝒆𝒍𝒉𝒊

Chaired a highly productive session of the SIAM CEO’s Delegation Meeting at Bharat Mandapam today, where we addressed various critical issues facing the automobile industry.

I am pleased to report that, in response to my… pic.twitter.com/9n4aUdgoby

— Nitin Gadkari (@nitin_gadkari) August 27, 2024

The visuals of the meeting held with the Society of Indian Automobile Manufacturers have been shared on X by Union Minister Nitin Gadkari. In the short clip, Nitin Gadkari can be seen chairing the meeting regarding the offering of discounts to new car buyers.

Apart from the video, in his post, Nitin Gadkari stated, “I am pleased to report that, in response to my recommendation, several commercial and passenger vehicle manufacturers have agreed to offer discounts for the purchase of new vehicles against the scrapping of older vehicles with a valid Certificate of Deposit.”

He added, “This initiative will significantly advance our Circular Economy efforts, ensuring that cleaner, safer, and more efficient vehicles are on our roads.”

Meeting Between Government and Automakers

This particular meeting, which was held yesterday, saw the participation of CEOs and top executives from major car manufacturers in India. These companies include Maruti Suzuki, Tata Motors, Mahindra and Mahindra, Hyundai Motor, Kia Motors, Toyota Kirloskar, Honda Cars, Nissan India, Skoda Volkswagen, Renault, and JSW Motor.

Union Minister Nitin Gadkari headed the meeting, and the discussions revolved around strategies to accelerate the voluntary scrapping of old vehicles. This meeting was organized to push the government’s broader agenda to promote a circular economy and reduce environmental pollution.

During the meeting, Gadkari emphasized the importance of phasing out old, polluting vehicles and replacing them with modern, fuel-efficient models. It was also highlighted that this is aligned with the government’s efforts to set up registered scrappage centers across the country. He added that these will provide a structured and formalized approach to vehicle scrapping.

Details of the Discounts

At the end of the meeting, all the major automakers agreed to offer discounts regarding the incentives for scrapping old vehicles. The major passenger vehicle manufacturers, including Maruti Suzuki, Tata Motors, Mahindra and Mahindra, and Hyundai Motor.

Along with Kia Motors, Toyota Kirloskar, Honda Cars, Nissan India, Skoda Volkswagen, Renault, and JSW Motor, have all agreed that they will offer a 1.5% discount on the ex-showroom price of a new car, or a flat discount of up to Rs 20,000.

It has been highlighted that this discount will only be offered to buyers who present a Certificate of Deposit from a scrapped vehicle. This discount is applicable for one year from the date of the announcement.

In addition to all the carmakers, German luxury automaker Mercedes-Benz has also announced a flat Rs 25,000 discount. Like all the other automakers, this discount will be offered on the purchase of a new vehicle when an old one is scrapped, regardless of the model.

As for the commercial cargo vehicles, manufacturers like Tata Motors, Volvo Eicher, Ashok Leyland, Mahindra & Mahindra, Force Motors, and SML Isuzu have all announced that they will offer a 1.5-3% discount on the ex-showroom price for vehicles purchased against a valid scrappage certificate. This discount scheme will remain valid for two years.

Additional Benefits of Scrapping

Apart from the discounts provided by the car manufacturers, it has also been discussed that customers scrapping their old vehicles will also receive the scrap value from registered scrappage centers. Additionally, it has been highlighted that these discounts will be over and above any regular promotional discounts that the companies might offer.

Reality of This Discount: Is It Worth It?

Now, on the surface, this initiative from the government looks attractive. However, when we go deeper, it seems like this discount is not worth it for new car buyers. Despite the initiative aiming to encourage the disposal of old vehicles, many people believe that the offered discount is nothing compared to the high cost of new cars.

In the present scenario, purchasing a new vehicle involves significant financial planning, so scrapping the old vehicle rather than selling it does not justify the limited discount offered. The maximum discount of 3.5% being offered by many is seen as insufficient, particularly for owners of fully functional old cars.

Apart from the above-mentioned point, for many car owners, scrapping a fully operational vehicle for a mere 1.5% to 3.5% discount on a new purchase is a losing situation. People are aware that they will receive relatively low scrap value for their fully functional cars, and this makes the trade-in option less attractive.

Due to the rising costs of new cars, many people are now leaning towards buying used cars. This is also because cars are depreciating assets. So, instead of spending huge sums on new cars, people can potentially yield better returns if invested elsewhere. So, for those people, this scrapping initiative does not make much sense.

Why Keeping an Old Car Might Be More Sensible

According to the government, all old cars, regardless of their condition, should be scrapped. However, this may not be entirely correct, and in some cases, keeping a well-maintained old car can be both economically and environmentally beneficial.

Even today, many older vehicles that still meet emission norms continue to run efficiently without contributing significantly to pollution. So, scrapping such cars in favor of new ones may not always be environmentally justified. The production of new cars also consumes considerable natural resources and energy, so rather than scrapping good cars, people can continue using their old cars.

Apart from this, another important aspect is that older cars have already undergone the bulk of their depreciation. This means that their value remains relatively stable. This contrasts with new cars, which can lose a significant portion of their value within the first few years.

Additionally, older vehicles typically have lower annual costs, including insurance premiums, thanks to their depreciated value. For owners who have taken good care of their cars, the ongoing maintenance costs might also be lower than those associated with a new vehicle.

As mentioned above, the production of a new car requires significant resources, from raw materials to energy, which has a considerable environmental impact. If an older car is still in good condition and meets current emission standards, continuing to use it might be more eco-friendly than purchasing a new one.