Car Scrapping Business – Start Yours Right Now

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Introduction

Old vehicles have been a source of pollution to the environment and the cause of many accidents. In order to stop the usage of such unfit vehicles on road, the [Vehicle Scrappage Policy 2021] was introduced at the Investor Summit held in Gujarat.

In this article, we will learn more about the vehicle scrappage policy, who is most likely to benefit from it, how to create a business plan for a vehicle scrappy business, how to calculate the car scrappage value, and much more!

Overview Of The Vehicle Scrappage Policy In India

The Nitin Gadkari Vehicle Scrappage Policy was introduced in India to reduce the damage caused by unfit vehicles that are still being used on the road. The policy aims to boost the automotive and manufacturing industry in the country.

The Motor Vehicle law in India states that a vehicle that exceeds 15 years, is considered to be unfit. After 15 years the vehicle is most likely to harm the environment by pollution. A fitness test will be conducted for vehicles after a specific time period. If the vehicle fails the fitness test, it will be scrapped immediately.

By doing this, the policy aims to recycle vehicles and reduce the pollution caused to the environment by unfit vehicles. It also allows the recycling of materials such as steel, plastic, etc, thereby reducing manufacturing costs. This will also lead to an increase in the sales of cars and other vehicles.

Who Will Benefit From The Vehicle Scrappage Policy?

The Vehicle Scrappage Policy has a benefit for each of us. The following are some of the key benefits:

  • It reduces the pollution and accidents caused by old and faulty vehicles
  • Scrapping old vehicles increases demand for new vehicles which helps in the growth of the car manufacturing industry
  • Materials from old cars can be recycled and reused
  • The scrapping industry can grow which will lead to an increase in job opportunities in the sector
  • Vehicle manufacturers will be able to offer up to a 5% discount on the price of the vehicles for customers wanting to buy a new vehicle
  • There will be zero new registration fee
  • The cost of maintenance for vehicles is greatly reduced
  • Customers can enjoy increased savings in fuels
  • States can offer up to 15% rebate on road tax for personal vehicles and up to 20% for commercial vehicles
  • People who are scraping their old and unfit cars will receive a scrap value that is equivalent to about 4 to 6% of the ex-showroom cost they would buy for

What Is A Scrap Certificate?

People who have scrapped their car will receive a scrap certificate after the scrapping has been done completely. The scrap certificate can be used to get a rebate of 4 to 6% of the total price of the vehicle. It can also be used to get a rebate on the road tax on the purchase of new vehicles.

Creating a Business Plan for a Vehicle Scrappage Business

With the implementation of the Vehicle Scrappage Policy, the vehicle scrappage business is sure to boom in the coming times. If you’re someone who wishes to start a car scrappage business, then you need a solid car scrappage plan to get you started and work your way through success in the industry. Read on to find out how to create a business plan for your vehicle scrappage business!

Executive Summary

The executive summary is the hook of the business plan that grabs the attention of the readers. Financiers and loan lenders often decide whether to fund your business or not based on your business plan. The executive summary is the key way to keep them interested in your business from the very start.

The following is an example of how an executive summary for a vehicle scrappage business:
“Scrap & Renew is an environmentally friendly car scrapping business. Our business aims to provide the best possible experience to our customers and to make sure that we do not have the environment during the process in any way. With a degree in automobile engineering, Jason, the sole proprietor of the business has key knowledge of automobiles. He has also worked as a car scraper for 5 years in XYZ scrappers and has the technical knowledge to run the business. With additional services such as physical fitness tests for the vehicle, checking the quality of the reusable parts, and assisting the customers on the whole process of scraping, Scrap & Renew aims to provide service with the customers in mind at all times.”

Market Research

Conducting market research is very important before starting a car scrappage business. The data may not help you to create your business on the physical level but it helps you gain key insight into the current trends in the industry, how the car scrappage industry works, find out any changes in the regulations and also find out what marketing activities are most likely to attract the desired target audience.

Market research helps you find trends in the global scrap market and gain knowledge of the local market as well.

It helps you answer some important questions such as the following:

  • How many scrap yards are there in total in your area?
  • How many scrap cars are scrapped by each one of them on an average every day
  • Are the competitors able to manage the demand?
  • Is the demand for scrapping high enough to welcome a new scrap yard?
  • What kind of services do the scrap dealers offer their customers?

Locate A Scrap Yard

Choosing a location for the scrap yard is very important to running the business successfully. The scrapyard must be away from residential areas so that it does not cause any kind of disturbance to the people. It must also not be too far off that people do not know of its existence. The scrapyard must be in a location that is easily accessible by road by its customers.

The space of the scrap yard must be enough for the vehicles to come in and the scrapping process to be done. The scrapyard must also not be in the vicinity of another scrapyard in order to avoid direct competition. The scrapyard may also require space for a warehouse where they can process the scrap and the reusable parts of the vehicle are refurbished, catalogued, stored and sold.

Service Offerings

The car scrapping business can offer additional services other than the scrapping itself in order to attract more customers to it. Some of the services the car scrapping business can provide include the following:

  • The car scrapper can provide services to help the customer deregister his or her vehicle
  • The car scrapper can have a separate area in the scrapyard where they sell recycled parts directly to customers who may need them for their car repair
  • The car scrappage business may also guide customers on where to purchase their next vehicle at a discounted price using their scrapping certificate

Competitors Analysis

Performing competitor analysis is important for running any business successfully. It helps to analyse the trends in the local market and find out the strengths and weaknesses of the competitors in the industry. The data will help the business with strategies that are most likely to attract potential customers and also provide products and services that are not available in the market.

Equipment and Staff

Estimating the equipment and staff required to run a scrap yard and the cost of it is very important in order to manage financial matters efficiently. Starting a car scrapping business requires a lot of investment and hence the areas of investment must be decided carefully in order to avoid any unexpected losses in the business.

The business must have all the required equipment and tools to carry out the scrapping process. The staff must be trained in dismantling the parts of the car and scrapping it. Experts can also be hired to inspect the condition of the vehicle and for checking the value of the parts that can be sold. An additional salesperson may be required if the selling is done to the customers directly at the scrap yard.

License and Registration

  • The scrapyard must be registered as a legal entity such as the following:
  • Sole proprietorship
  • Partnership
  • Limited Liability Corporate (LLC)
  • Public Limited Company
  • Private Limited Company
  • In addition to the business registration, the car scrapper must be an “Authorised Scrapper”.
  • The scrapyard must be approved by the Pollution Control Board and must also be certified as an Authorised Vehicle Scrapping Facility (AVSF).
  • The entity must have GST registration and a valid PAN

Financial Plan

Starting a car scrapping business requires a lot of financial investment. There are a number of ways by which car scrap dealers can source such finances. Some of the external financial sources include banks, private investors, friends, relatives, etc.

No matter what kind of financing you are aiming to get for your business it is essential that you need to fund at least a small portion of the business in order to prove to your investors that you are serious about the business and gain their trust. The business plan must contain the percentage of the finance that is going to be funded by you and the percentage for which you are going to get from an outside source.

RTO Rules For Scrapping A Vehicle

There are certain rules and regulations laid down by the Regional Transport Office for scrapping a vehicle.

The following are some of the rules:

  • When a car is sent for recycling, the chassis number is first taken out from it
  • The car must be scrapped only by an authorised scrap dealer
  • The car scrap dealer must scrap the car in a way that is safe and does not harm the environment
  • The owner of the car must inform the RTO about the scrapping
  • The car owner may choose to deregister the car before scrapping it
  • The car scrap dealer must inspect the physical health of the car and quote a price based on the weight of the car
  • The car scrap dealer must remove parts of the car and separate them into plastic, rubber, iron, etc
  • The car owner must ensure that the car has been scrapped by the scrap dealer
  • The car owner must take pictures of the scrapped car for future assistance

Scrap Car Prices In India

The car scrap value in India depends on how the scrap will be used.

The price will also vary depending on a number of factors such as the following:

  • Price of the scrap metal: The scrap metal values are different for steel, aluminium, lead, copper, etc
  • Condition of the car: For example, cars that are rusted have a lower value than cars without rusting
  • Car model: Car models which are not manufactured anymore have a lower price since their parts can be used or sold
  • Presence of any damage: Car body parts that are damaged or broken have a lower scrap value

The following are average scrap value for some of the car models in India:

  • Maruti 800 (Petrol) – Rs.12000
  • Zen (old), Esteem (Petrol) – Rs.15000
  • Tata Indica (Petrol) – Rs.18500
  • Accent, Lancer & Ford Ikon (Petrol) – Rs.21000
  • Toyota Qualis (Petrol) – Rs.29000
  • Toyota Qualis (Diesel) – Rs.34000
  • Swift/Polo (Petrol) – Rs.32000
  • Polo/Swift (Diesel) – Rs.41000
  • Tavera (Petrol) – Rs.37000+
  • Tavera (Diesel) – Rs.42000+
  • Innova (Petrol) – Rs.70000+
  • Innova (Diesel) – Rs. 80000+

Car Scrap Value Calculator

The value of the car scrap is calculated based on the weight of the car that has to be scrapped. It is usually determined by multiplying Rs.15 by every Kg weight of the car. Cars that are in working condition and whose parts can be sold will have a higher price.

For example, the ex-showroom scrap weight of the Maruti Suzuki Baleno is around 920 kg. The scrap value will be calculated as follows

920 x 15 = Rs. 13,800

Conclusion

The car scrapping business is one of the fast-growing businesses in India in recent times. The implementation of the Vehicle Scrappage Policy is a sure factor for the boom of the business. In addition to the scrapping service itself, the reselling and recycling of qualified parts is a sure way to gain great profits in the business when done in the right way!

Not the right car business for you. “There are many fish in the sea, but never let a good one swim away.” So keep a look out for different car business ideas for you to choose from.

This post is also available in: English

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1 comment

  1. In this blog, I understand the scrapping policy. I understand how to become a certified business owner for scrap my car.

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