India to proceed soon with 'cash for clunkers' scheme to boost car sales

MSTC

01/02/2021 14:19

By Aditi Shah and Chandini Monnappa
    NEW DELHI, Feb 1 (Reuters) - India will make public within
15 days details of a "cash for clunkers" scheme which would spur
around 10 billion rupees ($1.4 billion) in new investment and
create as many as 50,000 jobs, road transport minister Nitin
Gadkari said on Monday.
    India's finance minister Nirmala Sitharaman said in her
budget speech earlier on Monday there would be a new voluntary
scrappage policy based on a fitness test for private vehicles
older than 20 years and commercial vehicles older than 15 years.
    "This will help in encouraging fuel efficient, environment
friendly vehicles, thereby reducing vehicular pollution and oil
import bill," Sitharaman said. 
    Automakers in India have been pushing the government for
years to provide incentives for car and truck owners to scrap
old vehicles for new ones - a move they expect will help to
boost sales that are at multi-year lows.
    Around 10% of the 3.7 million trucks and 5% of the 5.2
million cars on Indian roads could be eligible for voluntary
scrapping, the Federation of Automobile Dealers Association of
India estimated, using 1990 as a base year. It said the fine
print of the scheme would determine the final impact on sales.
    Industry executives and analysts said that while the
voluntary nature of the scheme could limit its impact, the
incentives offered by the government would be crucial in
determining its success. The plan is expected to have more
impact on trucks initially and then private cars.
    Puneet Gupta, director at data analytics firm IHS Markit,
said there could be an annual sales boost of 5% for cars over
and above natural demand. 
    "It will act as a catalyst and replacement demand will
definitely increase in India," he said, adding that carmakers
including Maruti Suzuki  MRTI.NS , Hyundai Motor  005380.KS  and
Tata Motors  TAMO.NS  would be the biggest beneficiaries. 
    The Nifty Auto index  .NIFTYAUTO  rose as much as 4.6% led
by an 11.4% jump in shares of Indian truck-maker Ashok Leyland
 ASOK.NS .

 (Reporting by Aditi Shah;
Editing by Euan Rocha and Jane Merriman)
 ((aditi.shah@tr.com; +91-11-4954 8023, +91-11-3015 8023;
Reuters Messaging: twitter: @aditishahsays))