Vehicle scrapping policy unlikely to trigger replacement, says Jefferies

 The vehicle scrapping policy is unlikely to make people junk their old vehicles for new ones in a big way, owing to insufficient incentives offered by the government for replacement, a report said

The vehicle scrapping policy, proposed in Parliament last week, is unlikely to make people junk their old vehicles for new ones in a big way, owing to insufficient incentives offered by the government for replacement, a report said on Monday.

Under the proposed policy, a scrapped vehicle will be offered a monetary value close to 4-6 per cent of the showroom value. There could even be up to 5 per cent discount on the purchase of a new vehicle if a scrap certificate is produced.

In addition, it also offers a 25 per cent discount in road tax, among others.

It also proposes to de-register vehicles that fail fitness tests or are unable to renew registrations after 15-20 years of use.

While the scrapping policy has the right intent, we believe the incentives are insufficient to trigger much replacement, financial services firm Jefferies said in its report on Monday.

It said a vehicle owner can usually get scrap value of about 2-3 per cent of vehicle price in the market and hence the incremental incentive from the policy appears minimal.