Analysis of the End of Life Vehicles

(ELVs) Sector in India

Published by
Member Secretary
Central Pollution Control Board
Parivesh Bhavan, East Arjun Nagar
Delhi 110032
T: +91 11 43102207
F: +91 11 22307078
E: [email protected]
Project Team
Central Pollution Control Board
Dr A B Akolkar, Member Secretary, CPCB
Mita Sharma (Urban Pollution Control Division)
Meetu Puri (Urban Pollution Control Division)

Chintan
Bharati Chaturvedi
Gautam Mehra
Supriya Bhardwaj

Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH

Indo German Environment Partnership (IGEP) Programme
Dr Dieter Mutz, Programme Director, GIZ-IGEP
Dr Rachna Arora
Manjeet Singh Saluja

Text edited by
Francesco Obino

Photos and Maps

Photos provided by authors, partners and/or project managers.
All maps used in the report have been sourced from mapsofindia.com
and Google Maps.

New Delhi, India

August 2015
Chairman’s Foreword

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 Acknowledgements

The report would not have been possible without the cooperation of the officials
of the Pollution Control Boards, Regional Transport Officers (RTOs), automotive
manufacturers, component suppliers and their dealers, civil society organisations,
traders, dismantlers and other informal sector workers.

We would in particular like to thank the team of surveyors and project managers
from Chintan for conducting the research and surveys this report is based on, as well
as informal sector engagement which was carried out by Chintan across all the cities
mentioned in the report. In particular Arjun Bhagat, Bharati Chaturvedi, Gautam
Mehra, Bibin K Joy, Chitra Mukherjee, Imran Khan, Noble Varghese, Rajat Mohan,
Supriya Bhardwaj, Ankita Hazarika, Deepankar Das, Firoz Khan, Mohammad Ibrahim,
Mohammad Usman, Rajneesh Tyagi, Raj Dabral, Rizwan Ali, Rupesh Kumar, Sudesh
Kumar, Vivek Vishal, Tajuddin and Gopi Nath.

2
Table of Contents

Chairman’s Foreword 1

Acknowledgements 2

Executive Summary 6

Introduction 8

Scope of the Report 12

A Brief Overview of the Industry 13
The Methodology of the Study 16
Objectives of the Report 16
Sampling Design 17
Methodology 18
Quantitative Data 19
Qualitative Data 19
Secondary Research 19

Current Landscape 23
How Big a Challenge? A Calculation of Obsolescence Rates and
Sector Projections for the Next Decade 23
ELV Generation and Projections 26
Trade Chains and Material Flow in the ELV Sector in India 27
Engines 32
Gear Systems and Differentials 33
Chassis 34
Other Ferrous and Non-Ferrous Materials 34

3
 Rims of Wheels 34
Analysis of the End of Life Vehicles (ELVs) Sector in India Table of Contents

Electronic Components 35
Tyres 35
ELV Waste 35
Profits from Trading of Parts 37
Unused Parts: Toxic 38
Unused Parts: Waste 39
How is the Indian ELV Landscape Changing According to Key Stakeholders? 40
The Informal Recycler 41
The Formal Recycler 43
The OEMs 44
Occupational Health and Safety Challenges in the ELV Sector 45
Workers 45
Impact of ELV Trade on Nearby Areas 46

5 Major ELV Hubs in India 49

Chennai 49
Boarder Thottam 50
Pudupet 51
Kolkata 54
Phoolbagan 54
Mallick bazaar 55
Panagarh 56
Jamshedpur 59
Indore 60
Transport Nagar and Mechanic Nagar 60
Bhamori 60
Pune 63

The Vision and Aspirations of ELV Traders and Workers in India 65

Determinants of Aspirations from ELV Traders and Workers 65
Socio-Economic Aspirations 66
Formalization and Recognition of this Sector 67
Obsolescence and its Constraints 67
Need Technical Training for Dismantling 68
Expectations from the Government 68
Set Up Auto Recycling Zones 68

4
International Best Practices 70

Analysis of the End of Life Vehicles (ELVs) Sector in India Table of Contents
Dismantling Process 71
Prevalent Policies and Practice in Significant Economies of the World 72
European Union (EU) 72
Japan 73
Korea 74
China 75
United States of America (USA) 75
Status of the Major Manufacturers 76
BMW 76
Renault 76
Toyota 77
Examples from Other Countries 77

Policy Recommendations 79
Shared Responsibility for Effective Management of End of Life Vehicles 79
Key Actors 80
Government 80
Dismantlers and Recyclers — Formal and Informal 82
Manufacturers (Including Original Automotive Manufacturers,
Importers, Assemblers, Component Manufacturers) 83
Consumers 84
Dealers and Insurers 84
Examples from Other Countries 84
Conclusion 85

Annexure I: Process and Movement of Materials Across

Commercial Goods Vehicles And Four Wheelers 87
Commercial Goods Vehicle 87
Commercial Passenger Vehicle/Private Cars 88

Annexure II: Story of a Dying Car in India —

Understanding the Economic and Materials Flow of End-of-Live Vehicles (2012) 89

5
 Executive Summary

Following the phenomenal expansion of the Indian automobile market over the last two
decades, the end-of-life management of vehicles must gain new centrality in debates
about the environment, material efficiency and the labour and social dimensions of
circular economies.

While the informality of the end-of-live vehicle (ELV) sector in India is judged to be
inadequate to meet the challenges of the next decades, very little is known about how
this sector currently operates. This poses a fundamental obstacle in devising effective
policies, and reinforces the stigma attached to informal economies of material recovery
as inefficient, undignified and polluting, in spite of their significant (if imperfect)
contribution to national welfare.

This study follows up a previous 2012 publication by GIZ and Chintan (Annexure 2) that
delved into ELV management in and around Delhi. The present effort draws a broader
and more systematic picture of the ELV sector in India, by looking at five other major
automotive production hubs, and the thriving ELV markets that developed around
them: Kolkata, Chennai, Pune, Jamshedpur and Indore. By highlighting systemic links
and nation-wide challenges, the report offers insights that will be strategic to design
a regulatory and legal framework that reflects accurately the economic, social and
environmental reality of the Indian ELV landscape.

The report identifies a number of key trends:

In spite of its capacity to continuously adapt to changing material flows, important

changes in the technology and manufacturing standards used by vehicle
manufacturers since the late 1990s have become a challenge for the domestic
ELV sector. The capacity of ELV operators to adapt hampered by their limited access
to professional development and financial opportunities for business expansion and
development in particular.

6
All stakeholders in the ELV sector today are eager to be included in the blueprint of

Analysis of the End of Life Vehicles (ELVs) Sector in India Executive Summary
a formal ELV industry, and formalisation is perceived as instrumental to developing
businesses as much as a lever to enforce environmental standards and higher
material efficiency targets. Traders and dismantlers, most often running established
family businesses, require new space and financial inclusion to keep being competitive;
original equipment manufacturers (OEMs) are eager to enter the used parts market
and support quality control mechanisms; disposers of vehicles call for regulations that
minimise environmental risks while legitimising the economics of ELV trade; distributors
and service centres see in the used part market an important market they wish to enter.

A critical legislative and regulatory void, more than any violation of existing norms,
is behind the most hazardous practices in the Indian ELV sector. Whenever legislation
has been enacted, as in the case of batteries and used vehicle oils, the sector has proved
largely willing to comply. The lack of standard operating procedures, of a licencing
system and of responsive concerned authorities regarding the handling of ELV waste
remain allmajor issues.

Based on these observations, the report suggests to:

●● Support — through legal recognition, the allotment of space for auto markets and
financial inclusion — an upgrade of ELV businesses to combine business sustainability
with environmental and social sustainability. In particular, we recommend to
establish an ELV licensing system, allot space for dismantling outside urban centres
and transform existing markets in space for ELV parts’ retailing; facilitate ELV
operator’s access to mainstream financial tools like business development loans and
insurance;
●● Leverage the existing national ELV trade network to enforce a 100% ELV take
back policy across the national territory. In particular, we recommend to
identify procedures and actors for the de-registration of ELVs and to lighten the
administrative burden on the ELV sector, including by giving dealers the role of
facilitators in the processing of de-registration applications, like they already have
for the registration of new vehicles;
●● Enforce clear occupational safety and environmental standards in the ELV sector,
design a monitoring system and standard operating procedures for dismantling and
handling of hazardous waste, in coordination with manufacturers who ought to
produce manuals also in vernacular languages;
●● Recognise and leverage the convergence of interest between manufacturers,
disposers, dismantlers, traders and dealers, to strengthen the capacity of the
sector to increase material efficiency rates, including by systematically including
representatives of these groups in policy processes. This should be based on the
fundamental notion that each player in the economic automotive chain shares the
responsibility for establishing an enabling environment conducive to a thriving ELV
sector, with maximum gains and minimum hazards.

7
 Introduction

Whether commercial or private, vehicles are on the centre stage of any discussion
around pollution, traffic and consumption in India. And yet, rarely does any discussion
ever venture towards end-of-life vehicles, or ELVs. Every vehicle that comes on our roads
will nonetheless become an ELV, sooner or later, and its safe and sustainable handling is
an issue of critical importance.

In 2013, the Deutsche Gesellschaft für Internationale Zusammenarbeit GmbH (or GIZ)and
Chintan started studying the ELV sector in the Delhi region. The report that followed,
Story of a Dying Car in India (Annexure 2), suggested that vehicles have a thriving after-
life which required more attention that it had received that far. The study threw light
on the fact that a whole sector of entrepreneurs (working almost entirely in the informal
sector, for lack of regulations) recycles ELVs to a surprising extent of material efficiency,
and that many parts are reused and sold in a dedicated market extending well beyond
the city boundaries. Evidence from Delhi, Meerut, Manesar, Moradabad and Najibabad
was still only a fragment of the ELV landscape in India.

With the additional support of the Central Pollution Control Board, in 2014 GIZ and
Chintan expanded the scope of the work started in 2013 to touch upon the issues of
environmental impact, waste management, perceptions and aspirations of the informal
ELV sector in 5 new cities: Kolkata, Jamshedpur, Pune, Indore and Chennai.

The impetus behind this effort is the sheer deluge of ELVs that India can reasonably
expect along the next decade. The original data presented in this report confirms this
concern: in 2015, the total number of ELVs is estimated at 87,31,185. By 2025, this figure
is estimated to rise to 2,18,95,439 — an increase of 250%. How should India address this
challenge?

All over the world, the challenge of waste management is being viewed increasingly
through the lens of materials efficiency, embedded in the idea of growing circular
economies. In India, the scenario is no different, except for the fact that the reuse and

8
recycling happens virtually exclusively thanks to, and in, the large domestic informal

Analysis of the End of Life Vehicles (ELVs) Sector in India Introduction

sector. The challenge ahead is therefore to understand if the existing sector is a
sustainable infrastructure that policy makers and regulators could build on, leveraging
its material efficiency and its benefits. Do operators in the sector itself want to continue
this work? Does the ELV business have a future, and what does this future look like?

It is paramount to notice that, as shown in Figure 1, based on our study, virtually

every ELV business surveyed for this study across the country is currently financially
sustainable.

This study also found that more than

recycling, sustainability is a function of
reuse. Indeed, as figures 2 and 3 below
show, up to 70% of a vehicle can be
dismantled, and most of its spare parts can
be re-used. From the perspective of the
waste management hierarchy, which frames
reuse as a superior practice to recycling in
terms of material efficiency, this is a very
desirable situation.
Figure 1: 96% of the traders stated that the
Most of the entrepreneurs the surveyors profit margins are high enough to ensure business
sustainability. However, everybody also expects
interacted with were young, second margins to go down because of the increase in
generation business owners who are well non-reusable parts in newly designed vehicles.
aware of the nuances of reuse and trading
on the second hand markets — much against the commonplace that frames this practice
as virtuous but out-dated.

Figure 2: Up to 70% of an ELV’s parts are recovered through the dismantling process.
In some cases, entire vehicles are refurbished and sold.

9
Analysis of the End of Life Vehicles (ELVs) Sector in India Introduction

Figure 3: The ELV parts trade chain ends with mechanics, who place parts in running vehicles.
More than half of the ELV parts traded are directly procured by mechanics.
Refurbishers use them to put back onto the market old vehicles that are still operable.

New trends are setting in, however, and vehicles are increasingly discarded not because
they are old, but because they are simply damaged. The automobile industry, at the
same time, is thriving on models that have a decreasing scope to be dismantled and
recycled. A trader from West Bengal remarked how much he disliked brand new vehicles
that had met with an accident: “They are so new, there is no urgency for their spare
parts. They have such little value for us.”

Figure 4: Damage to the vehicle or its parts is the most important reason why vehicles are
disposed off. This shows that the cost of repairing and maintaining a vehicle and its
maintenance is the prime reason for turning into an ELV.

10
More than other trades, ELVs and their dismantling requires space — an endemic deficit

Analysis of the End of Life Vehicles (ELVs) Sector in India Introduction

resource in India, unless planned for. Many entrepreneurs reported that their growth as
a business was dwarfed by the land crunch, as Figure 5 shows. This is a key priority given
the projected growth of ELVs in the near future.

Figure 5: Lack of space is a major impediment. Slow sales and growing stocks can also cause
liquidity crunches that cannot be addressed through mainstream financial assistance like
other businesses. The cost of labour has also increased exponentially over the last few years,
reducing the margins of the traders significantly.

Many are however aware of the fact that land might be available only far from the
markets and customer base of today, and offered innovative ideas like splitting retail
and dismantling activities of a same business. It is based on these and many other
insights from this informal, or semi-formal, sector that this report formulates a number
of recommendations in the final chapter.

The authors expect that the original data and case studies presented below — a first of
its kind — will enable policy makers and regulators, informing their decisions as they
seek pragmatic incentives to promote ELVs management and bring the country ever
closer to enjoy the benefits of a circular economy.

11
 Scope of the Report

The term ‘End of Life Vehicles’ (or ELVs) identifies all those motorised vehicles that
are no longer in use — because they are no longer fit to operate or because they have
become too expensive to operate. Like any other consumer durable, the moment
vehicles become waste for consumers, they enter an altogether different economic
sector where they acquire a second life and new value in the hands of recyclers,
scrap dealers and sellers of parts on second-hand markets. In India, much of the post-
consumer recovery of recyclable, reusable and re-sellable material happens in the
informal sector: outside of regulatory frameworks or — more often-simply in the absence
of any regulation. For the ELV sector, the fact that a mass demand for motorised vehicles
in India is just two decades and a half old means that end-of-life management has
only started to gain attention as an issue in its own right. Accordingly, the sector has
operated without legal or regulatory references for two generations.

This study aims to throw a first light on India’s ELV market, as a preliminary step to
define the features a regulatory framework should have. It is the belief of the authors
that understanding how the sector currently operates across the country is instrumental
to retain — and expand — its capacity to extract as much value as possible from this
distinct type of waste, while respecting the environment and safeguarding its precious
human resources.

This effort follows up to an earlier study, titled A story of a dying car in India, published
in 2013 by GIZ and Chintan (Annexure 2). This previous work was dedicated to the
unexplored contribution of the informal sector to the automobile industry in and around
Delhi. Considerably expanding the first study, the present effort explores 5 more major
automobile hubs across the country. This, we hope, will not only help in understanding
the ELV market’s material and waste streams in greater depth, but also provide a first
overview of the diversity of operating practices at work across the country, whose
inclusion in any future regulatory effort will be instrumental.

12
A Brief Overview of the Industry

Analysis of the End of Life Vehicles (ELVs) Sector in India Scope of the Report
The motor vehicle sector has been one of the pillars of India’s economic growth for the
last two decades and a half. In 1991, when the decision was taken to progressively open
up the domestic economy to foreign investments, India could only count on 2 major
companies operating in the passenger car segment. By 2015, this figure has grown ten-
fold, with large Original Equipment Manufacturers (OEMs) from across the world setting
up shop in India. Foreign Auto Component manufacturers followed soon, injecting in
the domestic landscape new technology and improved materials — with both greater
performance and safety standards in mind.

As a result of these events, the last two decades saw very significant changes in the
resource usage of domestic manufacturers. Most notably, plastic and plastic composites
substituted metal, gradually but incrementally, and the weight of vehicles decreased
while their volume grew very rapidly.

Figure 6: More than 65% of the respondents stated that there has been no growth
in the business over the last 10 years. Just 10% of the respondents stated that
they have experienced growth in the last 10 years.

13
Analysis of the End of Life Vehicles (ELVs) Sector in India Scope of the Report

Figure 7: About 66% of the respondents state that there has been no developmental
progress in their work. They are doing the same thing that they were doing 10 years ago.

While India’s century-old recycling sector successfully adapted to new designs, absorbing
any valuable material from ELVs, constant technological innovation and the new scale
of the industry also posed challenges. With growing sophistication in OEMs’ production,
the scope to reuse parts fell to an unprecedented low. As a result, what was for decades
a profitable used parts market is increasingly shifting its operations to trading in scrap
and waste, a much less materially efficient economic activity. Profits have decreased,
and the soaring cost of labour, an essential input in this sector, menaces to push some of
India’s marginal ELV operators out of their business.

Figure 8: Vehicle owners expect to maximise their gains when selling to a trusted mechanic,
whom in most cases they have known since purchasing their vehicle..

14
The major implication of these changes, however, is that with the number of registered

Analysis of the End of Life Vehicles (ELVs) Sector in India Scope of the Report
vehicles in India reaching 1.6 million in June 2014 (from 400,000 in June 2000, a
four-fold increase in less than a decade and a half1), the country’s capacity to manage
ELVs — the automotive industry’s post-consumer waste — has decreased sharply. If the
demand for new vehicles generates employment and puts the vehicle manufacturing
industry at the forefront of India’s GDP growth, the decreasing scope for recycling is set
to impose new systemic costs and pose important challenges — a growing scramble for
raw materials in the first place.

Figure 9: Growth of registered vehicles in the last 15 years (SIAM data)

Figure 10: Disposal rates of vehicles in Chennai are far lower than those of other cities.

1 (SIAM data)

15
 The Methodology of the Study

Objectives of the Report

Following up to the 2013 study A story of a dying car in India (Annexure 2) this report
delves into the processes of the ELV sector across six major locations. In each location,
we have asked key stakeholders, formal and informal, about the causes for the disposal
of vehicles, the economic value created through disposal, reuse and recycling practices,
information on the life cycle of a vehicle and its parts, the structure of existing markets,
the kind of problems ELV operators face with respect to the law, and the sourcing
channels of the ELV trade. The study also recorded the aspirations of operators in the
sector were, as these are expected to be instrumental to design and implement any
policy.

In particular, the study focussed on the material flows in the ELV industry, tracing chains
of transactions and attempting to quantify both their economic and waste management
dimensions. It also maps the life of different types of vehicles across automobile hubs.
Overall, this study brings together new data about the size of national ELV sector in India
and its estimated development over the next decade, based on original calculations of
the obsolescence rates of different types of vehicles available in the market.

The stakeholders the research team interacted with include manufacturing companies
(OEMs and auto component manufacturers), automotive associations, state pollution
control boards, formal sector recyclers and Regional Transport Offices (RTOs), ELV
traders, dismantlers, sellers, refurbishers and labourers. The ultimate aim of these
interactions was to understand the attitude of stakeholders to the notion that ELV
— beyond a large economic sector — is also a distinct waste stream that requires
dedicated regulations, and a shared effort of responsibility between manufacturers, the
government and the informal sector.

16
Sampling Design

Analysis of the End of Life Vehicles (ELVs) Sector in India The Methodology of the Study
The study focuses on 5 of India’s major automobile hubs: Kolkata, Jamshedpur, Chennai,
Indore and Pune. Given Delhi and the capital region had already been covered as part of
the 2013 study, the data from that study has also been incorporated wherever possible.

For each city, the research team identified a shortlist of stakeholders of the ELV sector,
including:

●● Manufacturers (OEMs)
●● Traders and dismantlers of ELVs
●● Disposers of ELVs
●● State level pollution control boards
●● Distributors and service centres
●● Recyclers (if any)

Figure 11: Sample composition

Mapping stakeholders at 360 degrees helped in answering some of the key questions of
the study: the obsolescence rate of vehicles, material flow from ELVs and dedicated
value chains. The sample design we followed, and the research methods we used for
each stakeholder, are summed up in the table below along with the respective sample
size.

Table I: Sample size and methodology of data collection

Stakeholders Cities Methods and Tools Sample

Producers Chennai, Face to Face interviews 1 in each city
Jamshedpur, Indore, with Discussion guide
Kolkata, Pune
Distributors Chennai, Face to Face interviews 6 in each city
Jamshedpur, Indore, with Discussion guide
Kolkata, Pune
Consumers Chennai Questionnaire and FGDs 100
Jamshedpur with Discussion guide 50
Indore 50
Kolkata 100
Pune 100

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Analysis of the End of Life Vehicles (ELVs) Sector in India The Methodology of the Study

Stakeholders Cities Methods and Tools Sample

Collectors/ Chennai Face to Face interviews 10

Traders Chennai with Discussion guide 5
Jamshedpur and FGD dependent 5
Indore on availability of 10
participants
Kolkata 10
Pune
Recyclers (if Chennai Face to Face interviews 5
existing) Jamshedpur with Discussion guide 3
Indore 2
Kolkata 5
Pune 5
Regulatory Chennai Face to Face interviews 1
bodies Jamshedpur with Discussion guide 1
Indore 1
Kolkata 1
Pune 1
Pan INDIA 1

Overview of Research Process

Methodology
The study relies on original primary and secondary research. Primary research combined
qualitative and quantitative methods.

18
Quantitative Data

Analysis of the End of Life Vehicles (ELVs) Sector in India The Methodology of the Study
A structured questionnaire was designed and administered to ELV operators to gather
cumulative and comparative data across the five cities about the flow of material linked
to ELVs. For each city, the research team identified the market areas where ELVs are
processed (traded and dismantled for parts sale or recycling), with the help of local
partners. Typically, it was observed that smaller vehicles (scooters, motorcycles, auto
rickshaws and small passenger vehicles) and large or commercial passenger vehicles are
traded and processed in separate markets. A total of 400 disposers across 5 cities were
engaged. A dedicated questionnaire was used to interview an additional 40 traders and
collectors of used parts, to allow a degree of triangulation in data collection as well
as to complete a map of the ELV value chain. The data was analysed using SPSS and
Microsoft Excel.

Qualitative Data
With the support of an in-depth, semi-structured interview guide, qualitative data
was collected across all stakeholders. Key data areas covered were the profession of
the stakeholder, knowledge regarding material resources and their flow in the sector,
perceptions about other stakeholders in the sector and the future of the ELV trade,
including future regulatory frameworks.

Data collection with all stakeholders was done at their respective premises.

Secondary Research
Secondary research was essential to complement primary data, with particular regard
to official data and the policy literature. In many cases — for example for obsolescence
and material flow maps — secondary data was triangulated with survey and in-depth
interview data.

Secondary research on industrial data focused specifically on:

●● Sector trends for sales and registrations of new vehicles, including computation of
obsolescence rates, i.e. is the number of years between a vehicle’s first registration
and its last owner’s decision to dispose it off. Data on vehicle registrations
was collected from official sources, namely the Society of Indian Automobile
Manufactures (SIAM)2 (through www.ceicdata.com), which publishes monthly data on
the sector.
●● Data for vehicle weights was collected from the website of each OEMs. Vehicle
details on company websites list the total weight of the vehicle. The vehicle weight

2 SIAM data is the most reliable source of information on the sector since 2001. Data from June
2001 onwards has been used in computing current obsolescence rates for most types of vehicles.

19
 is important to understand the amount of material that enters the informal sector as
Analysis of the End of Life Vehicles (ELVs) Sector in India The Methodology of the Study

an ELV.
Secondary research was also instrumental to understand how the ELV sector operates in
other countries, including existing policy models.

Methodology for the Calculation of Obsolescence Rates

Obsolescence rates are an average measure of the time a vehicle of a specific category
takes to reach its end of life, irrespective of the number of owners. Specifically, a
vehicle can be describes as going through 3 different lifecycle stages:

●● Active life: a vehicle’s active life is defined by the number of years it can be
effectively used, with its original parts in place.
●● Passive life: the passive life of a vehicle is the additional period the owner carves
out from damaged or worn out vehicles by refurbishing or substituting parts.
●● Storage: Storage is time period where the vehicle is not in use and is waiting to be
dismantled, or awaiting disposal after being dismantled

The obsolescence rate is the sum of these three stages, defined as:

Obsolescence rate3 = Active life + Passive life + Storage

In developing countries that have large informal markets for first and second-hand
vehicles like India, the obsolescence rate of a vehicle (and of vehicle parts) is
comparatively high. A thriving informal market for used parts caters to a large section
of vehicle users, offering more competitive prices than new vehicle parts dealers. In
developed countries, obsolescence rates, for both complete vehicles and parts, are
easier to track. There is a state regulated market for dismantling, disposal and recycling,
and EPR rules bind companies to be responsible for resource recovery. This makes the
inventory process both compulsory and automatic.

In view of the constraints that exist in tracking informal sector transactions and product
movement in India, this study has concentrated on the disposal of fully assembled
vehicles by the final user. Hence, we calculate the obsolescence rate as the time a
vehicle is disposed off for dismantling and/or recycling. The data used for calculating
obsolescence computes the number of vehicles that have been bought and registered by
users in a year, and the number of years that these users operate the vehicle for. Yet, it
is important to understand that the used parts market recovers, refurbishes and reuses
about 70% of the gross weight of a vehicle’s parts.

3 The analogy for obsolescence rate has been derived from a publication on e-waste by UNEP
which can be accessed at link http://www.unep.or.jp/ietc/Publications/spc/EWasteManual_
Vol1.pdf. This document delves in the constraints that exist, in developing countries specifically,
with respect to data availability on parts’ life after they enter the informal market.

20
Data on vehicles bought and registered across categories is available from the Society for

Analysis of the End of Life Vehicles (ELVs) Sector in India The Methodology of the Study
Indian Automobile Manufacturers (SIAM), which publishes data on the sector on a monthly
basis. This study has used SIAM data to compute the total number of vehicles registered
over the last 15 years, disaggregated by category: two wheelers including scooters and
motorcycles, three wheelers, four wheeler including cars and jeeps, commercial goods
vehicles and commercial passenger vehicles.

The reference life span of vehicles by category, instead, was sourced from primary
data collection, survey and structured interviews in particular. Respondents who were
prompted about on this point include:

●● Disposers of vehicles;
●● Traders of vehicles and their parts;
●● Manufacturers, including OEMs and auto component manufacturers;
●● Auto associations;
●● Regional transport offices;
●● State pollution control boards.

Interacting with stakeholders operating at different points of the vehicles value and
supply chains allowed significant triangulation of data. The figures below represent the
average of respondents’ obsolescence rate quotes, with very little standard deviation
across professional categories.

Type of vehicle Obsolescence rate (in years)

Two Wheelers 10
Three Wheelers 15
Private Cars/SUVs 15
Commercial passenger Vehicles 12
Commercial goods vehicles 11

This data describes therefore extremely accurately the average active life of a vehicle,
by category, in India. This methodology also allows simply assuming the relative impact
of different factors affecting obsolescence: handling of the vehicle, terrain in which the
vehicle has operated, servicing of the vehicle and its parts, etc.

To compute total numbers of vehicles reaching obsolescence in 2015, the study cross-
tabulated registration records by year and by category with the obsolescence rate
obtained above. For example, if the average life of a 2 wheeler is 10 years, to arrive
at how many 2 wheelers will reach obsolescence in 2015 we looked at the number of

21
 vehicles within this category that were registered in 2005. Similar computation of all
Analysis of the End of Life Vehicles (ELVs) Sector in India The Methodology of the Study

types of vehicles were mapped to their respective obsolescence rates, with the results
shown below:

Type of vehicle Total ELV count in 2015

Two Wheelers 72,89, 442
Three Wheelers 2,62,439
Private Cars/SUVs 7,21,558
Commercial passenger Vehicles 46,522
Commercial goods vehicles 4,11,230
Total vehicle count likely to be ELV in 2015 87,31,185

The figure below illustrates this methodology.

22
Current Landscape

How Big a Challenge? A Calculation of Obsolescence Rates and

Sector Projections for the Next Decade
Obsolescence describes a state where a product, service or practice finds no more use
for the user, even if still functional. Obsolescence frequently occurs if a replacement is
readily available in the market, or if the repair cost for a product, or its running cost, is
higher than the cost of purchasing a new product.

A note on obsolescence and ELV

The obsolescence rate of a vehicle is the age at which the vehicle will reach ELV
status. This rate depends on many factors. The rate is normally lower in cities
and higher in locations with terrains which are more difficult. Given the focuses
of this study on cities, the estimates on the ELV volume should be considered
conservative, if not perfect.

Vehicle obsolescence is not just influenced by the age of the vehicle, but varies based
on geographical area of operation, the driver, the nature of the parts used and replaced,
and the rate of maintenance of the vehicle. Obsolescence of vehicles varies from one
type of vehicle to another, depending upon their use.

The surveys conducted with disposers and traders of vehicles tried to capture the
obsolescence rates of vehicles currently operating on the national territory. Across the 5
categories of vehicles for which the survey was conducted (commercials goods vehicles,
commercial passenger vehicles, cars, auto rickshaws, and scooters and motorcycles)
obsolescence rates varied, both by category and by city.

23
 The obsolescence rate presented below is the weighted average of the rates reported
Analysis of the End of Life Vehicles (ELVs) Sector in India Current Landscape

for each particular category of vehicle by disposers and traders. Whenever obsolescence
rates differed between disposers and traders, we computed data provided by traders,
based on the fact that they deal with larger volumes of ELVs and can count on a larger
sample.

Type of vehicle Obsolescence rate (in years)

Two Wheelers 10
Three Wheelers 15
Private Cars/SUVs 15
Commercial passenger Vehicles 12
Commercial goods vehicles 11

Obsolescence rates for 5 major categories of vehicles based on our survey

Figure 12: Almost 75% of ELVs are 10 years old or younger. The respondents are ELV traders
who were asked about the age of the vehicles that come to them as ELVs.

24
 Analysis of the End of Life Vehicles (ELVs) Sector in India Current Landscape
Figure 13: Most of the study’s respondents had used their vehicles for more than 7 years
before they disposed it off as an end of life vehicle.

Figure 14: More than 80% of the disposers started using the vehicle as brand new
while the rest had purchased used vehicles which they disposed at end of life.

25
 ELV Generation and Projections
Analysis of the End of Life Vehicles (ELVs) Sector in India Current Landscape

When we look back at the number of vehicles that have been sold in the last decade and
a half, the impact of ELVs and the challenge that it poses becomes clear. The numbers of
vehicles that are likely to be ELVs across India in the year 2015 are:

Type of vehicle Total ELV count in 2015

Two Wheelers 72,89, 442

Three Wheelers 2,62,439

Private Cars/SUVs 7,21,558

Commercial passenger Vehicles 46,522

Commercial goods vehicles 4,11,230

Total vehicle count likely to be ELV in 2015 87,31,185

Figure 15: Number of vehicles reaching obsolescence in 2015

When we project this number for all of India on a 10-year horizon, the figures we obtain
show the magnitude of the challenge facing the country:

Type of vehicle Total ELV count in 2025

Two Wheelers 1,77,23,951

Three Wheelers 7,57,932

Private Cars/SUVs 28,09,966

Commercial passenger Vehicles 94,757

Commercial goods vehicles 11,88,833

Total vehicle count likely to be ELV in 2025 2,18,95,439

Figure 16: Number of vehicles reaching obsolescence in 2025

The ELV count - across all segments — is projected to show a steep growth, as depicted
below.

26
 Analysis of the End of Life Vehicles (ELVs) Sector in India Current Landscape
Figure 17: Growth of ELV across the next decade

If this picture is alarming, it is imperative to understand what is working, and what

needs attention, in the ELV sector today, to be able to plan the ELV sector of tomorrow.

Trade Chains and Material Flow in the ELV Sector in India

Informal sector operators across the 5 cities covered during the course of the study
showed a deep technical knowledge of the use and reuse of ELV parts. The trading
and use of ELV parts has existed for generations, across the country. Today’s traders
have learnt the business from their forefathers, and applied their knowledge to
changing circumstances. The sector is built on relationships between traders, and
on the reputation that each one created for themselves. As the automobile industry
grew and more people became able to afford a vehicle, the trade has also become
more competitive, especially in the 2-wheeler and small 4-wheeler segment. For the
commercial goods and commercial passenger transport segments, large transport
companies still rely on a network of informal traders with whom they entertain
generation-old collaborations.

27
Analysis of the End of Life Vehicles (ELVs) Sector in India Current Landscape

Figure 18: The graph above indicates that over 80% of ELV traders have been involved in this business
for more than a decade. For at least half of the traders surveyed, the business is being passed to a 2nd
generation of owners.

Figure 19: The graph above suggests the existence of very dense network in the ELV trade.
Agents working across different cities in the country exchange information regarding ELVs.

Formal and informal interactions were instrumental to trace the lifecycle of different
parts and the key actors who are involved in trading them. A significant feature of the
sector is that trading and sourcing platforms have developed over decades in most cities,
and operators in one city are connected to counterparts across the country.

These links support a highly materially efficient trade loop between manufacturers and
consumers, channelling valuable resources back into the manufacturing systems once
their value as products, or as parts, is fully exhausted – but long after they entered the
consumer market as new vehicles.

28
 Analysis of the End of Life Vehicles (ELVs) Sector in India Current Landscape
Figure 20: More than 80% of disposers in the large metropolitan cities are satisfied with
the value that they derived from disposing off their vehicle.

Figure 21: Disposers of vehicle believe that recycling and reusing of parts is
more resource efficient than any other form of disposal of the vehicle.

29
Analysis of the End of Life Vehicles (ELVs) Sector in India Current Landscape

Figure 22: The ELV sector circular value chain

Most importantly, at each point in the chain value is created. The chain starts when
an OEM sells a vehicle to the distributor. The distributor then sells the same vehicle
to a consumer. The consumer runs the vehicle till it reaches its end of life (EoL) point.
Through this cycle,
Key factors in the value creation in the automotive several interactions take
sector that are enabled by the existence of the ELV place between consumers
sector are: and used parts traders
or service stations. Value
●● Usage of vehicles: Commercial vehicles are is created through each
usually overloaded, run beyond their capacity of these transactions,
so chances of reusing their parts diminish. In in a way that is directly
comparison, private vehicle and commercial proportional to the
passenger vehicle parts can be reused to a age of the vehicle. As
greater extent. the vehicle reaches
●● Trends in market rates: selling prices are nearly
obsolescence and these
fixed and common knowledge to ELV traders, transactions increase in
but fluctuations can reduce significantly profit frequency, the consumer
margins. disposes off the vehicle
to either the used parts
●● Maintenance: 75% of the parts of a vehicle which
trader, or to a scrap
has received high-quality maintenance can be
trader. Then a reverse
reused.
movement of parts

30
starts, with other consumers purchasing and selling specific parts until parts too reach

Analysis of the End of Life Vehicles (ELVs) Sector in India Current Landscape
obsolescence. Finally, parts are scrapped and converted into secondary raw material that
will be traded to Auto Component manufacturers, completing the cycle.

Figure 23: Almost 30% of the vehicles are procured directly from disposers.
Auctions also are an important sourcing platform of vehicles for large traders.
There is also a thriving market of agents that ensure that there is a constant supply for dismantling.

Pivotal to the ELV part trade in India, in terms of demand and price levels, is the
Mayapuri market of Delhi. Mayapuri is notoriously the largest ELV market in India as
well as the SAARC region for ELV parts.
Traders and users from different countries
come and visit this market to purchase OEMs which auction rejects at
parts in bulk or retail. This is a market manufacturing are also procured
that can count of significant liquidity and by traders from Mayapuri and
large traders and dismantlers participate are sold off on demand from
regularly in auctions across the country. different areas across the
Across all cities surveyed, traders stated country. A large number of these
that they would interact with at least one parts are refurbished as well in
large trader from Mayapuri on a monthly the area.
basis. The country-wide integration of this
trade is essential for smaller and more
peripheral traders, whose market access and customer base would otherwise be limited
to high-demand, high-value parts.

31
Analysis of the End of Life Vehicles (ELVs) Sector in India Current Landscape

Traders purchase Disposers give

from Mayapuri their vehicles
in case of away to
demand for a informal sector
part in their city dismantlers

Bulk demand is Dismantlers sell

generated at used parts to
Mayapuri in traders and the
Delhi (Vehicle sale rest of the
material to
Market for used
scrap dealers
parts)

Used parts
traders sell to
vehicle users
and mechanics

The large informal sector that runs the market is

highly specialised: there are traders who deal in
engines, while other deal only in gear systems and
differentials; some traders deal in tyres and some
deal in wheel rims. Finally, some deal in other
ferrous body parts, which are refurbished and sold
in retail shops. Parts that are sold as scrap and
parts that are treated as waste, also have dedicated
markets. The most visible of these is the trading of
used oils extracted from the vehicles and then sold
to waste oil traders.

Engines
Across the 5 cities, the trade of engines and engine
parts follows a similar pattern. Demand for engines,
however, varies: for example, engine parts traders
in Kolkata enjoy a proximity to Bangladesh and
benefit form a regular demand for engines for
commercial goods and passenger vehicles. Almost
every month a large trader from Bangladesh visits
Phoolbagan market in Kolkata, and often parts are
sourced from Chennai or Mayapuri to meet this Figure 24: Commercial and
non-commercial material flows
trans-border demand.
emanating form an ELV

32
Engines are sold either in compact form or in parts. The parts of an engine with the

Analysis of the End of Life Vehicles (ELVs) Sector in India Current Landscape
highest commercial value are the head, the valves, the pistons and pinions. These are
‘slow moving’ items — that is items with an inventory period longer than average — and
hence traders require larger access to liquid capital to enter this segment. Profit margins
in the trade of engines are very significant, and can go up to 50%. Markets in Kolkata and
Chennai are fast moving in this segment — with a higher demand for parts than in other
parts of the country, while secondary markets like the one in Jamshedpur depend upon
the larger markets (like Panagarh and the Kolkata area, in this case) for orders.

The engine market of Indore depends on Delhi and a limited local demand, with a lower
rate of trading. Large traders have to stock up to meet orders from Delhi. The market in
Pune, instead, depends on Mumbai and Ahmedabad, which are larger markets that source
parts from surrounding regions to meet shortfalls in supply. In some cases, as is the case
of Jamshedpur, engines are not sold but exchanged. The buyer pays a nominal price for
purchasing a used engine and cedes the original one, which is either refurbished or sold
as scrap by the trader.

The trade of engines in smaller vehicles also follows a similar pattern, but unlike large
traders of engines for commercial vehicles, this is typically a business line for small
traders. The profit margin for engines of smaller vehicles is lower, and so is the demand.
The normal holding time for an engine is as long as 12 months, after which it is broken
down into ferrous and non-ferrous components and sold as scrap to traders who in turn
supply it to rolling mills in nearby areas, in every city.

Engines from large commercial vehicles are also used as generators in rural areas, while
engines of smaller vehicles are often used to draw ground water for irrigation. In some
cases they can also be used to motorise small rickshaws that are employed to transport
grains between villages and local markets.

Gear Systems and Differentials

The gear systems and differentials business for commercial goods and passenger vehicles
is normally in the hands of large traders who have the space to store these parts. These
parts are mostly refurbished and then sold as used spares, and only very rarely sold as
scrap.

Unlike engines, the gear parts and differentials trade always operates at a local scale.
Very few customers, other than in the case of accidents, look for the entire system at
once. Accordingly, these are normally broken down into gearbox, shaft, differential and
axle, before being sold.

Since these parts are ferrous in composition, in case there is any defect, which cannot be
fixed, gears and differentials are sold to scrap traders and find their way to rolling mills
in the vicinity, where they are used to manufacture girders for the construction industry.

33
 In case of smaller vehicles, innovative techniques have been devised for reusing these
Analysis of the End of Life Vehicles (ELVs) Sector in India Current Landscape

parts. Gears from scooters and motorcycles (and even from auto rickshaws) find their
way into rural areas where they are used to motorise smaller vehicles used for local
transportation of grains and other goods.

Chassis
This is one of the heaviest parts of a commercial vehicle. Indeed, the entire weight of
the vehicle rests of the chassis and this is one part that — according to the traders we
interacted with - has the lowest obsolescence rate. Chassis have been known to last as
long as 50 years, resisting use in multiple vehicles during their life.

The demand for chassis, however, has dipped over the last 10 years. The traders blame
primarily the newer designs, but also the use of far stronger metal alloys than before.

The chassis of military vehicles are in particularly high demand: in reason of their
limited use, they are treated as almost new.

Ingenious ways to reuse chassis have also created a market for them in rural areas.
Tractor trolleys, which are used to transport grains or passengers in rural areas, are
typically built on chassis which has been extracted from a commercial ELV.

Smaller vehicles, except SUVs and large sedans, do not have a chassis, and the structural
component of these vehicles is simply sold as scrap.

Other Ferrous and Non-Ferrous Materials

Commercial goods or passenger vehicles have a large number of parts which are non
ferrous in nature. Tin plates, for example, are used for the outer body of the vehicle. In
case these have not been sheared in accidents, they are used in other vehicles and only
later they are sold as scrap.

The item in highest demand are however bumpers and vehicle doors. Smaller traders are
normally engaged in this segment. The supply comes from auctions of older vehicles,
auctions conducted by insurance companies and auctions conducted by service stations.

Rims of Wheels
Wheel rims represent a separate category because they are at the centre of a very
fast trade. Typically, once a vehicle is dismantled, a trader who deals in the rims
separates the tyre from the rims and refurbishes it to sell it in on the local market on
the same day.

34
Electronic Components

Analysis of the End of Life Vehicles (ELVs) Sector in India Current Landscape
Electronic components are normally sold as scrap. Large traders of commercial goods
and passenger vehicles try to sell electronic components to scrap traders, who then
extract copper and other precious metals from them, often by burning them.

In very few cases in Kolkata and Chennai, it was observed that the traders have
shredding machines that separate the copper from the wires (in these cases, the rubber
is then sold as scrap).

Fuses in newer vehicles, instead, are treated as waste: they are either dumped with
municipal solid waste or abandoned along highways. Fuses from small vehicles meet the
same fate, except for a few which are reused.

Tyres
Tyres represent a major source of rubber, and are converted for multiple uses. The most
common use for tyres across all cities is as a spare in running vehicle — depending on the
conditions of the piece. While in Kolkata, Chennai, Pune and Indore spare tyres are sold,
in Jamshedpur they are also rented out to vehicle owners.

In Jamshedpur and Chennai (especially in the urban outskirts), tyres are used as a fuel
for melting tar for road construction. In Indore, oil is extracted from tyres through
pyrolysis process, and then sold on the market as fuel. In some cases, carbon black, a
by-product of pyrolysis with very low calorific value, is used for paving roads in rural
areas.

ELV Waste
Broken tempered glass, seat covers and foam, glass wool and rubber piping for windows
of an ELV are treated as waste. These are usually disposed off or dumped. While this was
not the case in any other city, Chennai traders stated that they pay a waste collector
to collect all these parts and dump them at landfills. Traders in Jamshedpur reported
instead that many throw this material at night, in dustbins meant for MSW collection.

35
Analysis of the End of Life Vehicles (ELVs) Sector in India Current Landscape

Figure 25: Glass and rubber are the 2 components most often cited as non-reusable.
Disposal practices for these parts have not been regulated yet.

Figure 26: Amajority of respondents stated that glass wool cannot be reused or recycled.
It is treated as waste and is either thrown with Municipal sold waste or disposed off along highways.

36
Profits from Trading of Parts

Analysis of the End of Life Vehicles (ELVs) Sector in India Current Landscape
Figure 27: Highprofit margins are a driving force for newcomers in the ELV sector.

Any vehicle is a sum of its parts. There are close to 3,000 components in a vehicle, and
each is manufactured based on the sought durability and prescribed safety standards.

Over decades, used parts traders have become specialists in using and reusing these
resources to a maximum. Whenever a vehicle reaches ELV status, there are parts, which
are in working condition, whether because they have not been used long enough, or
because they have been recently replaced. These parts are extracted and retailed by
specialised traders at a premium.

The study computed data on the profit margins for main ELV parts traded in the informal
sector currently. The graph below illustrates these rates:

Figure 28: Profits are the highest from engine trading

37
 The parts mentioned above are normally metallic, ferrous or otherwise. Beyond these
Analysis of the End of Life Vehicles (ELVs) Sector in India Current Landscape

materials, there are several parts that are extracted from vehicles like plastics, rubber
and wood — almost all find a market.

A used tyre dealer normally makes a profit of 15-20% while someone dealing in plastics
makes a margin of close to 15%. End users of wood normally make door panels from
the material that is extracted and end up making margins between 30% and 40%. The
remainder is sold as fuel.

Figure 29: A large number of traders likes to work in the commercial goods and passenger vehicle
segment because the margins are very high and the shelf life of the used parts is short.

Unused Parts: Toxic

An ELV contains also parts and substances that are toxic or highly polluting. These
include asbestos found in brake pads and any of the oil used in the engine, gears,
brakes, etc. Batteries also contain toxic acid that can be a potent water pollutant if not
disposed properly.

State and central pollution control boards are in charge of implementing rules, which
take care of a large number of toxic substances coming from ELVs. These include the
Battery Management rules, Waste Oil Management rules and all regulations pertaining to
hazardous substances and waste.

Waste oil management rules, for one, are implemented strictly by the Pollution Control
Boards. Vendors are required to obtain and renew their oil refining licence yearly, and in
some states audits of waste oil recycling take place every six months.

38
 Analysis of the End of Life Vehicles (ELVs) Sector in India Current Landscape
Fluid Disposal mode Reuse end
Engine Oil Sold As grease in machines
Transmission Drained
Coolant Fluid Drained
Power steering Sold Used as grease in machines
Brake Fluid Drained
Hydraulic Fluid Drained
Diesel Sold In machines, agricultural pumps, grass cutter.

Figure 30: What happens to vehicle fluids?

The enforcement of the Battery Management and Handling Rules 2001 has been found to
be lax in the areas where the study was conducted. Toxic battery water is systematically
drained to reduce the weight of the battery before they are sold to recyclers. Recyclers
demand that this be done so that their costs are decreased — recycling the toxic acid is
in fact a separate process.

Sellers of batteries from ELVs include mechanic/dismantler/service stations, and buyers

are typically only authorized recyclers.

The sector still does not have any way to neutralise or extract any value from asbestos,
and it is usually dumped either with municipal solid waste or alongside highways. The
only exception seems to be Chennai, where the Municipality implements the rules
strictly and requires traders to hire vehicles to transport any hazardous waste to
designated landfill areas.

Unused Parts: Waste

Each part of an ELV has its own market value, a demand and a supply. There are however
parts which have no market because they cannot be reused. These include: coil wire,
fan belts, fog lamps, glass wool, bolts, foam, rubber, seat covers, small pipes, electronic
components, wires (either plastic or rubber), oil and air filters, and clutch plates. The
body of air or oil filters body, catalytic convertor, carburettor, brakes and clutch plate
are reused only if in good condition, else they join the list of ELV components that are
simply disposed off as waste.

These small items make their way to some corner of the dismantling yard, only to be
later dumped or disposed in landfills, or often simply alongside highways.

39
 How is the Indian ELV Landscape Changing According to Key
Analysis of the End of Life Vehicles (ELVs) Sector in India Current Landscape

Stakeholders?
Markets across different places have evolved in their use of materials over time. Delving
into the history of these markets suggests that traders have been handing knowledge of
the work across generations, through family businesses.

The ever-increasing size of the automobile industry has however started to take a toll
on the infrastructure that is available for these recyclers. Land availability has become
a major issue in cities like Kolkata, Pune and Chennai. The varying availability of labour
and its rising cost is another issue that these traders have to deal with on a regular
basis. Smaller cities like Jamshedpur and Indore have been able to offset land issues by
allocating areas like Transport Nagar in Indore and a stretch on NH-33 in Jamshedpur for
these activities. However, these once peripheral areas are now being integrated in the
quickly expanding urban fabric.

Over the last 10 years, the automotive industry has developed considerably, and the
ELV sector has had to adapt and catch-up, also in terms of technology. Smaller markets
like Indore, Jamshedpur and Pune are today on the verge of closing down, if it were not
for their integration within the larger national ELV market driven by Mayapuri in Delhi.
Many large players have either moved to different businesses altogether, or have started
selling branded spares. With margins decreasing dramatically, in these cities only large
players still have hopes of survival.

Chennai and Kolkata are still flourishing primarily because of their capacity to trade in
bulk with Bangladesh or with the Mayapuri market in Delhi. The sustainability of these
markets will however be tested over the next few years when the used parts trade is
likely to dwindle due to changes in design of vehicles and new challenges in refurbishing
parts. The existing ELV material flow is likely to take a new route from the disposer
directly to the scrap trader, and used parts traders may have to find a new space for
themselves, decreasing the material efficiency of the whole sector. Capacity building for
this sector is a huge priority, particularly if the goal is to increase resource efficiency of
the automobile industry.

Over the last 10 years, vehicle obsolescence rates have also started to be defined by law,
and civic authorities within city boundaries have implemented stricter rules. In Chennai,
for example, state buses and other goods and transport vehicles are currently issued
permits to run only for 8 years – compared to 15 years earlier. Once the permit expires,
they are either dismantled or sold off through auctions. Many of these vehicles, however,
change registration numbers and start operating in rural areas.

40
 OEMs have also designed warranties

Analysis of the End of Life Vehicles (ELVs) Sector in India Current Landscape
for parts for up to 3 years, and the
emergence of authorised service stations
further reduced the volumes of the
trade. OEMs do not sell used parts
in the ELV market, but scrap it. The
product then finds its way into rolling
mills where it is converted into girders
for the construction industry. The
major implication of these changes is a
Figure 31: ELV trade stakeholders predict that
in the future a growing portion of ELVs will be depression of the ELV parts market across
sold for scrap, because of technological changes the country.
in the vehicles manufacturing process itself.
The number of vehicles becoming
obsolete today is 4 times as high as 15 years ago. Capacities, however, have not
been built systematically during this period and the sector is still extremely labour
intensive. Policy frameworks have set barriers for the very few formal ELV operators
and, in the informal sector, material efficiency is being lost because much material is
now being scrapped rather than reused.

The Informal Recycler

The informal sector has played for decades an invaluable role in managing ELVs,
extracting value through their work from materials whose disposal poses only costs to
public authorities or private consumers. Till the early 2000s, these actors managed
to carve an economic sector that exploited the automobile industry’s resource-heavy
production processes. The accumulation of knowledge thrived thanks to a family
businesses model, turning reuse and recycling practices into a profitable economic
sector. In the last two decades, however, the opening of the Indian market for FDI, a
spiralling demand for private vehicles, and government support to the industry, has
impacted deeply the ELV landscape. The sector still manages the piling ELVs for the
major part, but new actors have been interested in entering the market in one way
or another. A move such as that of the redesign by OEMs of commercial goods and
passenger vehicles resulted in hundreds of engines, gears and differentials loosing
their market as second-hand parts, and being sold by weight as scrap.

Labour has been another critical issue for the sector. Earlier, inter and intra-state
migrations provided an easy source of cheap labour for ELV traders, guaranteeing
margins that would drive the growth of the business. Later, and particularly from 2008,
an increase in wages combined with falling rates for scrap starting squeezing traders’
profits. Many large traders today feel that, unlike earlier, their only capital are the
parts they often sell as scrap to keep the business running, including often to buy new
parts.

41
 Operationally, these issues are combined with a little interest of authorities in the
Analysis of the End of Life Vehicles (ELVs) Sector in India Current Landscape

sector, except at the level of local policeman who systematically demand a cut from the
business. Public authorities have also not engaged at any significant length the need to
build the sector’s capacities, including in terms of occupational health.

On the legal front, there are

multiple issues. The commercial
value of ELVs naturally precedes
any other consideration for the
informal sector. Many believe that
their work should be recognized,
as has been the case for other
sub-sectors of India’s recycling
industry. Moreover, in just three
decades their physical location
within the urban fabric has shifted
from the outskirts to residential
and business areas. A general Figure 32: Lack of space is the major obstacle towards
space crunch in Indian cities is business expansion. Limited access to business finance is
also a concern, and a direct implication of that of legal
affecting the volume of business,
recognition of the sector.
particularly by increasing costs.

Recognising the sector through an appropriate

policy framework is urgent. Considering the growth
of the automotive industry and shrinking legal
obsolescence term, the economic and material
management functions played by this sector are
only going to become more central to the economy
and the environment. Not only does the informal
sector need space to work, but also access to
capacities and financial tools to thrive again.

The traders believe that newer models coming into

the business with high manufacturing standards
will help them going forward. This is primarily Figure 33: 70% of the traders face issues
because knowledge will be universal and will be with the police and municipal staff.
shared amongst peers. Sturdy materials will also This is a major source of reputational
hazard for the sector, and contributes to
lead to higher prices for reused products because impacting negatively the business.
obsolescence rates of the parts will reduce and
even vehicles with higher vintage will command a
higher price at the dismantling stage.

42
The traders also believe that legalising the trade of used parts will actually help them

Analysis of the End of Life Vehicles (ELVs) Sector in India Current Landscape
since the OEMs could become their customers. These actors are confident that the supply
of used parts and obsolete vehicles for dismantling will only increase after the trade is
legalised.

Figure 34: The ELV trade is facing a tough competition from non-branded low-cost vehicle parts
imported from China. More than 70% of the traders stated that demand for parts has decreased
over the last 4-5 years. They believe that legalising the trade of reused parts will provide an
enormous push to the sector. Furthermore, formalisation of the informal sector will also help the
sector to get rid of daily administrative issues.

The Formal Recycler

ELV recycling as a business opportunity has yet to be explored by the formal sector. The
existence of a legal and regulatory framework will be instrumental in this sense, as it
has been the case for other value chains.

Other initiatives have had limited success. In 2006 the government has set up a facility
at GARC, close to Chennai (NATRIP), to conduct research specifically on ELV dismantling.
A number of vehicles have been provided by the OEMs to initiate research, but outputs
have been disappointing.

The government has no clear implementation procedures for de-registering a vehicle.

Without de-registration, no vehicle can qualify as an ELV, and unless it is declared so,
it cannot be traded as scrap according to the Motor Vehicles Act 1956 and successive
amendments. This poses an insurmountable obstacle to the few formal recyclers in the
ELV industry.

43
 Currently, registration and de-registration are still a localised process: a vehicle has
Analysis of the End of Life Vehicles (ELVs) Sector in India Current Landscape

been registered under a RTO, can only be de-registered by the same RTO. This makes
legal access to ELVs difficult and often also expensive.

De-registration is also not (yet) a standard process. Different RTOs have different
processes, including in some cases 6-months procedure that involve multiple taxations
and insurance, or aprovision that RTOs cut the chassis number and deposits it with local
court to declare a vehicle an ELV.

The formal sector can access mainstream finance tools, but cannot operate outside of a
regulatory framework. Also, it has to compete with the informal sector for ELVs and has
to learn how to maximise its use of resources.

Figure 35: About 80% of the respondents feel that there are no monopolistic attitudes
among larger traders in this business. They feel that since the larger players have
higher operating costs, the price that they set helps the smaller players to maximise their profits.

The OEMs
OEMs are the drivers of the automobile industry, contributing in very significant measure
to the growth of the national economy. Thousands of jobs have been created over
the last 15 years, pushing the demand for consumer goods to unprecedented levels.
Consumerism has brought the issues of waste to the forefront. While policies have
been drafted taking cognisance of different types of waste that pose a problem at the
moment, an urgent look is needed into the waste that will pose a challenge in the future
too, like that from ELVs.

44
Extended Producer Responsibility has been flagged many times during the last decade.

Analysis of the End of Life Vehicles (ELVs) Sector in India Current Landscape
According to the law, the principle makes the producer responsible for the goods it
manufactures till the end of their life, including their post-consumer handling. EPR
prescribes that the costs of managing post-consumer resources be built in the cost of the
product itself, sharing the burden between the consumer and the law and embrace this
responsibility.

In particular, OEMs have argued — often off the record - that they only assemble the
vehicles, and hence are not responsible for the original materials. In turn, component
manufacturers say that they produce based on the specifications set by OEMs, and hence
they are not solely responsible. The OEMs however are also of the view that if they were
allowed to trade used parts, they might change their take on EPR.

It remains to be seen what resource efficiency EPR allows. EPR models being
implemented in Europe offer varying degree of success and flexibility, with implications
for their material efficiency. To ensure that the ELV sector survives in India, while
consumerism, demand and growth are not sacrificed, it is important that a robust policy
framework make all stakeholders accountable for their actions, proportionally to their
role in the economic chain of the automotive sector.

Occupational Health and Safety Challenges in the ELV Sector

In India, ELVs are almost entirely processed in the informal sector. Despite being known
for one of the highest rates of recycling in the world,4 jobs in the informal sector are
normally precarious and insecure; they thrive
in hazardous or unhealthy environments, and
they cannot rely on formal health assistance or
safety nets.5 This makes informal sector workers
systematically more vulnerable to environmental
and health challenges. Some of the implications of
the sector are elaborated below.

Workers
ELV workers are no different from their counterparts
working in comparable conditions in other resource
recovery streams. They lack systematically access Figure 36: More than 70% of those
in the used parts trade are aware
to basic health and welfare services, and work in that there are waste streams
an unhealthy and unsafe working environment. associated with the dismantling of a
62% of respondents to this study reported that vehicle. These waste streams contain
hazardous wastes as well as those for
the cuts and bruises happen on a daily basis. 17% which no provisions for disposal exist.

4 Cooling Agents, Safai Sena, The Advocacy Project & Chintan 2009
5 Recovering resources, creating opportunities, GIZ, 2011

45
 of the respondents agreed that when waste is burnt, the fumes from the same are
Analysis of the End of Life Vehicles (ELVs) Sector in India Current Landscape

“unbearable”. 24% of respondents agreed that they suffer from skin diseases because
they are in constant touch with chemical substances. 17% of respondents agreed that
they are troubled with frequent stomach ailments. A quarter of the respondents suffered
from skin diseases and 10% reported breathing difficulties linked to inhaling chemical
fumes.

The infrastructure where they operate is often rundown, and in many cases the lack of
space forces them to operate from roadsides, with a consequent lack of access to basic
sanitation and potable water. Less than 10% of respondents we interacted with used
protective equipment and contact with hazardous substances and dusts was routine.
Most of the workers, especially unskilled labourers, work more than 12 hours in a row.
The working conditions of ELV operators present overall a higher exposure to health
hazards, particularly on the workplace, and poor access to health services, inside and
outside the workplace.

Figure 37: About 90% of the respondents are Figure 38: About 90% of the respondents
unaware of the environmental hazards associated believe that the work is not harmful for
with dismantling an ELV and trading its parts. them or physically stressful.
The driving force behind the trade is economic.

Impact of ELV Trade on Nearby Areas

Field exposures to ELV markets in the 5 automotive hubs point to high ecological and
environmental risks. Toxic liquid waste (like engine oil and battery water) are dispersed
in the environment, even when — as is the case of engines — the aim of ELV operators is
to recover it. In Chennai’s Pudupet market, the practice of discharging battery water in
public drains was observed to be systematic.

46
Broken tempered glass, seat covers and foams, glass wool and rubber parts on windows

Analysis of the End of Life Vehicles (ELVs) Sector in India Current Landscape
are treated as waste from a dismantled vehicle. Chennai traders stated that they pay
a waste collector to collect the same and dump it in landfills, and in no city these
materials are sold. Traders in Jamshedpur reported dumping this waste in MSW bins
during the night.

The implications of these practices in terms of environmental impact — ground water

and soil pollution in particular — are still largely under appreciated, and more research
is urgently needed to quantify and qualify the threat it poses for local communities of
residents.

Figure 39: 90% feel that they have no need for training.

47
Analysis of the End of Life Vehicles (ELVs) Sector in India Current Landscape

Figure 40: 62% of respondents admit that cuts and bruises happen on a daily basis.

48
5 Major ELV Hubs in India

In this section, we give a bird’s eye view of the ELV sector in each of the 5 cities the
study explored, based on structured and unstructured interactions with ELV operators.

Chennai
There are 2 hotspots for informal sector ELV recycling in the city of Chennai: Boarder
Thottam, where a majority of goods and passenger vehicles are dismantled, and
Pudupet, which is the hotspot for dismantling 2-wheelers and 3-wheelers. Both markets
are marked in the map below.

ELV hotspots in Chennai

49
 Further, Chennai houses a government facility dedicated to cars and specifically ELVs, the
Analysis of the End of Life Vehicles (ELVs) Sector in India 5 Major ELV Hubs in India

Global Automotive Research Centre (GARC), which in turn hosts the National Automotive
Testing and R&D Infrastructure Project (NATRiP). This facility was set up in 2006 in
collaboration with the manufacturers to enable the study of ELV recycling. The facility
has till date been able to dismantle 85 vehicles which were primarily provided by
manufacturers. The centre also conducts tests for new vehicles, including for design
purposes.

Boarder Thottam
Boarder Thottam is a 50 year old market located within a residential area, two
kilometres away from a newly built state government multi-specialty hospital, and
behind the landmark LIC building on Mount road. Vehicles are dismantled in large sheds
and their parts sold on the same premises. Vehicles of various types find their way to this
market, but Boarder Thottam is known as Chennai’s major hub of commercial goods and
passenger vehicle parts. Some of the specialty items found here include tyres in bulk and
Ashok Leyland Wheel discs and engines, for which traders come from as far as Mayapuri
in New Delhi.

The market features around 500 shops distributed along five streets, hosting more
than 600 ELV operators — dismantler, used parts trader, used parts re-furbisher and in
some cases large mechanics. An additional 1,500 labourers work in the market. Large
workshops dismantle about 4 to 5 vehicles daily. The price of vehicles is set according to
market rates, and varies depending upon the age of the vehicle and a cursory assessment
of the value of its parts, with the typical margins being in the range of 15-20%, once all
viable parts are sold. Vehicles that arrive to the market after an accident typically offer
higher profits based on the abundance of re-sellable parts, with margins of up to 50%.

The market also receives vehicles from finance companies that recover unpaid credits by
impounding vehicles. A number of vehicles are however also sourced through informal,
and illegal, channels, as in the case of vehicles impounded by moneylenders. Some
of the traders described a system of dedicated night auctions whose purpose is the
immediate dismantling of vehicles and the sale of parts to traders before the owner has
the opportunity to file a complaint with the police. These episodes were cited as one of
the most significant levers of police harassment of market operators – irrespective of the
validity of the allegations.

ELVs come to this market from both within and outside the city. Some dismantlers based
in Boarder Thottam also compete for government tenders for ELV public busses, which
usually take place during February and March every year. In this case, the dismantling of
buses is done in the outskirts of Chennai, close to bus depots.

The day of buyers and sellers of ELVs and second-hand parts starts early in the morning.
Typically, vehicle dismantling begins at 4 am and finishes by 10 am, before the
temperature rises. Information regarding which vehicles are being dismantled spread

50
through informal networks, mostly by word of mouth, attracting specialised second-hand

Analysis of the End of Life Vehicles (ELVs) Sector in India 5 Major ELV Hubs in India
parts traders who negotiate the sale of each part separately. Auctions are informal in nature
but generally transparent, with the highest bidder winning the lot on offer.

Labourers are paid by vehicle: Rs. 1,000 to dismantle a jeep and between Rs. 2,500 to
Rs. 3,000 to dismantle a truck. Usually, 4-5 labourers are required to dismantle a truck.
Some skilled labourers to work faster use gas cutters. The dismantler usually provides gas
cylinders.

Hazardous waste like used engine oil is sold for Rs. 25 to Rs. 30 a litre. Unlike other cities
the study explored, however, in Chennai it is usually sold to construction companies, who
use it to lubricate wooden plates used to shape cement roofs in new buildings. Battery
liquids are drained before batteries are sold to authorised battery recyclers.

Iron scrap was sold at Rs. 23 per kg, Aluminium scrap at Rs. 110 per kg and copper scrap
for between Rs. 250 to Rs. 300 per kg during the visit, but the price of metals fluctuates
according to market prices.

Any vehicle that reaches the market for dismantling with complete paperwork is first
assessed for re-furbishing, and at times sold as a functioning second-hand vehicle once a
few parts have been fixed or changed. This presents advantages in terms of cash flow in the
short term for traders. However, dismantling and selling parts remains a more profitable
activity.

Pudupet
The Pudupet ELV market is situated about 2 Kms away from Boarder Thottam. This market
primarily deals in smaller vehicles, including 2-wheelers, 3-wheelers and 4-wheel passenger
vehicles, but small trucks are also occasionally dismantled. Like Boarder Thottam, Pudpet is
over four decades old.

Pudpet counts 458 establishments and on an average 90 ELVs handled every day. The total
number of people involved in the ELV business at this location is around 2000.

Any single dismantler works on about 50 vehicles every month. The business has increased
over the years, in line with the growing demand for personal passenger vehicles. The
market has a strategic position within the city and is easily accessible for customers in
search of spare parts. Talks regarding a possible move to Chennai’s Auto Nagar (50kms
outside the city centre) are not well taken by market operators, who fear loosing direct
access to their customer base.

Many of Pudpet’s traders source vehicles through auctions for dismantling, and a number of
them are mechanics who also trade, leveraging their skills to re-furbish used parts to sell
them without recurring to intermediaries. Hazardous waste (used engine oil in particular)
is stored in drums and then sold off to authorised recyclers. Batteries are drained in local
sewers to reduce the weight of the battery before they are sold off to recyclers.

51
 The dismantlers provide gas cutters to the labourers to increase the dismantling turn-
Analysis of the End of Life Vehicles (ELVs) Sector in India 5 Major ELV Hubs in India

around. The labour employed is usually made up of waged employees, and very few
shops employ daily labourers for such activities in the area.

Chandra and Babu: Vehicle seat covers sellers

“My husband Babu and I started our business here in 1960, when we came from
Andhra Pradesh. At that time our business was very small and our investment
was of about Rs. 2000-3000 in total. Babu also sold chicken for a living then,”
recollects Chandra who is now 57 years old. Babu is now 77 years of age today.
“When business started the scenario was very different, our turnover was small
as we had to make seat covers by hand. We could only sell 2 or 3 seat covers in
a month then. Now everything is ready made and we sell between 5 and 10 seat
covers per day.” Chandra is confident that an increase in the range and brands of
vehicles has boosted the demand for seat covers, and their business. Yet, Babu
still describes his business as a “family business: my wife manages the finances
and our son runs the business. And we are doing very well”, with a financial
turnover in the range of Rs. 50 to 80 thousand per month. Their only concern
is dealing whith the police, who reportedly regularly visit the shop to help
themselves to seat covers, without paying.

J Mohammad Ali of Pudupet

Ali was a laborer at a mechanic shop in Myanmar, from where his father brought
him to Pudupet as a teenager in 1985, after moving there himself in 1980.
Ali's family is originally from Ramanathampuram, where they were agricultural
labourers and into the salt business. Ali's father came back to Chennai as part of
the larger flow of Indian migrants to Myanmar who moved to Pudupet in those
same years, where they were given a plot of land.

Ali says that the business is still good at Pudupet. He can make a profit of 40%
from his business, 4-wheel ELV being the segment with highest returns. There is no
business without investment, however: a lorry for Gujarat costs about Rs. 5 lakh.
A group of traders which Ali has joined created a informal shared cash pool, with
monthly conributions of Rs. 50,000. Members borrow the money whenever they
need. Ali would like to be able to access some government-sponsored financial
support for his business.

Ali says not to be interested in shifting to Auto Nagar. According to him the
demand to shift comes only from the large vehicles auto unions, for whom it
would make sense. For smaller dealers like Ali, the shift would involve the risk of
loosing many of his clients.

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 Analysis of the End of Life Vehicles (ELVs) Sector in India 5 Major ELV Hubs in India
Paneerselvam: Spare part dealer

“I have heard that the automobile part market here started in the 1960s.
However, my father brought me here in 1979. My father was here from 1968 ,”
mentions Paneerselvam. “In those days the market was small and there were
less than 10 people working here. Now there are about 458 establishments and
at any given moment about 92 ELVs are being handled,” he adds. Paneerselvam
dismantles about 50 vehicles a month. Thinking about the past, Paneerselvam
notices that people now tend to change vehicles very fast, “like they do with
mobile phones”. Also, new rules on maximum mileage contribute to bringing
about 80 new vehicles at the market every day and so are 5-year depreciation
rules and 3rd party insurances, particularly for parts. Customer, according to
Paneerselvam, still like coming to Pudupet marketbecause they can find single
spare parts: “if you need a car door handle the shop will sell 4 pieces, but from us
you can buy exactly what you need”. Yet, he believes that his work is beneficial
and appreciated by large companies like Hindustan Motors, they also contribute to
growing the market for cars.

Many things have changed, too: Paneerselvam estimates that recycling rates
for parts shrunk from “70% to 20%”: parts that use electronic circuits are not
reusable, and specific models (like Sumos) have very few parts that can be reused
or refurbished a at all. “Buying a new vehicle sometimes might feel easier!”.
Service stations have also taken over the job of local mechanics, who had strong
networks within the ELV market. People like Paneersenvam have no choice but
adapt, says his son. To keep operating, Paneerselvam is diversifying. He recently
went to China from where he procured a fork lift. He now rents it out for
additional income.

Like many others, Paneerselvem takes the opportunity to complain of problems

with the police: allegations of trade of stolen vehicles is frequent, and police
officers demand bribes regularly, which impinge on his earning significantly. He
also complains about having to pay high taxes to submit RCs to the local RTO when
sourcing vehicles.

53
 Kolkata
Analysis of the End of Life Vehicles (ELVs) Sector in India 5 Major ELV Hubs in India

The study explored three main ELV markets in Kolkata: Phoolbagan, Mullick Bazar and
Panagarh.

Map of ELV processing hotspots in Kolkata

Phoolbagan
Situated close to Rabindra Bharati University, on BT Road, Phoolbagan is Kolkata’s hub
for ELV parts traders. The market, set up to relocate Bagbazar in the 1980s, is clearly
divided in two sections: one with retail shops and another with scrap yards where ELVs
are ‘cut’ and their parts sold either to traders or to scrap dealers. There are close to
1000 businesses in the market, and in a day about 5-6 large commercial vehicles are
dismantled and sold off in parts or for scrap.

The commercial vehicles that are dismantled are mostly purchased through auctions run
by finance companies, insurance companies, transport companies and the police and
transport department. In fact, the market mostly deals in vehicles that have been seized
or were involved in accidents.

The market hosts a wide range of specialised operators: auction traders, traders who
purchase parts from dismantled ELVs, refurbishers of ELV parts and second-hand traders
of full vehicles who put on the market vehicles that are still functional (in these cases,
profit margin can rise from 20-30% up to 50%).

Dismantled ELVs are channelled through 5 material flows, which are handled separately:

● Body including the chassis

● Engine

54
 Differentials including gears

Analysis of the End of Life Vehicles (ELVs) Sector in India 5 Major ELV Hubs in India
●●

●● Other electronic and mechanical parts

●● Plastic, rubber and glass including rims

The ELV body, including the chassis, is sold either directly to refurbish accidental
vehicles or sold as a part. Any damaged component of the body is sold directly to scrap
dealers.

If the engine casing is intact, it is usually sold directly to private buyers. In some cases,
the price of the transaction is adjusted by subtracting the scrap value of the engine
being disposed off. Whenever the engine casing is not intact, specific parts (like the
head and the mount) are recovered, the rest is sold by weight to scrap dealers.

Engine oil is sold to scrap dealers who filter it and market it for use in industrial
machinery.

Differentials, including gears, that come from vehicles that are 8 years old or less
(around 35% or all ELVs) are sold as used parts.

Most electronic and any other mechanical part are typically sold by weight to scrap
dealers, except fuel tanks, exhaust pipes, air-ducts, which are often refurbished for the
second-hand market if not damaged.

Parts made of fibre plastic that are intact are resold. Tyres are also resold if they are
in good condition, or used as ‘gattis’ (or ‘camel skin’) on old tyres. Safety glass (with a
plastic coating) is recycled and tempered glass is dumped, often on highways rather than
being disposed off at landfill sites. Other plastic and rubber components, including seat
foam and covers are either dumped or burnt.

Recycling of all the scrap coming from Phoolbagan takes place in Durgapur, East India’s
hub for iron and steel foundries. The material is however channelled by a number of
intermediary small and medium-sized scrap traders operating in Bajrangbali, one of
India’s largest scrap markets. It is from Bajrangbali that large scrap dealers send all the
material to Durgapur.

Mallick bazaar
Mallick bazaar is another large used parts market located close to Park Circus, right in
the middle of the city. This market deals mostly in small passenger vehicles (including
LMVs), SUVs, scooters and motorcycles. (Auto rickshaws, instead, find their way into
villages and smaller towns close to Kolkata after their registration expires with the
Transport department). The market is located between AJC Bose road and Elliot road and
houses close to 3000 businesses. In a normal day, close to 15-20 cars are dismantled in
yards located within the market itself.

55
 ELVs reach the market through a network of middlemen spread across the states of
Analysis of the End of Life Vehicles (ELVs) Sector in India 5 Major ELV Hubs in India

West Bengal, Bihar, Jharkhand and Odisha. This network provides an interface between
owners and dismantlers or second-hand car dealers. Middlemen charge a fee of INR 300
to INR 500 for the dismantling of a car in private yards in the market.

In the case of vehicle sold directly as second-hand functional cars, the profit varies from
30% to 50% margins, depending upon the condition of the car. Middlemen prefer second-
hand brokering as deals are cashed immediately. These vehicles are normally sold to
the customers outside of Kolkata. Typically, these vehicles have either completed their
maximum registration (15 years in Kolkata) and have been barred from running within
the city by the Transport department.

In case of ELVs dismantled for parts, profits range between 40% - 60% margins, depending
on which parts are recovered.

Low Motor Vehicles (LMV) are dismantled in the following parts:

●● Engine
●● Gear box and clutch system
●● Tyres and rims
●● Axles and chassis if available
●● Body
●● Battery
●● Smaller parts
●● Glass and rubber (waste unless can be resold if in proper condition)

For SUV, instead, the chassis would be sold separately. 4-wheel drive vehicles are more
valuable in reason of their additional mechanical components.

Traders in this market buy used parts from Mayapuri in Delhi too, to meet the demand
for specific components in Kolkata.

Ambassador cars are the only ELVs for which used parts are in greater demand than new
parts, and only very rarely sold as scrap.

Panagarh
The ELV market in Panagarh first appeared about 40 years ago, in the proximity of an
army camp, in an area that was a hub of transportation for the whole Northeast region.
Today, it is located close to the Railway station, on Kolkata’s GT Road.

56
The army used Panagarh to auction its old vehicles from the Eastern Region operations.

Analysis of the End of Life Vehicles (ELVs) Sector in India 5 Major ELV Hubs in India
At the time, ELVs from the mining industries also reached the market in large numbers.
Gradually, non-industrial ELVs started being channelled to the market too, and the
market has now a steady supply of large commercial vehicles from across West Bengal
and neighbouring states. Auctions run by Tata Motors in Jamshedpur are a major platform
for sourcing ELVs, but the market also sources material from Vijaywada, the hub for
Leyland vehicles. Alongside these actions, auctions are conducted by finance companies,
insurance companies, transport companies and the police and transport departments.
The market still handles a large number of military vehicles coming from MSTC auctions,
which happen on the opposite side of the railway line.

Panagarh develops along 3 kms on NH1 and counts around 5000 shops, which makes it
a significantly larger hub than Phoolbagan. Used parts traded in this market cater to
a large number of collieries operating in the area. Dumper trucks operating in mines
locally also rely on this market for spares. Like other markets, the main categories of
operators are traders of vehicles and parts, traders who refurbish old vehicle parts and
traders who purchase vehicle parts in larger scales through auctions conducted at Tata
Motors in Jamshedpur and Leyland in Vijayawada. Traders in this market confirmed that
selling cars as complete units is the most profitable transaction, with 10% to 15% higher
margins than for dismantling. The proximity of the wholesale market in Phoolbagan
drives profit margins for parts down.

Dismantling feeds 5 material flows:

●● Body including, the chassis;
●● Engine;
●● Differentials, including gears;
●● Other electronic and mechanical parts;
●● Plastic, rubber and glass, including rims;

The trading of parts happens in the same way as other Kolkata markets, with the only
difference that the proximity of Durgapur and the foundries keeps the price of scrap
higher than in other markets, with lower transportation costs benefitting traders.

57
Analysis of the End of Life Vehicles (ELVs) Sector in India 5 Major ELV Hubs in India

Arvind – ELV trader

Arvind, and MBA graduate from Gaziabad, is the owner of a shop at Panagarh.
He has been in the trade at Panagarh for the last 2 years and arrived here
from Chennai, where he worked with Canon. Arvind runs his shop as a family
business, with his father looking after vehicle sourcing and him overseing
spare parts sales. Like many operators at Panagarh, Arvind and his father are
originally from Ayodhaya, UP.

Vehicles traded in Arvind's shop are Volvo, Scania, TATA and Tatra. He prefers
vehicles sold off after accidents as it typically reduces paperwork. He plans
to expand and diversify to trade in all parts within the next five years. He
also plans to expand his trade to scooters and smaller cars, and new vehicle
parts. Arvind has a vision to reach out to customers in smaller centres, who are
unlikely to travel long distances for low value items. He has already tied up
with a partner in Pakur, Jarkhand.

Arvind handles between 15 to 20 vehicles ever month, with a lower turn-over

during the monsoon and a peak between December and March, months with a
higher incidence of road accidents. Arvind describes his work as a 'postmortem',
“we open and look inside a vehicle and see what is working and what is not,
and then decide what to do with the parts. We have 4 workers in the shop
whose only work is to cut and open up the vehicles.” Plastics are taken by
wastepickers, who may sell the meter boards, if in working condition. Wood
in large trucks is often of very good quality, at times teak. If motor parts are
in working condition they are resold, otherwise they are melted. Tyres are
resoled and then sold. He also procures a few parts from Mayapuri in Delhi, and
includes vehicle parts for companies like TATA, Tupper, Leyland and AMW. On an
average Arvind resells 15 -20% of vehicle parts, with the rest being sold as scrap
and melted.

Arvind’s customers include Afghanis and South Africans. “We also get a number
of returning customers from Dhanbad, who come only to me, they trust me”
says Arvind with some pride. Complicated paperwork for taxation and export
can be a hinderance for international trade, however, and Arvind looks forward
to government action to simplify administrative practices for medium-sized
businesses like his.

58
Jamshedpur

Analysis of the End of Life Vehicles (ELVs) Sector in India 5 Major ELV Hubs in India
There are two main ELV markets in Jamshedpur, one known as ‘National Highway (NH)
33’, and the other as ‘Jugsalai’. NH 33 is located along the highway that connects
Ranchi to Jamshedpur and is a hotspot for commercial vehicles and part. The market
was set up here after it was decided to relocate Jugsalai for lack of space. NH33 is a
sequence of around 400 shops and garages on both sides of the highway, with around
12 shops engaged in dismantling. Most shops, in fact, only retail vehicle parts, with
some others involved in refurbishing and assembling, repair and scrap trading. There is
no specific yard for dismantling ELVs, and the work is carried out in garages. 15 to 18
vehicles are being dismantled in these garages every month.

Jugsalai lies instead on the outskirts of the city, near the main railway track. It is known
for its trade in parts of small vehicles such as two wheelers, three wheelers, and private
cars/SUVs, as well as small commercial passenger vehicles. A total of 150-200 shops are
operating here, excluding retail traders. 5 businesses also engage in dismantling. There
is only one yard available for dismantling and around 45 to 50 vehicles are dismantled in
this market every month.

Map of Jamshedpur with its 3 ELV markets

Largely, scrap from ELV is sent directly to Panagarh and Phoolbagan in Kolkata, because
of the higher value of scrap there. Vehicles in running condition are sold directly in
Jamshedpur, and re-usable parts sold throughout the city.

In Jamshedpur, traders have not formed any association, and the scale of trade is
very small compared to other centres. Many traders complained about the business

59
 decreasing, with only 25% to 30% of parts being fit for refurbishing or resale. Most
Analysis of the End of Life Vehicles (ELVs) Sector in India 5 Major ELV Hubs in India

components of ELVs are sold as scrap, a significantly lower margins. Now the traders are
earning Rs. 3,000 to 3,500 selling parts as scrap, the same parts could profit as much as
Rs. 10,000 to Rs. 15,000 if they were designed to be reusable. Iron scrap is bought for
Rs. 30 to 40 per Kg (with seasonal variations of up to 20%), aluminium scrap for Rs. 70 to
75 per Kg, plastic scrap for Rs. 5 per Kg — according to national market rates.

Both markets depend on commercial vehicles, while private and individual owners prefer
to buy original parts.

Engine oil and other fluids like diesel are sold to the oil refinery Mangalam Refinery
Pvt. Ltd. in Ranchi. Fluids are refined to make grease and resold to factories for use in
industrial machinery.

Indore
There are three famous markets for the ELV trade business in Indore: Transport Nagar,
Mechanic Nagar for commercial goods vehicles and Bhamori for commercial passenger
vehicles and private cars and scooters.

Transport Nagar and Mechanic Nagar

Transport Nagar and Mechanic Nagar markets were setup in the outskirts of the city
about two decades ago. However, as the city limits expanded, these markets found
themselves swallowedby the city, and became the hub for all things related to cars in
the city: parts (old/new), refurbishing and welding of vehicle bodies, catering to the city
but also for larger areas in MP and Maharashtra.

There are more than 400 shops in the market, and around 200 shops have their own
garages where ELVs are occasionally dismantled. It is primarily a retail market for parts
of commercial vehicle and reconstruction of heavy vehicle bodies. Most of shops are
involved in refurbishing, assembling, and dismantling.

The market dismantles about 300 vehicles every month. The parts of these vehicles are
sold off to traders within the market. The sale of parts has become a specialised trade
here and the traders are very well off, having been in the business for decades.

Bhamori
Many of the traders at this location are working on small vehicles such as two wheelers,
three wheelers, and private cars/SUVs/, and small commercial passenger vehicles. A visit
to the market indicated that around 40% of operators are involved in this trade. There
are 80 shops that are engaged in dismantling vehicles. There is no yard available for
dismantling and this work is being carried out in rented garages in the outskirts of the
city. Around 100 vehicles are being dismantled in this market every month.

60
 Analysis of the End of Life Vehicles (ELVs) Sector in India 5 Major ELV Hubs in India
Map of Indore and its 3 ELV markets

Waste pickers collect tyres so that they can use them for pushcarts employed in
waste collection locally. In some cases, tyres are also burnt to melt coal tar on road
construction sites. Brick kilns also purchase tyres as fuel. Profit margins from the sale of
tyres are around 15%-20%.

A number of traders purchase ELVs from insurance companies to make sure paperwork
won’t cause delays. Some of them have developed links within the transport authority so
that they get information on the kind of vehicles that have applied for de-registration,
in view of future procurement and dismantling. Used parts are sold in the market to
traders, but in recent years the proportion of material sent to scrap has been rising
consistently.

The average profit margin in the dismantling business ranges from 20% to 40%. Vehicles
that were manufactured in the decade of the 90s still command a high price because of
the use of metals that can be extracted and sold as scrap at higher rates than plastic
that is used in vehicles manufactured more recently.

61
Analysis of the End of Life Vehicles (ELVs) Sector in India 5 Major ELV Hubs in India

30000
Averageexpenses
25000

20000

15000

10000

5000

0
Labour Electricity Materials Other(A) Other(B)


Figure 41: Labour accounts for almost half the total monthly expenditure that takes place every month.

Glass, rubber and plastics, if not scrapped, are dumped in the landfill area in the
outskirts of the city.

Salaries paid by traders to skilled labour range around Rs. 11,000 monthly, and many
labourers are migrants who have settled in Indore for now a decade.

Traders like Abdul Gafoor, being in the trade for the last 70 years, have devised systems
(computerised, to keep track of the vehicle type and vintage of the used part)through
which they can manage large inventories, which would make formalising the business
very easy.

Traders complain that over the last 5-6 years period the trade has suffered from falling
scrap prices. This has lead to significant losses for many who have maintained large stock
over time but have not been able to sell used parts. However, dealers of engines and
gears indicate that they have been able to survive the crisis because the margin in these
parts is very high and even scrap values are high enough.

Many dealers who operate as family businesses are witnessing a generational change in
Indore, with a larger push to strengthen links with other national markets. Parts that are
not found in Indore are purchased from Mayapuri, Mumbai and Ahmedabad.

Dealers in Indore participate in local schemes where they purchase old vehicles and
offer discounts on new ones. This sales strategy leads to a lot of old vehicles being
exchanged. These are however further re-furbished and sold, typically in areas outside
Indore, despite not conforming with norms and having reached their legal obsolescence
deadlines.

62
Large traders in used parts have now also started to move towards the business of new

Analysis of the End of Life Vehicles (ELVs) Sector in India 5 Major ELV Hubs in India
parts by becoming authorised dealers of major OEMs. This strategy means primarily to
offset the loss of business that followed changes in the design of vehicles.

Pune
There are 2 markets in the city of Pune dealing in ELVs. These are Putthupet and
Bhimapet. Putthupet is a market famous for the trade of smaller vehicles and its parts.
Bhimapet deals instead in larger vehicles, but with the growth of the city, this business
has progressively shrunk for at least a decade, and many of the large traders like have
diversified their business and discouraged the next generation to enter into the trade.
The trade of used parts has also shrunk and is being taken over by that of new parts.

These changes follow the introduction of OEM 3-year warranties for parts, which led to
a drop in demand. The growing use of plastics in vehicles has also reduced their reuse
value and most of the material
that is retrieved after dismantling
Pune is also home to the Automotive a vehicle is now sold by weight as
Research Association of India (ARAI), a scrap.
cooperative industrial research association
Hazardous waste from ELVs,
established by the automotive industry with
however, is managed properly
the Ministry of Industries, Government of
in the city in the areas where
India. It provides technical expertise in
this trade is thriving. Pune
R&D, testing, certification, homologation
has authorised informal oil
and framing of vehicle regulations. ARAI has
collectors to operate as a
been working with the Ministry of Heavy
link between businesses and
Industries and has drafted guidelines on
authorised recyclers, reducing
ELVs along with SIAM. These guidelines
the amount of used oil dispersed
are named AIS 129 and have prescribed
in the environment by more then
standards that the industry needs to follow
300,000 litres of used oil every
with respect to design, manufacturing of
month.
vehicles in the future.
The regional transport office
in Pune has mandated auto
rickshaws to be de-registered after 20 years, in light of pollution control priorities. The
de-registration process is simple. The fitness certificate of the vehicle is checked and the
owner fills a form. The vehicle is then dismantled in front of the officer and the scrap
trader who dismantles the vehicle pays a token amount to the vehicle owner. The chassis
of the vehicle is cut during the dismantling process, and the RTO officer collects the
chassis number and the engine number.

Monitoring and environmental regulation apply to some but not other key stakeholders in
the sector. The local State Pollution Control Board mandated the monitoring of all OEMs

63
 operating in and around the city. All authorised recyclers, including the informal sector
Analysis of the End of Life Vehicles (ELVs) Sector in India 5 Major ELV Hubs in India

oil pickers, are monitored by the SPCB. However, there are no provisions to monitor the
local mechanics and the garages where the dismantling happens, and no mechanism to
monitor the amount of e-waste that comes from ELVs.

The Pune municipality itself maintains a huge fleet of vehicles. There are a total of 923
vehicles in the depots — including passengers’ buses, jeeps, ambassador cars, municipal
trucks, etc. The vehicles that reach obsolescence are auctioned, as is the case for busses
that reach 8 year of operation. The auctions run by the municipality attract large traders
from Mayapuri and from Mumbai, Nagpur and Ahmedabad. In most cases, re-usable
parts are extracted before the auction by the engineering wing of the municipality, to
be reused in other vehicles. The large amount of waste oil produced by municipality
vehicles is handled according to the existing regulations, and sold to authorised
recyclers.

Military vehicles also come for dismantling at Kothrud. There are a handful of players
in this trade who participate in auctions and dismantle vehicles. Scrap rates around the
city are very low and in some cases, scrap is sold to areas that are 400 to 500 kms away
from Pune. Iron scrap sells for Rs. 25 a Kg, copper for Rs. 450 a Kg and aluminium is sold
for Rs. 150 per Kg. Used engine oil is sold at Rs. 25-30 per litre to the local oil pickers
in Pune. Broken glass and rubber are thrown away in the dustbins operated by the
municipality. Doors are recycled as spare components for older cars. Window shields are
also reused and sold. Good condition tyres are used in old cars, for a price that varies
between Rs. 1000 and 1200. Tyres that cannot be re-used are sold at Rs. 300-400 per
piece.

There are around 150 oil pickers in Pune who collect used oil from local garages,
service stations, and vehicle dismantlers. A total of 97 are members of an
association namely Wapaslele Oil Kasht Kari Panchayat. These oil pickers have
been working in the business for the last 15-20 years. These 97 people collect
around 300,000 litres, 1500 drums used oil (1 drum=200 litres) in a month. Some
oil pickers use two wheelers and some four wheelers to collect used oil from
different parts of Pune.

The Pune pollution control board office has given consent to pick oil to Wapaslele
Oil Kasht Kari Panchayat from different parts of the city. Wapaslele Oil Kasht Kari
Panchayat also issues an I-card to all the oil pickers. All the collected oil is sold
to authorized oil-refining plants in Pune at Rs. 25-30 per litre. These oil pickers
make a profit of Rs. 2-3 per litre, with a steady demand that guarantees business
sustainability.

64
The Vision and Aspirations of
ELV Traders and Workers in India

Resource efficiency in India is a priority area, and the End-of-Life Vehicle (ELV) sector
— in reason of its size and nature — has a large role to play. ELVs contain materials and
parts that can be refurbished and reused, and offering an important opportunity for
improving resource efficiency and reducing the demand for raw materials. Understanding
the material flow linked to ELVs management — from valuable metals to low grade used
oils — is critical to improving their efficient use.

In India, the management of ELVs is a sector that is still completely informal and
unregulated. ELV operators interact with formal actors only in those few cases where
regulations have targeted specific material flows, as is the case of scrap metal and
other high-value and low-toxicity materials. The residual materials that stay within
the informal sector through their recovery life cycle tend to be of the lowest value
and most highly toxic, due to the lack of interest for these materials from the formal
sector. The informal sector is often seen as highly efficient in resource recovery, but the
lack of regulatory frameworks and standards operating procedures make sector-wide
monitoring and performance measurement (included the attribution of credit in terms
of material efficiency) a difficult task. Also, in the absence of a legal framework, the
economic incentives that drive the sector come often in conflict with environmental
considerations: the informal sector is not always environmentally friendly, especially in
the context of material recovery.

Determinants of Aspirations from ELV Traders and Workers

The study explored ELV traders’ and workers’ own vision regarding the future of the
sector, filtered through their own personal business aspirations. Overall, most traders
aspire to keep operating in the sector, but know that policy changes are needed for that
to be possible.

65
Analysis of the End of Life Vehicles (ELVs) Sector in India The Vision and Aspirations of ELV Traders and Workers in India

Figure 42: 52% of the respondents have been working in Figure 43: Almost 30% of the respondents
this sector for between 10 and 20 years. 21% have spent were unemployed before they joined this
more than 2 decades in this business. Just about 10% of trade. More than 20% joined just after
them have joined the trade a few years ago and are less they completed their studies. About 25%
than a decade in this business. joined their family business. The rest left
another occupation, finding ELVs more
lucrative and sustainable.

Socio-Economic Aspirations
Most ELV traders have been in the business for two or three decades. A majority of them
started working as teenagers; many joined family businesses and learnt the skills on the
job. Most of the people work in rented shops and they pay approximately Rs. 7,000 to
8,000 per month in rent. Most traders aspire to expand their business, but the negative
reputation of the sector is a hindrance in accessing formal financial support. Liquidity
is a prime factor for these actors because the competition is high, and the ELV parts or
entire ELVs with the highest margins are also the most expensive to source.

Figure 44: The greatest challenge for the expansion of the trade are financial and economic issues faced
by traders. Cash flow is a major issue because of little access to institutional finance. ELV operators do
take loans from non-institutional sources but these come at a high rate of interest, affecting their profit
margin and motivation to expand.

66
Formalization and Recognition of this Sector

Analysis of the End of Life Vehicles (ELVs) Sector in India The Vision and Aspirations of ELV Traders and Workers in India
Traders hope that the emergence of an inclusive regulatory framework — in other
words the formalisation of the informal sector — would allow them to access all the
financial tools and support available to mainstream businesses — loans, insurance,
etc. 67% of these respondents who applied got the loan while the rest did not. Lack of
documentation is the single most important reason for denial of loan to these applicants.
42% amongst them tried for a loan of less than Rs 5 lakhs. About 75% of these loans were
required for investment in the business.

In Chennai, they also proposed to have an Auto Nagar and space for vehicle parking in
his city.

Figure 45: Technical assistance and financial assistance are the 2 most common types of
help that the traders offer each other.

Obsolescence and its Constraints

The last decade saw drastic changes in the obsolescence pattern in the automotive
sector, particularly in reason of the decrease of vehicle mileage and the increase in
technological sophistication of vehicles (which become, as a result, harder to repair).
The main reason for reaching the ELV status is the expiry of vehicles papers. The
emergence of authorised service centres and the constant innovation of parts have
impacted the profits of the sector, where new parts are yet not available, and old ones
meet a decreasing demand.

67
 Need Technical Training for Dismantling
Analysis of the End of Life Vehicles (ELVs) Sector in India The Vision and Aspirations of ELV Traders and Workers in India

The ELV sector is highly knowledgeable about how to dismantle existing vehicles, but
the spiralling rate at which new models and new technology is being introduced requires
new technical skills. The existing skill set represents a solid foundation on which to
build more specialised and sophisticated technology, but that will require investments in
training and dismantling technology.

Expectations from the Government

Government actors should make available space for the sector to thrive and expand.
Parking space is for example essential. The government could also facilitate ELV
operators’ access to credit by recognising and setting up a licence system.

Figure 46: About 37% own the space where Figure 47: Most of the traders are small operators
they work while the rest rent it. and pay Rs. 2,000 per month in rent or less. Larger
traders who dismantle vehicles take up larger
spaces, for which they pay more.

Set Up Auto Recycling Zones

The government should also recognize ELV processing zones as part of the national
recycling industry, regulating levels of noise and other kinds of pollution. Auto
recycling areas should be professionalised, with ID cards distributed to all operators
and systematic accounting and monitoring procedures to improve and streamline the
business.

68
People believe that the government is trying to build auto parks, which will be

Analysis of the End of Life Vehicles (ELVs) Sector in India The Vision and Aspirations of ELV Traders and Workers in India
recognized as special zones for recycling. This, they believe, will help them to
streamline their business and they will be able to work without any harassment from
civic authorities and otherwise. More than 53% of the traders however, would not like to
shift from the present area because they believe they would loose their customer base.
Most (79%) respondents, however, have clients who come from far away too (in 62% of
cases bulk buyers), while for small parts the markets remain local.

Figure 48: 69% stated that they were not a part of any association that
can help them with their job.

69
 International Best Practices

End of Life Vehicles (ELVs) have gained prominence globally also due the growing concern
around excessive pressure on energy, water and raw materials. Automobile ownership
worldwide has been increasing at a higher rate than the global population, reaching
more than 1 billion units in 20106. It is expected to cross over 2 billion units in 20307.
The generation of ELVs was estimated at 40 million, which accounts for 4% of total
automobile ownership8.

Governments around the globe have started supporting circular business models. The
global economic crisis of 2008, soaring commodity prices and growing awareness of the
human impact of environmental degradation have pushed the circular economy agenda
into the mainstream policy debate. The key drivers towards ‘Green Initiatives’ in the
automobile industry are environmental (reduction in resource consumption, emissions,
waste generation and disposal), social (improved living conditions of community) and
economic (reduced costs, environmental liabilities and enhanced access to markets).
Dedicated ELV legislative frameworks exist in the EU, Japan, Korea and China, while in
the US, ELV recycling is managed under existing laws on environmental protection. The
EU has been the standard setter with regard to circular economy regulation, passing
legislation from the year 2000, followed by Japan’s Law on Re-utilization of End of Life
Automobiles in 2002.

6 An international comparative study of end-of-life vehicle (ELV) recycling systems, Sakai Shin-ichi
et. al (2013)
7 Vehicle Ownership and Income Growth, Worldwide: 1960-2030, Joyce Dargay, Dermot Gately
and Martin Sommer, Energy Journal, 2007, Vol. 28, No. 4
8 An international comparative study of end-of-life vehicle (ELV) recycling systems, Sakai Shin-ichi
et. Al (2013)

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 Analysis of the End of Life Vehicles (ELVs) Sector in India International Best Practices


Reference: Toyota Global recycling initiatives http://www.toyota-global.com/sustainability/

environment/recycling_based/2013_activities_07/ accessed on 04th February 2015

Dismantling Process
Currently, 75% to 80% of each ELV is recycled or re-used in Europe, mostly for ferrous
metal9. Some European countries have already achieved even higher standards
(Germany, Belgium), while other are far from reaching the prescribed targets (Italy
in particular)10. In order to meet European ELV targets, technological innovation has
gone in two directions, upstream or downstream. Upstream efforts have seen changes
in car designs to facilitate the ELV processes. A number of car companies globally have
made agreements with dismantlers directly. Upstream efforts have a delayed, long-
term impact. Downstream efforts instead focus on modifying the recycling operations
by developing new techniques and processes. In this respect, efforts need to focus on
materials that are not being currently recycled (fluids, polymers, rubber, glass and
electronic parts). Once processes are standardised and technology developed, bigger
and more efficient recycling plants will be able to handle wastes coming from different

9 Gerrard, J., Kandlikar, M.: Is European end-of-life vehicle legislation living up to expectation?
Assessing the impact of the ELV Directive on ‘green’ innovation and vehicle recovery. Journal of
Cleaner Production. 15, 17–27 (2007)
10 EUROSTAT, Environmental Data Centre on Waste, ELVs - Key Statistics and Data http://epp.
eurostat.ec.europa.eu/portal/page/portal/waste/data/wastestreams/elvs (2009)

71
 industrial fields, not just the ELVs, with large use of automation. An example of large
Analysis of the End of Life Vehicles (ELVs) Sector in India International Best Practices

automated dismantling system is represented by CRS (Car Recycling System) 11 in the

Netherlands. Small-specialized companies could also contribute by focusing on non-
recycled components.

The recycling process starts with collection, segregation and dismantling. The
components containing hazardous substances like lead, oil and refrigerant gases
are removed first, and only then the material that can be reused or recycled can be
extracted with high economic returns. Dismantling processes adapt to a country’s
legislation: in Japan, for example, the collection of refrigerant gases and air bags is
legally mandated, and in the US components containing mercury (like switches) are
removed first. The weight of an ELV after dismantling is reduced to 55-70% of the original
weight in EU and Japan. This helps in reducing the amount of automobile shredder
residue (ASR) and avoids hazardous material contamination in ASR. After the dismantling
and removal of hazardous and recyclable materials, the hulks of car are typically
put into shredders. The ferrous and non-ferrous metals are separated with magnetic
separators. The percentages of iron and non-ferrous metals in a vehicle mass are 36-70%
in the EU, and 50-55% in Japan, respectively. The amounts of ASR (light & heavy) are
reported to be 12-32% in the EU, and 17% in Japan. In the EU, ASR in many cases is
disposed off in landfills. It was a similar situation in Japan prior to the enactment of
the Law for the Recycling of End-of-Life Vehicles. However, after the enforcement of
this legislation, which mandates the recycling of ASR, material separation of secondary
resources, collection of slags by melting furnaces, and energy recovery have become a
common practice.

Prevalent Policies and Practice in Significant Economies

of the World
European Union (EU)
In the EU, the EU-Directive 2000/53/EC on ELVs was enacted in 2000. The main
objectives include a) to make vehicle dismantling and recycling more environmentally
friendly, b) to set clear quantified targets for reuse, recycling and recovery of vehicles
and their components and c) to encourage producers to manufacture new vehicles also
with a view to their recyclability. The Directive is based on the subsidiarity principle and
the extended producer responsibility principle. According to the subsidiarity principle,
EU member states must establish their national legislations on the ELV recycling system,
while the Directive sets recycling targets for different phases.

Member states are required to meet these targets, while car manufacturers and
importers shoulder the expense of recycling under an extended producer responsibility

11 Car recycling Systems BV. http://carrecyclingsystems.com/ (2009)

72
provision. The targets that member states must meet for ‘‘reuse and recovery’’ and

Analysis of the End of Life Vehicles (ELVs) Sector in India International Best Practices
‘‘reuse and recycling’’ rates, were respectively 85 and 80% by 2006 and then 95 and
85%, respectively, by 2015.

According to data published by Eurostat in 2008, 20 Member States achieved the reuse/
recycling target of 80% (of the average ELV weight), and sixteen Member States met the
85% reuse/recovery target.

The challenge of deregistration of vehicles is significant in the EU. In most Member

States the number of ELVs represents more than 50% of the amount of de-registered
passenger cars (e.g. Belgium, Italy, Spain and the Netherlands). Thus, for those countries
the gap between the number of de-registered cars and ELVs is lower than 50%. In other
Member States (e.g. Austria, Denmark, Finland, Sweden) the gap is higher, and there
is no detailed information available on the further use of more than 50% of the de-
registered cars.

There are different approaches to de-registering vehicles across European Member

States. In some countries (e.g. in Austria) a vehicle is de-registered automatically with
the change of ownership of a car. In other countries (e.g. in the UK) vehicles are not
deregistered when ownership changes, but, de-registration generally takes place when
the car owner wants to dispose of the vehicle.

Japan
The Automobile Recycling Law that came into effect in January 2005 mandates an
appropriate division of roles between automakers and other involved parties, to promote
the recycling and appropriate processing of end-of-life vehicles. The act specifies
components/materials to be recycled, stakeholders that will shoulder recycling costs, as
well as the development of an information management system.

Recycling targets are separately determined for airbags, refrigerant gas and ASR, and not
for the whole ELV. Furthermore, an environmentally sound treatment of fluorocarbons
is mandated by law. The recycling rates for airbags and ASR from 2015 are 80 and 85%,
respectively. With regards to the recycling of ASR, thermal recovery is acceptable but no
provision was set regarding its recovery rate.

A flow chart depicting the system for collection and recycling under the Japan
Automotive recycling law is as follows:

73
Analysis of the End of Life Vehicles (ELVs) Sector in India International Best Practices

Reproduced from Report on Vehicle Recycling, Environment Affairs Division,

Toyota Motor Corporation

Korea
In Korea, the Act for Resource Recycling of Electrical and Electronic Equipment and
Vehicles was enforced in 2008 and is modelled on EU initiative. The key components
of the Korean ELV Legislation include: — Research and Development (R&D) production
stage — restriction on the use of hazardous material and new vehicles must be compliant
with the annual recyclable rate, currently set at 85 per cent through improvements in
materials and structures.

EPR (Extended Producer Responsibility) was employed by the Korean government

before, but strengthened through this act, which evolved into the Integrated Product
Policy through the introduction of the Eco-assurance System. The Eco-assurance
System requires both preventive and follow-up management of products: the former
ensures environmentally friendly design and manufacturing, while the latter guarantees
environmentally sound management of waste. Under this act, the responsibility for ELV
recycling is placed on all the stakeholders involved, including manufacturers, importers,
dismantlers, shredders, ASR recyclers and refrigerant gas processors. Recycling rates are

74
mandated. When the ELV recycling cost exceeds the price of the ELV, manufacturers and

Analysis of the End of Life Vehicles (ELVs) Sector in India International Best Practices
importers cover the excess cost. The act also requires submission of performance data
with regard to recycling to Korea Environment Corporation (KECO).

Under the Korean ELV recycling framework, recyclers assume the responsibility
of carrying out recycling if the ELV is economically valuable. On the contrary,
manufacturers assume such responsibility if the recycling presents an overall cost. This
split responsibility makes unclear whose responsibility it is to achieve the target. In
addition, less valued or costly materials are likely to be avoided during the dismantling
process, since those components that are of higher value are preferentially separated.
Overall, the framework indirectly incentivises lower recycling rates.

China
Since 2006, the Automotive Products Recycling Technology Policy identifies the
responsibilities of manufacturers and importers to promote ELV recycling, and lists
the substances used in car manufacturing that must be controlled and prohibited in
consideration of broader environmental protection goals.

The policy sets the following recycling targets for ELV: about 85% (or at least 80%
material recycling) by the year 2010; about 90% (or at least 80% material recycling)
by the year 2012; and about 95% (or at least 85% material recycling) by the year 2017.
In 2008, the Regulations of Remanufacturing Pilot of Automotive Parts was issued
with the aim of carrying out a trial program for the production of secondary products
from used components. This effort contributed to improve the recycling rate at the
dismantling stage.

In China, several problems on ELV recycling are however frequently reported: ELVs end
up in the used car market and are used illegally; improper recycling processes causes
serious environmental pollution at the facilities; and illegal remanufacturing. The reason
for these is attributed to the absence of a comprehensive management system

United States of America (USA)

The US presents a different case in terms of legislation. In the US, ELV recycling operates
autonomously based purely on market mechanisms. The Automotive Recyclers Association
(ARA) has promoted ELV recycling, but there is no mandatory recycling target, and
the rate of material recycling is reported to be at 80%. A strong emphasis is placed on
the promotion of environmentally sound management at the dismantling or recycling
facilities. In particular, dioxins, furans, polycyclic aromatic hydrocarbons (PAHs) and
greenhouse gases are constantly monitored.

The ELV recycling program in the US is therefore the object of strict monitoring under
environmental laws and agencies. Among the relevant regulations are the Resource

75
 Conservation and Recovery Act (RCRA), the Clean Air Act (CAA), and the Clean Water Act
Analysis of the End of Life Vehicles (ELVs) Sector in India International Best Practices

(CWA). In addition to federal laws, state governments also define additional regulations.
The ARA disseminates regularly information to ELV recyclers regarding the latest
environmental regulations from other states, and builds an electronic database. In most
states, ASR is classified as a non-hazardous waste and ends up in a landfill. However, its
environmental impact is currently being looked into with major concern.

Status of the Major Manufacturers

Major OEMs have also initiated their own programs for proper disposal and recycling of
ELVs, either by their own initiative or to comply with the country’s rules and regulations.
Some of the practices of major corporates are discussed in the following section.

BMW
In the early 90s, long before statutory EU regulations, the BMW Group had already
started to establish a widespread network of centres in the EU for vehicles take back.
BMW ELVs returned through these centres are processed in an authorised treatment
facility.

The BMW Group also asserts its responsibility for taking care of used parts, operating
fluids and sales packaging. These are collected according to country-specific programs.

As part of its goal to reach a circular material model, the BMW Groups uses recycled
materials in new vehicles. Currently, 15% of plastic parts approved for BMW Group
production vehicles are made of recycled materials, and they are used for example in
under-body panelling, rear shelves, fuel tanks and wheel housings.

Renault
Renault offers free take back for all vehicles regardless of their age as from the 1st
January 2007. As defined in the law in the EU, free take back is offered provided that:

●● The vehicle is delivered to a Renault appointed take back facility;

●● The vehicle contains all its essential components, in particular the engine,
transmission, coachwork, wheels or catalytic converter (if originally fitted);
●● That no waste has been added to the vehicle (for example: household and garden
waste, extra tyres etc.)

In the UK, Renault Trucks has selected Cartakeback.com to provide free take back of
vehicles falling under the relevant legislation. The Cartakeback Network covers all
regions of the UK. All take back and treatment facilities operate in conformity with the
Department for Environment Food & Rural Affairs (DEFRA) requirements. Vehicles are

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treated to meet the recycling and recovery target of 85% by weight from 2006, as set by

Analysis of the End of Life Vehicles (ELVs) Sector in India International Best Practices
the End of Life Vehicle EU Directive.

Toyota
Toyota has been working with dismantling and recycling companies to ensure compliance
with the Japanese End-of-life Vehicle (ELV) Recycling Law that came into effect in
January 2005. Toyota collects and treats CFCs/HFCs, recycles/recovers airbags and
automobile shredder residue (ASR) from end-of-life vehicles. In 2013, the ASR recycling
rate was 96%, and the vehicle-recycling rate, converted into a per-vehicle value,
reached 99%, exceeding the Toyota Recycling Vision goal of 95%.

Toyota Motor Europe (TME) completed the construction of ELV collection networks in 28
EU member states.

In China, the Recycling Working Group, under the Toyota China Environment Committee,
is working closely with local affiliates to promote compliance activities with local
automobile recycling laws through measures such as ascertaining regulatory trends and
auditing local infrastructure. At the end of February 2014, a plant that received 32%
of its capital from Toyota Tsusho Group opened in Beijing, with the goal of becoming a
model ELV dismantling plant in China.

Examples from Other Countries

At EU level, three Directives introduce EPR as a policy approach: the ELV Directive
2000/53/EC, the new WEEE Directive 2012/19/EU and the Batteries Directive 2006/66/
EC. EPR is also widely used in support of the implementation of the Packaging and
Packaging Waste Directive (94/62/EC), although the Directive itself does not impose the
principle. In addition, article 8 of the Waste Framework Directive 2008/98 sets some
principles regarding the implementation of EPR by the European Member States.

The ELV system introduced in Sweden is a good example of individual financial

responsibility without duplication of infrastructures for dismantling and recycling.
Car manufacturers in Sweden, and importers, have decided to take advantage of the
well-functioning part of the established dismantling and recycling companies and have
consequently signed contracts with these actors. This means that a specific dismantler
may serve many, maybe all, manufacturers, but having an individual contract with each
of them.

The ELV management system that started in January 2005 in Japan is also based on
individual financial responsibility. All manufacturers and importers must announce the
end-of-life management fees of their products. The fees announced in mid-2004 ranged
from ¥7,000 to ¥18,000, varying not only between brands and sizes but also between
models of the same brand (Automotive Department, METI, 2004; Oonishi, 2004).

77
 Unlike the system for four large appliances, an advance disposal fee system has been
Analysis of the End of Life Vehicles (ELVs) Sector in India International Best Practices

chosen. Car producers in Japan are responsible — logistically and financially — for the
management of auto-shredder residues, ozone depleting CFCs and airbags, and must
achieve recycling and recovery targets for auto-shredder residues, which gradually
become more stringent. Similar to the development of the four large appliances,
the car producers established two groups to organise their take-back and recycling
responsibilities. However, out of 27 recycling facilities, 18 have contracts with both the
groups (Tanaka & Oonishi, 2005).

78
Policy Recommendations

Shared Responsibility for Effective Management of

End of Life Vehicles
Globally, and for now a number of years, the automobile industry has integrated
environmental concerns into the design of the complete lifecycle of its product —
adapting its designs, modifying vehicle use and managing end of life. EU Directives, for
example, require that the automobile industry reach 85% reuse and recycling 12 and 95%
reuse and recovery rates13 by an average weight per vehicle per year. Indeed, no other
consumer product has a recycling rate as high as an automobile. Resource efficiency is
key in this industry to minimizing costs and resources, pushing up profits over the long
run. On average, a vehicle is made for 75% of metals, which is recyclable, and for 25%
of plastic composites, glass, rubber, textile etc.14. To ruin this picture, up to 25% of
the waste material coming from an ELV poses a potential environmental threat, due to
presence of heavy metals, waste oils, coolants, ozone depleting substances, etc.

Given the existence of efforts on both sides, the key question remains how to make ELV
regulations and the voluntary standards of the automobile industry converge towards
guaranteeing an environmentally sound management of the ELVs. The EU regulation
on ELVs, emphasizes the responsibility of producers, as per the principle of ‘Extended
Producer Responsibility (EPR)’. The overall objective of EPR is to spur innovation in
the industry and improve the recycling infrastructure, develop closed material loops,
decrease waste from automobiles and set up mechanisms for ELV take back 15. ELVs’

12 “Reuse and Recycling” includes reuse of ELV components together with material recycling, i.e.
extracting secondary raw materials
13 “reuse and recovery” includes the above plus energy recovery
14 Svetlana Gross, 2008, End-of-life vehicles management in Europe: driving the change.
Cases of Sweden and Germany. IIIEE thesis, Lund University, Sweden.
15 Reid Lifset, Thomas Lindhqvist (2008), Producer responsibility at a turning point? Journal of
Industrial Ecology,Vol.12, Issue 2.

79
 nature as post-consumer waste calls for holistic environmental policy efforts that
Analysis of the End of Life Vehicles (ELVs) Sector in India Policy Recommendations

identify the responsibility and degree of participation by all stakeholders — consumers,

producers, recyclers, dealers all have a role to play in guaranteeing the safe take back
and disposal of ELVs.

The urgently needed legislative framework in India should take stock of the experiences
of other countries, and draw from their learnings a solid mechanism for minimizing the
environmental impact of ELVs. In particular, the Indian legislator should identify the
drivers for this change without disregarding the reality and dynamism of the national
recycling industry. An ideal ELV management system would have as key moments the
following: (1) a legislative framework for shared responsibility inclusive of all key
stakeholders, (2) a functional recycling infrastructure, including by upgrading existing
value chains (3) incentive structures to salvage reusable ELV parts and (4) effective
collection and channelization mechanism that leverage the knowledge and network so
far developed in the informal sector. These elements, under the overall objective to
protect the ‘wholesomeness of the environment’ (as per the Environment Protection
Act, 1986), have as a premise to identify and engage key actors, defining their roles and
responsibilities, and improving the effectiveness of ELV management in India.

Key Actors
The ‘Shared Responsibility’ model we envision has as its premise the creation
of a common understanding amongst the manufacturers, dismantlers, recyclers
and consumers of their respective stakes and responsibilities. This will be key for
strengthening and structuring a material flow and environmental and economic
performance standards that deliver better reuse, recycling and recovery rates. ELV
management involves a number of actors — from producers, recyclers and dismantlers
(both formal and informal), to government authorities, and consumers — both private
and commercial -, dealers/intermediaries and insurers included.

Government
Governmental authorities will play a key role in setting framework goals and regulating
processes each other actors would follow, by the means of legislation and harmonization
of existing frameworks, licensing, implementation of regulations, monitoring and
compliance reporting. Public authorities with a stake in the sector are however multiple.
The de-registration process of ELVs is governed by the Ministry of Road Transport
and Highways, while automobile industrial policies fall under the Ministry of Heavy
Industries. Environmental protection measures like fuel efficiency standards, waste oil
recovery, hazardous waste handling etc. are regulated by the Ministry of Environment
and Forests, with Central and State Pollution Control Boards as implementation and
monitoring agencies. There is an urgent need to clarify the role of each agency and
developing inclusive guidelines to ‘govern’ the complete ELV process in India. Such ELV

80
guidelines should identify the overall

Analysis of the End of Life Vehicles (ELVs) Sector in India Policy Recommendations
responsibility for ELVs processing In December 2014, the National Green
licensing, authorization mechanisms Tribunal (NGT) announced the ban of
and monitoring processes, take back the vehicles older than 15 years on
mechanism and vehicle registration the roads of Delhi, to reduce the air
and de-registration procedures. The pollution loads in the city. The industry
regulator needs to set up an enabling welcomed the entire ban as a significant
framework for the producers and step towards fleet modernization.
recyclers to take up effectively However the Ministry of Road Transport
their responsibilities. State and the and Highways challenged the decision
national governments can also use with fitness and road worthiness as
administrative, economic and data criteria’s towards permanent solution
management instruments to support than age limit.
the effective implementation and the
environment friendly disposal of ELVs.
An illustrative list of such instruments is given in the table below.

Administrative Instruments Collection and/or take-back of ELVs, substance

restrictions, achievement of collection, re-use and
recycling targets, environmentally sound treatment
standards, treatment and disposal restrictions,
minimum recycled material content standards, product
standard.
Economic instruments Material/product taxes, subsidies, advance recycling
fee, upstream combined tax/subsidies, tradable
recycling credits.
Informative /Awareness Reporting to authorities, marking/labelling of products
generation Instruments and components, local collection network, information
provision to consumers about the right disposal of ELVs

Source: Adopted from Lifset (1992)16, OECD (2001)17, Stevens (2004)18, Walls (2004)19.

16 Lifset, Reid. (1992). Extended Producer Responsibility: Rationales and Practices in North
America. In T. Lindhqvist,Extended Producer Responsibility as a Strategy to Promote Cleaner
Products. (33-49). Lund: Department of Industrial Environmental Economics, Lund University.
17 OECD. (2001). Extended Producer Responsibility. A Guidance Manual for Governments. Paris:
OECD
18 Stevens, Candice. (2004). Extended Producer Responsibility and Innovation. In OECD, Economic
Aspects of Extended Producer Responsibility. (199-217). Paris: OECD.
19 Walls, Margaret. (2004) EPR Policy Goals and Policy Choices: What does Economics Tell Us? In
OECD, Economic Aspects of Extended Producer Responsibility. (21-49). Paris: OECD.

81
Analysis of the End of Life Vehicles (ELVs) Sector in India Policy Recommendations

Figure 49: When asked how business and working conditions could be improved, 35% of the respondents
stated that they look forward to more space for improved trading and dismantling. 21% felt that better
road infrastructure will help customers to access them easily and hence their business will grow. When
asked if specific skills were required for traders to help them do their job better, a large number of them
requested computer literacy courses. Management of data is a critical element that they believe they will
be able to do with computer training.

Dismantlers and Recyclers — Formal and Informal

Recyclers include traders, scrap dealers, dismantlers, waste management companies,
metal and other recyclers. Overall, these are actors interested in the trading,
refurbishment, recycling and treatment of ELV parts for the extraction of metals. From
our primary surveys and field research, we have observed that recycling of ELVs is a
space-demanding activity. The existing informal markets have been operating from
as long as 40 to 50 years now, at times even longer. What used to be markets on the
outskirts of the city are now an integral part of a fast expanding urban fabric, and
increasingly surrounded by residential areas — with obvious implications in terms of
space available for ELV operations. The presence of communities living in the vicinity of
the markets also increases objective risks linked to the sector.

It is expected that like other urban waste management projects, the required land for
recycling would be made available by local government when planning urban landscapes.
The Central Government should also relax the duty on the imported equipment to make
the project financially attractive to developers, and even government agencies in Pubic

82
Private Partnership models. If not all, many major industrialist expressed interest in

Analysis of the End of Life Vehicles (ELVs) Sector in India Policy Recommendations
supporting the relocation and upgradation of informal sector dismantlers and recyclers
for their inclusion in future formal ELV material chain.

Regarding the formal sector, one demonstration unit (NATRIP) was set up in Chennai by
the Ministry of Heavy Industries, as a pilot dismantling facility. Two formal recyclers in
the process of setting up facilities in the South India were also found.

Finally, a new model implies leveraging the existing trade channels to structure a
network of dismantling and recycling stations across the country, with receiving stations
recognized by the industry. Dismantlers could keep their role as a platform for the trade
of ELV spare markets, in support of an ever circular economy.

Manufacturers (Including Original Automotive Manufacturers, Importers,

Assemblers, Component Manufacturers)
Manufacturers play a key role not only at the end of life stage but from the earliest
stages of the design, a defining moment for the reduction of hazardous substances that
are at risk of being dispersed during dismantling and recycling. In this context, Extended
Producer Responsibility ought to give producers the leeway needed to innovate by
choosing materials and structures that aim to make also the dismantling and recycling
easier and safer.20 Producers also need to set up mechanisms for product take back, with
infrastructural and financial responsibility for its effective implementation nation-wide.
In order to finance the collection and recycling system, producers (manufacturers and
importers) could for example bear the financial responsibility to upgrade their network
of dealers and insurers to be take back centres. They should also existing competences
and leverage the informal sector for collection and dismantling operations. After
the collection and initial dismantling, the formal sector can pitch in for recovery of
secondary resources from the ELVs.

The issue of access to technology and research and development in the area of
recycling also needs to be taken up by the formal players involved in the ELV business.
The producers will also have to play a major role in strengthening the capacities of
the informal sector in this regard, in light of their superior means. One of the major
issue that came up during the interactions with operators in the informal sector
was the spiralling pace of model innovation by the automobile manufacturers. The
informal sector would benefit from support in catching up with the latest technological
breakthroughs, something for which their existing business model does obviously not
allow resources. The automobile manufacturers could frame the Standard Operating

20 Thomas Lindhqvist (2001) Extended Producer Responsibility for End-of-Life Vehicles in

Sweden - analysis of effectiveness and socio-economic consequences, IIIEE Reports,
Lund University, Sweden

83
 Procedures (SOPs) for dismantling every model and type of vehicle. The SOPs could be
Analysis of the End of Life Vehicles (ELVs) Sector in India Policy Recommendations

shared with the informal sector in vernacular languages.

Consumers
Consumers play a key role in the safe management of ELVs. Both private and commercial
vehicles need to be tested regularly for fitness. For private consumers, incentive
mechanisms should be devised to support the disposal of ELVs at the right time.
Consumers also need to be informed regarding the right disposal practices for ELVs, and
to the risks posed by the non-metallic ELV components.

Dealers and Insurers

To set up effective collection mechanism, the dealers will be an inescapable link
between consumers and manufacturers or consumers and dismantlers. The administrative
procedures like deregistration could be managed directly by dealers, as they are
already enabled to offer this service at the moment of the purchase. Since reuse 21
and prevention of waste is the primary objective of this ELV management framework,
the second hand market needs to be supported. Spare parts usage is much more
environmentally friendly than recycling and insurance companies can play a major role in
growing this demand. For instance in Sweden, the Folksam Auto AB (folksamauto.com) is
a subsidiary of the Folksam Insurance company which acquired a large car workshop with
the objective to support the repair of old spares and increase use of spare parts to bring
down the costs of new original-enterprise (OE) parts.22

There is a strong need for creating awareness amongst consumers and industrial
operators (like repairers) for channelizing ELVs and minimixing waste through a thriving
quality spare parts market. Recyclers and manufacturers need to cooperate to fulfill
their shared environmental responsibilities.

Examples from Other Countries

At EU level, three Directives introduce EPR as a policy approach: the ELV Directive
2000/53/EC23, the new WEEE Directive 2012/19/EU and the Batteries Directive 2006/66/
EC. EPR is also widely used in support of the implementation of the Packaging and
Packaging Waste Directive (94/62/EC), although the Directive itself does not impose the
principle. In addition, article 8 of the Waste Framework Directive 2008/98 sets some
principles regarding the implementation of EPR by the European Member States.

21 Reuse means dismantling and reselling used parts of the vehicle, be it large components such as
engines and chassis, or hulk parts, or smaller parts up to light bulbs and power cables.
22 Rainer Lukas, 2001, End of Life Vehicle Regulation in Germany and Europe – problems and
perspectives. No.113, Wuppertal papers.
23 Directive 2000/53/EC of the European Parliament and of the Council of 18 September 2000 on
end of life vehicles, Official Journal of the European Union.

84
The ELV system introduced in Sweden is a good example of individual financial

Analysis of the End of Life Vehicles (ELVs) Sector in India Policy Recommendations
responsibility without duplication of infrastructures for dismantling and recycling.
Car manufacturers in Sweden, and importers, have decided to take advantage of the
well-functioning part of the established dismantling and recycling companies and have
consequently signed contracts with these actors. This means that a specific dismantler
may serve many, maybe all, manufacturers, but having an individual contract with each
of them.

The ELV management system which started in January 2005 in Japan is also based on
individual financial responsibility. All manufacturers and importers must announce the
end-of-life management fees of their products. Car producers in Japan are responsible
— logistically and financially — for the management of auto-shredder residues, ozone
depleting CFCs and airbags, and must achieve recycling and recovery targets for auto-
shredder residues which gradually become more stringent. Similar to the development
of the four large appliances, the car producers established two groups to organize their
take-back and recycling responsibilities. However, out of 27 recycling facilities, 18 have
contracts with both the groups.24

Conclusion
The assessment study of ELV generation and handling in India is far from straightforward.
The materials efficiency of the automotive sector is ultimately embedded in the
informal or semi-formal sector. A second generation of ELV entrepreneurs across
India are investing in expanding their businesses. Their work is inventive, but it must
embrace environmental safeguards to prevent negative externalities like pollution and
occupational hazards. Some vehicle parts will requires special handling procedures
and dedicated channels to be managed, in light of their toxicity. This is a new terrain
for India, and requires shared responsibility from the OEMs, auto part manufacturers,
governmental actors and, indeed, ELV entrepreneurs themselves.

Smart Cities in India are likely to offer their residents improved public transportation
in the next decades. The network of roads and highways is also expanding. All this will
naturally result in more and more vehicles on the roads, and more ELVs off the roads
tomorrow. However, as the data presented in this report points out, if nothing changes
the informal sector will be unable to cope with the projected increase in ELVs over the
next decade, and if they won’t be able to face the challenge, nobody else will either.
The informal ELV sector needs to be made part of a concerted plan for regulating,
formalizing and strengthening national ELV processing capacities.

This study urges for three key steps forward. First, training for existing ELV
entrepreneurs, particularly to prevent environmental contamination and safeguard

24 Tanaka, T & Onishi, T (2005). Mega Competition Age of Automobile Recycling.

Nikkei Ecology. 67.

85
 occupational health and safety. Second, including space for ELV handling in master
Analysis of the End of Life Vehicles (ELVs) Sector in India Policy Recommendations

plans and zonal plans — very little will be possible without land. And third, processes
related to de-registration of vehicles must be streamlined, moved online, centralized
and made accessible to everyone, across the country. The various arms of the central
and state government will be key to bringing about these shifts, and so will be the active
participation and Sakai Shin-ichi involvement of auto manufacturers, based on shared
commitment to drive materials efficiency in the particularly vibrant context of India.

Together, we can tell an even more transformational story of a dying car in India.

86
Annexure I
Process and Movement of Materials
Across Commercial Goods
Vehicles And Four Wheelers

Commercial Goods Vehicle

Body-Cowl, Refurbish
Chessi, rest & sell
of body Traders
(metal, Scrap
Finance wood)
Company
Sold
Auction
of parts Refurbish
Agents & sell
Engine Traders
Accidental
Case Scrap

Cutting Sold directly

Auction
of
Vehicles Sold in parts
Individuals Vehicles Gear Box &
Traders
Differentials
Refurbish
& sell

Scrap
Insurance
Company
Used in
spares
Tyres Traders
Sold/scrap

Rent out
to bus

Rubber Rim,
Other
tempered Dumped
Parts
glass

Oil Recycling

Metal,
Scrap
Safety glass

87
 Commercial Passenger Vehicle/Private Cars
Analysis of the End of Life Vehicles (ELVs) Sector in India Annexure I

Body-
Bonnet,
Doors, Repair & Sold
Bumper
etc
Finance

Tyre Traders Repair & Sold

Agents Auction and Rim
Accidental
Repair & Sold

Accessories
Cutting Scrap
Auction of
Individuals Vehicles

Repair & Sold

Engine Scrap

Insurance
Traders

Differential
and
Repair & Sold
Gear Box

88
Annexure II
Story of a Dying Car in India –
Understanding the Economic
and Materials Flow of
End-of-Live Vehicles (2012)
 About this Study
This report summarises the results of two surveys and a number of field-based
research missions carried out in the End-of-Life Vehicles (ELV) industry in
Northern India. The research aims to present a clear picture of what happens
to a vehicle in India at the end of its life-cycle. As a first step, a schematic
materials flow has been developed through a participatory process with users,
dismantlers, and recyclers. The study shows that the ELV industry consists of
many different participants, who constantly interact with each other in a
complex, interdependent process. The study provides a better understanding of
the economics of the recycling of ELVs in India, as well as an insight into the
attitudes, knowledge, and practices of the ELV handlers. The major focus of
the study is the economic, environmental, and social challenges that emanate
from a change in status quo. For the environmental issues, the report
identifies a number of different individual vehicle parts as either waste
(i.e., cannot be reused or recycled) or posing environmental danger (i.e.,
toxic to either humans or wildlife), according to the way they are currently
treated by the informal sector. The report ends by presenting a series of
recommendations on how to improve the resource efficiency of the ELV
industry in India. It proposes a system to recognise and formalise the work
of a currently largely informal sector, and ways for vehicle manufacturers
to take responsibility for the products they release in the market.

90
The Story of a Dying Car in India
Understanding the Economic and Materials
Flow of End-of-Life vehicles
 Published by
Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH,
New Delhi
Chintan Environmental Research and Action Group

Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH

Indo German Environment Partnership (IGEP) Programme
Third Floor, B-5/2 Safdarjung Enclave
New Delhi 110 029, India
T: +91 11 49495353
F: +91 11 49495391
E: [email protected]
I: www.giz.de, www.igep.com

Chintan Environmental Research and Action Group

C-14 Lajpat Nagar, Second Floor, Part III.
New Delhi- 110 024. India
T: +91-11-46574171, 46574172
F: +91-11-46574174
E: [email protected]
I: www.chintan-india.org

Authors
Dr. Ashish Chaturvedi, GIZ-IGEP
Dr. Rachna Arora, GIZ-IGEP
Bharati Chaturvedi, Chintan
Aiden Short, Chintan

Acknowledgements
This report would not have been possible without the cooperation
of all survey respondents. We would also like to thank the surveyors
who visited all the areas mentioned in the report in order to collect
the valuable data hereafter analyzed. Chintan worked closely with
Gautam Mehra and his team at Strategos. All maps used in the
report have been sourced from Google Maps.

92
Copyright notice
© Copyright 2012, Chintan Environmental Research and Action Group and Deutsche
Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH Indo German Environment
Partnership (IGEP)

Disclaimer
This document may be freely reviewed, reproduced or translated, in part or whole,
purely on non-profit basis for any non-commercial and development purposes, keeping
the source acknowledged. Authors welcome suggestions on its usage. The information
has been compiled from primary surveys and published references /resources as cited
in the publication. Mention of any company, association or product in this document is
for informational purpose only and does not constitute a recommendation of any sort
by either GIZ or Chintan. We encourage the use of the information in this document to
promote economic, environmental, and social justice. We urge you to quote this report
when you use the information in it and inform us if possible.

New Delhi, June 2012

About Chintan Environmental Research and Action Group

Chintan is a registered non-profit organization with a vision of inclusive, sustainable,
and equitable growth for all. Our mission is to reduce ecological footprints and increase
environmental justice through systemic change brought about through partnerships,
capacity building at the grassroots, advocacy and research, and sustainable, scalable
models on the ground.

About GIZ
The services delivered by the Deutsche Gesellschaft für Internationale Zusammenarbeit
(GIZ) GmbH draws on a wealth of regional and technical expertise and tried and tested
management know-how. As a federal enterprise, we support the German government
in achieving its objectives in the field of international cooperation for sustainable
development. The Indo-German Environment Partnership (IGEP) is a joint programme
of the Ministry of Environment and Forests (MoEF) Government of India and the
German International Cooperation (GIZ) on behalf of the Federal Ministry for Economic
Cooperation and Development, Germany, focusing on urban and industrial environmental
management in India.

93
 Table of Contents

Executive Summary 95

Introduction 96
Aims and Objectives of this Study 99

Methodology 100
The Methodology at Work 102

The Current Landscape 105

Sustainable Development Impacts of the Industry 107
Social Aspects 107
Environmental Aspects 110
Economic Aspects 112

Perspectives 115
Recycler’s Perspective 115
Disposer’s Perspective 116

Key Observations and Recommendations 118

94
Executive Summary

This report summarises the results of two surveys and a number of field- based
research missions carried out in the End-of-Life Vehicles (ELV) industry in Northern
India. The research aims to present a clear picture of what happens to a vehicle in
India at the end of its life-cycle. As a first step, a schematic materials flow has been
developed through a participatory process with users, dismantlers, and recyclers.
The study shows that the ELV industry consists of many different participants, who
constantly interact with each other in a complex, interdependent process. The
study provides a better understanding of the economics of the recycling of ELVs in
India, as well as an insight into the attitudes, knowledge, and practices of the ELV
handlers. The major focus of the study is the economic, environmental, and social
challenges that emanate from a change in status quo. For the environmental issues,
the report identifies a number
of different individual vehicle
parts as either waste (i.e.,
cannot be reused or recycled)
or posing environmental danger
(i.e., toxic to either humans
or wildlife), according to the
way they are currently treated
by the informal sector. The
report ends by presenting a
series of recommendations on
how to improve the resource
efficiency of the ELV industry
in India. It proposes a system to
recognise and formalise the work
of a currently largely informal sector, and ways for vehicle manufacturers to take
responsibility for the products they release in the market.

95
 Introduction

This study is based on the need to enhance resource efficiency, and thus tap valuable
gains, in the End-of-Life Vehicle (ELV) industry in India. End-of-life vehicles contain many
materials and parts that can be refurbished and reused, thereby producing an important
opportunity for clear gains in resource efficiency. A wide range of materials, from valuable
metals to low grade used oils, are available from an end-of-life vehicle. Understanding
the flow of these materials is critical to improving their efficient use. In the EU, which
has been collecting data on ELVs for a relatively long period of time, more than 85 per
cent of a vehicle’s weight is recovered, recycled or reused, according to Eurostat data.

Currently in India, the management of ELVs is essentially left to an informal and

unregulated sector. It does, however, interact with the formal sector, especially in the
field of scrap metal and other high-value, low-toxicity materials. The materials that stay
within the informal sector through their recovery life-cycle tend to be of the lowest
value and most highly toxic, due to the lack of interest for these materials from the
formal sector. Although the informal sector is often seen as highly efficient in resource
recovery, it is also known for its lack of record-keeping and, therefore, its inability to
monitor and display performance and get credit for its work. Also, given the nature of
their practices, the informal sector is not always environmentally benign, especially with
regard to material recovery.

This study aims to provide a much-needed insight into the current system of ELV
processing. Results from a series of surveys of both vehicle disposers and ELV traders
and processors identify the main participants in the industry and the most prevalent
ways in which they interact with each other. Understanding these interactions is
essential to forming a basis of intervention policies that will affect the efficiency and
sustainability of the sector. The trader survey provides data to map the flow of material
between different participants within the industry. The main priority of the survey is to
understand how and where hazardous materials are traded and under what conditions

96
they are treated. Second to hazardous and toxic materials, the next priority is to

The Story of a Dying Car in India Introduction

identify components for which there is no potential reuse. Parts that do not currently
have a market, for example, or that cannot be extracted from the ELV without damage,
due to possible technical limitations, need to be identified. This data will provide
evidence that can be used to prioritise intervention strategies within the industry.

The end-user survey provides an understanding of the decision-making and planning in

vehicle disposal, and how the vehicle can then enter the ELV dismantling industry. The
survey also provides insights into consumer awareness of the social and environmental
issues involved in ELV disposal. Understanding the correlation between stated desires
(e.g., environmental concerns, best value for money, etc.) and actual disposal methods
will provide data on whether greater information dissemination is required to marry
people’s intended outcomes with the actual disposal of the vehicle.

The Indian vehicle industry is growing exponentially every year. More importantly,
this growth trend began nearly twenty years ago, suggesting that the demand for
ELV treatment will start to show a similar trend in the next few years. It is essential,
therefore, to understand this industry, in order to ensure that policy makers have
adequate evidence to base the crucial decisions they will need to make, for efficient and
sustainable economic growth in the future.

Some companies doing business in India, particularly in the electronics sector, have
begun to adhere to the concept of Extended Producer Responsibility (EPR) as a result of
legislation, whereby the initial manufacturer of a product is responsible for the proper
disposal of their product at the end of its usable life. This spirit is also behind the
initiative of the Ministry of Heavy Industries and Public Enterprises initiative of creating
an ELV recycling centre in Chennai under the auspices of the National Automotive
Testing and R&D Infrastructure Project (NATRIP). This public initiative is set up in
direct cooperation with, and strong involvement of, the Society of Indian Automobile
Manufacturers (SIAM), which supported while drawing up specifications and layouts for
the various components of the unit. However, the legal support for such an initiative in
the ELV sector is still missing.

In the ELV industry, the disposal challenge is compounded by the high value embodied in
a lot of the “waste” created by an ELV. Large companies are, therefore, attempting to
become involved in recuperating valuable material from their own products. They are
interested in developing the reverse logistics based on experiences in other countries
around the world.

The Indian economy has been on a steady growth path since the late 1980s. According to
World Bank data, the average GDP increased more than 6.2 percent from 1980 to 2011 1.
The growth of the economy has fuelled a huge drive in urbanisation. The combination of

1 World Bank DataBank, accessed on 07-12-2012, analysed in house.

97
 higher incomes and changing lifestyles have affected consumer choices and resulted in
The Story of a Dying Car in India Introduction

an exponential increase in the purchase and ownership of motorised vehicles, as seen in

Figure 1 below.

Vehicle population has grown at a spectacular

rate of 9% since economic liberalization in 1991.

Figure 1: Vehicle Ownership in India.

Source: Indian Automotive Aftermarket Study book 2011

The majority of these vehicles are two-wheelers, as shown in Figure 2 below.

PV: Private Vehicle

CV: Commercial Vehicle
3Ws: Three-Wheelers
2Ws: Two-Wheelers

Figure 2: Vehicle Park Market Share in India.

Source: Indian Automotive Aftermarket Study book 2011

The Current ELV Market Reminiscent of the Solid Waste Market

The management of municipal solid waste, known to most of us as “rubbish”, “garbage”
or “trash”, has changed drastically in the past 20 years. Several comparisons can be
made between the ELV industry of today and that of the municipal waste industry 20
years ago. Just like ELVs today, municipal waste management used to be dominated

98
by an unregulated informal sector, uncontrolled by any central policy to monitor their

The Story of a Dying Car in India Introduction

behaviour. Over time, the private sector has become involved in waste management,
drawn by its increased profit margins and legislative changes. In some areas the
transition has been positive for the environment and society in general. In most cases,
however, this transition has not been effectively managed, resulting in a loss of inherent
efficiency in the informal sector. Avoiding mistakes made in such situations will ensure a
smooth transition to a more formal and better regulated ELV sector.

By drawing on these parallels, it will be possible to frame an efficient strategy to move

from an unregulated ELV disposal system to a regulated, clean, and socially inclusive
system. Further, some of the mistakes made in the Solid Waste Management sector, such
as unnecessarily favouring large corporations with little experience over small dealers
with specialised, first-hand knowledge and expertise, can be avoided.

Aims and Objectives of this Study

This study aims to take a snapshot of the current ELV dismantling sector in North India,
to assist policy makers with empirical data for their regulatory decision-making. The
study will focus on the people and materials involved in the dismantling and recycling
of an ELV. A process map will outline the interactions of the different participants.
This will provide policy makers with the data needed to understand those who are
affected by their decisions. Secondly, the study will compile a list of toxic materials
that are currently not being dealt with appropriately. This will highlight the areas of
the ELV industry that require immediate attention and action, because of the adverse
effects that current procedures pose to human health and the environment. Lastly, a
“Knowledge, Attitude and Practices” (KAP) survey of actual car users and disposers will
show how final users make their vehicle disposal decision and in what manner they get
rid of their cars. This will allow an understanding of the extent to which final disposers
need to be involved and/or the incentives that need to be provided in any policies
relating to the ELV sector. The study will then conclude with a set of recommendations
for new policies, and areas of action for policy makers which would improve resource
recovery and overall sustainability of the ELV sector.

99
 Methodology

Information for this study was gathered through both qualitative and quantitative data
collection methods. This methodology was based on the need to document an industry
which has been operating with little or no records for many years.

The literature survey presents a broader picture of the industry. It highlights other
parts of the world where the situation may be very similar to the current Indian context,
or could be made similar in certain ways after the implementation of recommended
policies.

The literature review was followed by a number of open-ended discussions in the

field. These discussions gave the research team a basic understanding of the various
participants, their specialisations, locations, and their interactions with each other,
thereby creating the work-flow process map of the industry.

These two techniques, outlined above, make up the qualitative section of the study.
Together, they provide the quantitative aspects, described below, to be executed.

A trader survey was conducted by interviewing a sample of those identified during

the informal interactions in putting together the process map. This allowed the team
to understand exactly which parts of the vehicle a specific participant would work
on. A list of priority materials to be addressed in order of their toxicity could then
be created. A database of most recent disposers was also created as a result of the
trader surveys.

The recent disposers were then interviewed to better understand their knowledge,
attitude, and practices with regard to disposing of a vehicle.

100
 The Story of a Dying Car in India Methodology
Process Map Disposer
• Similar current contexts of Participants • Understand economics of Survey
• Preferred achievable the ELV business
contexts • Understanding interactions • Find out list of waste and • Understand Knowledge,
in the industry hazardous parts Attitudes, and Practices of
• Connect with major recent disposers
participants in a particular
geographical area
Literature
Review Trader Survey

Qualitative Field-Based Informal Discussions

Informal discussions were carried out in the field to gain a basic overview of the
entire ELV dismantling process. These discussions laid the foundation for the study
team to understand some basics of the work-flow process and, therefore, frame the
questionnaires for subsequent surveys in a more effective manner. These investigations
resulted in information-gathering about the processes involved in various material
extraction procedures. The fact-finding team was experienced in recognising processes
likely to produce toxic, hazardous outputs and by-products.

Chintan used its own linkages with the informal sector to uncover trading and
dismantling links within the informal sector. However, most of the chain and the trade
was understood by asking each trader about his contacts, business linkages, and a
request for an introduction to such persons. This ‘mapping’ helped to follow a less known
trade and the informal sector within it, as well as build credibility and a relationship in a
short time. Using this research methodology, researchers were directed to Najibabad, for
example, that was not part of the original plan (see Figure 3).

Quantitative Trader Survey

First, traders were separated into two distinct classes -- formal and informal traders.
The distinction between the two groups was based on three criteria. If a trader
possessed all three of the following prerequisites, they were considered “formal”:

• A mailing address
• A land line number
• A permanent housing structure

If any of the above was not available, the traders were considered “informal traders”.
The following sections show that the data collected from these two data sets did not
differ statistically. It has become obvious from field observations that this is due to
the lack of a formal recycling system integrating all the materials involved. As a result

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 of the absence of such a system, participants who fit the criteria of formality interact
The Story of a Dying Car in India Methodology

with the informal sector that they operate in a near identical fashion. As part of the
questionnaire, traders were asked to provide contact details to at least three people or
organisations from whom they had recently bought an ELV. This list of contacts was then
used as part of the survey subsequently described.

Quantitative Final User/Disposer Survey

The traders interviewed in the previous survey provided contact details for 510 recent
disposers, including individual car owners and organisational fleet managers. They were
interviewed and asked to
answer the questionnaire. This
questionnaire collected data
on the respondent’s profile,
their reasons and means of
disposing of their old vehicle,
and on their attitude towards
the disposal of their vehicle.
In determining attitude, this
study focuses on the concepts
of value for money, knowledge
of environmental burden,
and acceptance of the formal
sector’s importance in the ELV
industry.

The Methodology at Work

Identifying a dismantling platform
ELVs themselves, but to a greater extent, the parts extracted from them, are traded
across regional boundaries. This seems to be due to the huge number and variety of
parts that comprise an ELV -- some require a high level of specialisation and aggregation
to extract their value. Particular “trading platforms” can, therefore, be identified and
mapped out according to the general geographical area, across which the parts of one
ELV are traded. These are, obviously, not clearly defined and overlap, but this study has
tried to capture as much of the trade in one of these platforms by focusing its research
on five major cities in Delhi and Uttar Pradesh. A snapshot of another platform was taken
by conducting some research in Kolkata.

The survey was conducted in seven major cities of North India: Delhi, Manesar, Kolkata,
and Lucknow, Meerut, Moradabad, and Nazibabad, in Western Uttar Pradesh. Interactive
sessions using standardised questionnaires were used to interview the owners or

102
managers of dismantling, reprocessing, or repairing units in these areas. The areas in

The Story of a Dying Car in India Methodology

Delhi and Western Uttar Pradesh were chosen in order to capture all the data from one
“dismantling platform”. Kolkata was chosen in order to get a snapshot of different ELV
platforms, which require additional study.

Figure 3: Cities in which the ELV Survey was conducted

Delhi Survey Areas

The Delhi survey involved sampling in eight different areas (see Figure 4), with details
on their size in Table 1

Figure 4: Delhi Survey Areas

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 Table 1 Survey Area Details
The Story of a Dying Car in India Methodology

Number of Units Operating in

City Survey Area
the ELV Industry
Mayapuri 3000
Gokul Puri 90
Jama Masjid 68
Abul Fazal 6
Delhi
Punjabi Bagh 5
Karam Pura 4
Karol Bagh 3
Gehvra Mor 2
Chatriwala Peer 15
Meerut
Soti Ganj 55
Kolkata Phool Bagan 1000
Nazibabad Kabari Bazaar 150
Landgey ki Puliya 100
Nawabpura Only informal Discussions
Moradabad
Karaula Only informal Discussions
Transport Nagar Only informal Discussions

Source: Chintan fact-finding mission, part of a Delhi Pollution Control Board assignment, 2011.

Figure 5: Trader survey samples: Geographical spread

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The Current Landscape

The Automotive Recyclers Association published a report on End-of-Life Vehicles

Worldwide in 2012, which clearly describes the industry2. This report underscores many
of the existing best practices and key challenges faced by the industry.

According to the report, more than 100,000 family units are involved in ELV dismantling
in India, usually organised around informal centres specialised in particular tasks. These
units were originally formed around the outskirts of major towns, but have now been
integrated into highly densely populated areas as a result of the explosive expansion of
urban cities in India. The informal sector performs a critical role in recovering valuable
resources from ELVs and is surprisingly efficient in doing so. It, however, does not adhere
to any particular environmental norms and is responsible for large amounts of toxic
compound releases into the air, ground and water. Guidelines need to be issued and
enforced alongside a strategy to ensure the sector remains efficient whilst incorporating
all modern social and environmental legislation.

Best-Practices: Treatment of ELVs in Other Countries

European Union
The European Union (EU) was the first to initiate regulatory legislation on ELV recycling
with the Directive 2000/53/EC of the European Parliament, on 18 September 2000. The
Directive was designed to reduce the amount of landfill space required for ELV disposal,
while ensuring a uniform treatment schedule across all member states. It also includes
provisions to eliminate leakage of hazardous compounds from the treatment system, by
introducing an EU-wide certificate of destruction (CoD), required for a vehicle owner to
stop paying registration and road tax, if applicable in their member state.

2 Automotive Recyclers Association. 2012. End-of-Life Vehicles Worldwide. Retrieved on 7

December, 2012 from: http://www.a-r-a.org/article.asp?paper=102&cat=166&article=804

105
 The directive includes major stakeholders, such as manufacturers, in the process.
The Story of a Dying Car in India The Current Landscape

Manufacturers are required to provide dismantlers with specific dismantling information

for their vehicles, particularly for hazardous parts.3

Japan
Japan also moved early with an ELV Recycling Law in 2002. It holds similar provisions to
the EU Directive, but goes one step further in applying “the polluter pays” principle.
Indeed, vehicle manufacturers and importers are tasked with creating reverse logistics
systems for any parts and components that are not recyclable or reusable. These
include Automobile Shredding Residue (ASR), airbags and chloro-fluorocarbons (CFCs).
Manufacturers and importers are not simply in charge of collecting these materials but
must also organise and fund their safe dismantling.

As a result of this regulation, the cost of recycling a vehicle is absorbed by the industry.
This has pushed the industry to take disposal costs into account when designing and
manufacturing new vehicles.4

3 Official Journal of the European Communities. 2000. DIRECTIVE 2000/53/EC OF THE EUROPEAN
PARLIAMENT AND OF THE COUNCIL,18 September 2000, on end-of life vehicles (OJ L 269 ,
21.10.2000, p. 34)
4 US EPA. 2008. Recycling and Reuse: End-of-Life Vehicles and Producer Responsibility. Retrieved
on 11 December, 2012, from: http://www.epa.gov/oswer/international/factsheets/200811_elv_
directive.htm#ASIA

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Sustainable Development

The Story of a Dying Car in India The Current Landscape

Impacts of the Industry
We now outline the sustainable development impacts of the current processes of ELV
recycling by outlining the social, environmental and economic aspects in turn.

Social Aspects

Note: Field surveys showed there was a distinction between certain disposers who would always sell
all their ELVs at auction and others who would sometimes need to sell only one ELV to a workshop.
The distinction was based on size, but it was not possible to put a number on it.

The figure above shows the interaction between the different participants in the disposal
of End-of-Life Vehicles. It has been created based on information collected during the
field research as described in the methodology chapter.

The process map shows a diverse interaction between participants within the industry.
First, disposers can be categorised based on their disposal practice. Bulk disposers,
such as government transport agencies operating large fleets, always sell at auction.
Individual disposers, however, would only have access to vehicle showrooms where
they would return their old vehicle in exchange for a discount on a new one, or to local
dismantlers. Between these two types of disposers are the medium-size disposers who
would sometimes have enough ELVs to bring to auction, but would, most often, have to
turn to automobile workshops.

107
 Whether it goes to auction, a workshop, or a showroom, an ELV always has to go through
The Story of a Dying Car in India The Current Landscape

a dismantler, the cornerstone in this whole interaction. Dismantlers, then, redirect the
different parts either to a scrap dealer for reuse, to recyclers, or simply dispose of the
product in an uncontrolled and unregulated fashion.

Through the surveys, it has been possible to quantify the interaction described above. It
is important to realise, however, that the entire process is highly dynamic and complex,
and it responds to a number of different market signals and pressures. The whole system
is highly efficient, and all the key participants have a strong ability to respond quickly to
market changes.

Vehicle Sourcing
In the flowchart, the main participants surveyed, who provide valuable data, are marked
“dismantlers”. The results show that they, like other parts of the flowchart, have a
complex interaction schedule with other participants. Most individual dismantlers, for
example, source their vehicles from more than one of the possible sources described in
the chart. It seems, however, that the largest source of vehicles for these dismantlers
is individual disposers who contact them directly. Indeed, 89 percent of dismantlers
claimed that people come straight to them to dispose of their ELV. Forty-two percent
claim they also buy vehicles by independently approaching mechanics, showrooms, and
workshops. In addition, only 15 percent claim to go to vehicle auctions. Obviously, these
percentages do not add up to 100, as respondents were encouraged to give more than
one answer when applicable.

The data shows that most participants in the market, including disposers, are aware of
the value of their ELVs and know where they can take them in order to extract their full
value.

Dismantled Parts Use

The data shows that dismantlers seem to naturally follow some major parts of the waste
hierarchy, whereby waste reduction is given priority over reuse, and reuse is given
priority over recycling. When asked what the respondents did with a purchased vehicle,
39 per cent claimed they simply fix or replace various parts and resell it as a working
vehicle. This segment of respondents says they source the parts they use in these
refurbished vehicles from other ELVs which they dismantle themselves. This practice is
possibly enhanced by the behaviour of disposers, as described in the following chapter
on Perspectives, where a large percentage have decided to dispose of their vehicles
simply through a consumer desire for a newer version, rather than any specific technical
issue with the vehicle. Consumers are, therefore, buying two or more identical or similar
vehicles, using parts from one to fix others, selling refurbished, operable vehicles, then
recycling the unusable parts from each vehicle.

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Another 22 percent of the respondents say they are able to sell damaged parts to

The Story of a Dying Car in India The Current Landscape

specialised refurbishers. This practice allows for resources to be efficiently utilised, with
very little waste being generated. Indeed, only 13 percent of respondents claim there
were certain parts of a vehicle for which they could find no resale value.

The survey shed light on another interesting component of the geographical nature
of the ELV dismantling and recycling demographic. Certain cities have specialised in
the appropriate treatment and recycling of particular parts and materials. This is the
case, for example, of all oil recycling in Meerut, whereas all the steel parts are sent
to Muzaffar Nagar for further treatment. In fact, the only system closely resembling
a closed loop system was discovered during the survey of the Uttar Pradesh Roadways
system for government vehicles. This system was on enough of a large scale to
incorporate all the elements of the recycling and treatment process, without having to
resort to further treatment outside their area. All parts were bought, traded, and reused
locally by local traders and mechanics. The large quantity of ELV waste from the UP
Roadways allowed for a comprehensive ecosystem to exist in one area.

Box 1: Medium and Bulk Disposers:

A Case Study in Moradabad

Three neighbourhoods were surveyed in this city: Langdey ki Puliya, Darshimhal

Ghat, and Karaula. It quickly became apparent that the informal sector has
a highly-strained relationship with the police in Moradabad, highlighted by a
recent incident involving some stolen cars.

Overall, in the three areas, there is a clear distinction between large-scale

dealers, organised into a more formal association, and small-scale dealers,
who struggle to manage the bureaucratic process. The small dealers have to
often struggle with proof of ownership of the cars they bought, regular police
crackdowns, and the need to have greater organisational structures so they can
develop and evolve into more recognised groups.

Langdey ki Pulliya is a center for dismantlers. The vehicles are procured in

large part through auctions involving bulk dealers. Reusable parts are then be
removed and sold directly to scrap dealers.

Non-reusable parts are sold on to small family units in Darshimhal Ghat and
Karaula. Each of these units tends to specialise in the recycling or extraction of
one particular part or unit. Many of these processes involve dangerously caustic
materials and generally unhealthy working conditions.

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 Environmental Aspects
The Story of a Dying Car in India The Current Landscape

Each ELV is dismantled into thousands, even tens of thousands, of different individual
parts, each with its own distinctive market and environmental burden. For the purposes
of clarity and effectiveness, this study focuses on a selected number of ELV components
based on considerations of their toxicity and waste. These components are broken
down into simple categories, fluids on one side and solids on the other. Further to these
toxic parts, the economics of non-toxic, more valuable parts was studied in order to
understand the major source of revenue generation for dismantlers.

Fluids
The fluids used in the operation of a vehicle are inherently toxic and are, therefore,
chosen as a subject of more detailed study in this report. From basic engine oil to brake
fluids and hydraulic fluids, through AC gas and battery acid, there are a multitude of
environmental hazards involved in the removal and recovery of these liquids. Table 2
presents the results of the fact-finding mis\sions concerning the fate of these liquids.

Table 2: Fluid Parts of an ELV and their Disposal Method

Fluid Disposal Method

Drained or sold to the vendors. Oils are sold at Rs. 25/L. The
collected oils are either sold to furnaces or small informal
refineries. The vendors sell them on to informal refinery
units. The refined oil is either packed and resold into the
Engine Oil
market, or sold loose and adulterated. The unrefined oil
is sold for application on cog wheels in machines, such as
crushers or bucket wheels, for lubricating crane wires, and
also burned in furnaces or boiler for generation of heat.
Transmission All of these oils are mixed together and “refined” by
Coolant Fluid heating. They are then mixed with a viscosity amending
chemical which allows the solidified mix to be used for the
Power Steering Fluid
lubrication of cogs. There are some traders who do not have
Brake Fluid
the necessary scale to produce this lubricant themselves
Hydraulic Fluid so sell it on, or alternatively, in rare cases, drain it to the
Gear Oil ground.

Battery Acid Drained

A.C. -Gas Released into the air

These are toxic and require careful handling, and can cause soil and groundwater
contamination if improperly disposed5

5 http://www.nrdc.org/water/pollution/gsteps.asp

110
Solids

The Story of a Dying Car in India The Current Landscape

As stated above, an ELV can be dismantled into an almost endless list of individual parts.
The selection in Table 3 is chosen based on the hazardous nature of the embedded
chemical components or the process involved in their extraction.

Table 3: Solid parts of an ELV containing hazardous compounds and

their disposal and recycling methods

Solid Part Disposal and Recycling Method

Air Filter If the air filter cannot be reused directly, the ferrous parts are sold to
kabaris for Rs. 15 - 18 per Kg and the foams are burned or dumped.
Key Toxicity: Foams are made up of polyurethene which release
potentially hazardous dioxins when burned.
Oil Filter Non-working oil filters are sold to scrap dealers. First, paper from the
filter is removed - dumped or burned. Metallic parts are sold to kabaris
for Rs. 15-22 per Kg, which is then sent to the recyclers for Rs. 25 per Kg.
Key Toxicity: Residue oil and toxic particles released to ground and air
from dumping and burning the filter paper.
Brake Shoe Brake shoes often contain a asbestos traces, sometimes equivalent
to 20 percent of the weight of the shoe. The asbestos is removed and
dumped, while the metallic part is sold to kabaris, which is then sent
for recycling. Scrap dealers sell these metal brake parts to recyclers.
The ferrous brakes are sold for Rs. 23-30 per Kg, while aluminium
brakes are sold for Rs. 70-90 per Kg. The metal recycling sites in Delhi
are Mandoli, Sahadara, Samaypur Badali, and Anand Parbat.
Key Toxicity: Asbestos fibres cause asbestosis, various other lung
disorders, and even lung cancer.
Battery Metal parts of battery terminals are sent for recycling and sold to scrap
Terminal dealers for Rs. 20-25 per Kg. The ferrous metals are sold at Rs. 23-28
per Kg and brass or copper is sold for approximately Rs. 100-200 per Kg.
Key Toxicity: Copper is extracted using acid, which causes pollution and
affects the respiratory and dermal system of workers and others living
nearby.
Switch Non-functional switches are dumped by automobile parts dealers.
They are picked up by street waste pickers who usually break them to
recover the metal parts. Brass or Copper is sold for Rs. 100-200 per Kg.
whereas ferrous parts are sold at Rs. 23-25 per Kg.
Key Toxicity: Switches contain toxic mercury which is released into the
environment.

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The Story of a Dying Car in India The Current Landscape

Rubber Most of the rubber parts are dumped and some of them are picked up
by street waste-pickers and sent for recycling. They are then sold to big
recyclers at Rs. 2-5 per Kg.

Key Toxicity: Rubber is used in furnaces, emitting several pollutants.

Clutch Clutch-discs can often be repaired and reused. Non-functioning clutch
Discs discs are broken to remove the asbestos layer which is dumped. Ferrous
parts are sold at 23-28 per Kg to kabaris, which are then sold to
recyclers through big scrap traders.
Key Toxicity: Asbestos is dumped on the ground, or at best, in municipal
dumps, exposing the public at large to this highly toxic material which
causes asbestosis, various lung disorders, and even lung cancer.
Electronic Electronic parts, such as circuits, are sold to e-waste collectors, where
Parts they are tested for reuse. Parts, including PCB, are sold for Rs. 40 per
Kg. Working parts are taken out and sold to refurbishers, and price
variation depends on the working components that can be as expensive
as Rs. 200 per Kg. Waste components are sold to e-waste dismantlers
and recyclers.
Key Toxicity: Extraction of precious metals is typically not done in an
environmentally-safe manner.

Wasted Parts
The following histogram shows specific parts of an ELV that are called problem parts
by most dismantlers. These parts are of particular interest, as they are currently being
disposed of and are, therefore, entering a waste stream, thereby representing resource
inefficiency. Depending on the
geographical area in which
these parts are disposed of,
and the quality of the waste
collection systems in those
areas, they may reach a
landfill, a waste-to-energy
plant, or they may remain in
the environment.
Figure 6: Unused or Wasted Parts of an End-of-Life Vehicle
Economic Aspects
Table 4 shows the economics of various parts that most dismantlers have to deal with. It
is important to realise that the price of purchase of the vehicle to be dismantled is not
included in this data. This table shows the disparity in profit margins related to recycling
different vehicle parts. Although a lot of these are based on less than five data points,

112
those with a greater number of data points, such as the piston, show that opportunities

The Story of a Dying Car in India The Current Landscape

of up to 150% margins are possible.

Table 4: The Economics of Various Valuable Parts

Part Name Cost of Selling Price Margin Margin of

Recycling Recycling Cost
Cylinder * 3250 26000 22750 700%
Engine Lock * 18333 55000 36667 200%
Starting Assembly * 13500 40000 26500 196%
Silencer * 13000 33000 20000 154%
Piston 14400 36000 21600 150%
Temperature Meter * 8500 18500 10000 118%
Brake Shoes 14200 26000 11800 83%
Air Duct * 20000 36000 16000 80%
Speedometer * 12000 21000 9000 75%
Wiper * 7000 12000 5000 71%
Oil Pump * 17250 28333 11083 64%
Hydrometer * 9000 14500 5500 61%
Clutch Plate 25200 40500 15300 61%
Axle * 20000 30000 10000 50%
Sensor * 14500 21500 7000 48%
Steering Wheel * 14250 21000 6750 47%
Battery Accessories * 11000 15000 4000 36%
Water Pump * 15000 20000 5000 33%
Gear Box * 26666 35000 8334 31%
Engine 44444 56250 11806 27%

Entries marked with an asterisk (*) represent parts for which five or fewer recyclers
volunteered their prices.

Economics of the ELV Business

The surveys show that the ELV industry is dominated by small businesses operating
on limited capital. Figure 7 shows the breakdown by size of the respondents, clearly
showing that over 70 percent of recyclers have a budget of under Rs. 50,000 per month
for vehicle purchase.

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The Story of a Dying Car in India The Current Landscape

Figure 7: Monthly Budget for Vehicle Purchase Figure 8: Average Cost Breakdown of
Surveyed Dismantlers

Figure 8 shows the high proportion of dismantler costs spent on labour. Such statistics
help to understand the high potential for job creation within this sector.

The Delhi case study explains this further. Across 28 valid observations in the city, a
total of Rs. 417,000 was spent on labour, at an average of Rs. 14,893 per unit. Per the
local minimum wage laws, and the generally understood minimum viable living wages
in Delhi, this sum would allow for two workers to be hired on average. By extrapolating
this data to the 3,200 ELV recycling units in Delhi, as recorded by Chintan in 2011, this
comprises 9,600 jobs, including the labourers described above and the owner of the unit.
It is, therefore, clear that the ELV sector also provides livelihoods, a role that must be
augmented.

114
Perspectives

In this chapter, we capture the perspectives of the two main players in the current
market – the recyclers as well as the disposers. In the absence of any regulation or
policy guidance, the perceptions of these two sets of actors drive the transactions in the
sector.

Recycler’s Perspective
Aside from the data displayed in the Methodology chapter describing the movement
of parts within the industry, the survey also included information concerning the
dismantlers’ knowledge of their own industries and their needs within it.

Outside input
The dismantlers were asked what
type of professional assistance
would be of most use, if they were
to be offered help from an external
agency. Their responses are shown
in Figure 9. Overwhelmingly, 38
percent of the respondents claimed
that space was the main limiting
factor to the expansion of their
business activity. This issue has
come to the fore, because the
Figure 9: Types of Assistance Requested by Respondents
areas that dismantlers have used
traditionally were set up when they were on the outskirts of cities. These sprawling
cities have now engulfed the dismantlers struggling to cope with the density and new
zoning regulations around them.

115
 Another large part (27 percent) of the respondents claimed that loans would provide
The Story of a Dying Car in India Perspectives

them a greater ability to improve their business. Indeed, buying and selling vehicles
is a capital-intensive business, which will be discussed in more detail in the following
section.

A surprisingly small number of respondents claimed that technical knowledge would be

appreciated. Only 18 percent believed they could benefit from training by an external
body. It was clear to researchers on this project that all the participants in the industry
are highly knowledgeable in their own sectors. It was astonishing to see how accurately
and agreeably traders could decide prices for extremely specific parts, sometimes with
variants in the hundreds.

An unexpected request for marketing came from 11 percent of respondents, who

required assistance in bringing some of their parts to a suitable market. One respondent
even claimed that car manufacturers were designing new parts with the intent of
keeping kabaris out of work, through the practice of “planned obsolescence”. In
referring to buses and heavy vehicles, one recycler said, “As TATA gets richer, we
recyclers get poorer.” A certain amount of cooperation in the ELV industry, to ensure that
parts which have reached the end of their life are reused, would be very helpful to the
recovery of resources from vehicles.

Disposer’s Perspective
The study surveyed 550 individuals who had recently disposed of their vehicle through
the channels studied above. These people were asked how much they knew about the
disposal process and different aspects concerning the economics of the process itself.

Disposal Method and Reason

Respondents were asked why they chose to dispose of their vehicle. The majority (54
percent) told us they simply wanted to purchase a new vehicle. This is significant,
because it tells us that a certain number of our data points may not represent ELVs
as per the definition, but may represent vehicles that could or would be reused after
“disposal”. Indeed, this is compounded by data collected through the method of disposal
question. It shows that 54 percent of respondents either exchanged their vehicle for a
discount on a newer vehicle or simply sold their old vehicle to a friend or relative. This
data seems to suggest that disposers only approach mechanics or used vehicle agencies
when their vehicle is damaged or cannot be operated.

Personal Use before Disposal

Respondents were asked how long they had been using their vehicle before disposing
of it. The data shows that 65 percent of respondents had been using their vehicle for

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between three to eight years, this number itself spread perfectly evenly, with 33 percent

The Story of a Dying Car in India Perspectives

in the range of three to five years, and another 32percent for six to eight years.

ELV Value
The following two graphs show the value recovered by the final disposer, broken down
into two-wheeler and four-wheeler categories.

Figure 10: Value recovered by the final Figure 11: Value recovered by the final disposer in
disposer in 2 wheel category 4 wheel category

Value for Money

It is clear that disposers expect to
monetise their ELVs. When asked
whether they felt they received good
value for money from their disposal,
respondents could be categorised
into four main groups, depending
on the method of disposal they
used. Figure 12 shows, as disposers
moved further away from using the
dedicated ELV purchasers, they were
less and less satisfied with the value
for money received for their vehicle.
Figure 12: Value for Money Received for ELV

This data reveals some valuable information. First, as people expect to be paid well, it
is difficult to pass on any increased costs involved in the improved ELV recycling to the
final disposer. Secondly, the data shows us how the consumer is increasingly satisfied as
they deal with more specialised market participants. The specific used vehicle agencies
provide customers with the greatest value for money, also suggesting they are the most
efficient players in the market.

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 Key Observations and
Recommendations

This study of the ELV industry has shed light on some of the complexities involved in
dismantling and recycling ELVs, and we present some recommendations for the future.
These recommendations can be broken into two main sections. First, recognition of
the advantages offered to society by the informal ELV recycling sector, enabled by
formalising and organising the work-flow process and the industry. Second, recognition
by vehicle manufacturers of their responsibility to ensure their products are safely and
efficiently treated at the end of their life, enabled by a program of Extended Producer
Responsibility (EPR), common in many other countries. All these recommendations,
however, have a cross-cutting impact on all three sustainable development goals:
economic, environmental, and social.

Giving Due Credit

The informal sector in India currently ensures very high resource efficiency rates, and
creates employment, in the ELV industry. It is essential, therefore, that mistakes made
during the privatisation of the Municipal Solid Waste Management process, which lead
to considerable losses of efficiency, are not repeated when dealing with ELV disposal.
Recognising, and thereby formalising, the informal sector will allow the ELV industry to
promote its currently efficient recycling process while concurrently allowing it to work
on much-needed areas of improvement.

Facilitating Transfers of Vehicle Ownership

A major concern for ELV dismantlers and traders, especially those acting at smaller
scales, is the bureaucracy involved in proving ownership of the vehicles they purchase.
They spend large amounts of time and money pursuing documents from between
government departments, sometimes in different states, simply to enable them to
recover resources from a discarded vehicle. However, even at the small scale, most of

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these participants are highly technologically literate and capable of using a network-

The Story of a Dying Car in India Key Observations and Recommendations

based solution hosted online.

Chintan and GIZ, therefore, recommend that the Indian government facilitate the roll-
out of a web-based platform to recognise a vehicle trade. Vehicle transfer operations
can then be logged online, increasing efficiency savings in the industry and also allowing
the government to gain a greater understanding of vehicle movements within the
population.

Recognising Space Requirements as part of

Local Urban Planning
Another major concern for the ELV sector is space. By its nature, the sector requires the
presence of different types of participants in close physical proximity to allow efficient
dismantling and reuse of different parts of a vehicle. In so many surveyed areas, the ELV
industry could trace their beginnings to the outskirts of a city a number of decades ago,
but were subsequently surrounded by, and even integrated into, sprawling urbanisation.
This has many implications, both for the industry itself and for the city and its
inhabitants. The sector obviously struggles to process as many vehicles as is necessary,
but the city and its inhabitants are also hindered by the presence of the sector in the
immediate vicinity.

Chintan recommends that the ELV industry be taken into account during the formulation
of all city master plans and other local urban planning policy decisions.

Extended Producer Responsibility (EPR)

Improving the efficiency and efficacy of the work of the ELV sector in India requires
an understanding of the toxic and waste materials that are currently not adequately
treated. This study underscores a number of toxic components that are an integral part
of vehicle components. These components are currently released into the environment
due to a vacuum in both adequate legislation and opportunities to implement the
necessary regulations.

Product Buyback
Chintan and GIZ recommend the introduction of an EPR strategy for the vehicle industry
in India. Companies that produce or sell vehicles for the Indian market should be held
responsible for the appropriate disposal of toxic and waste products from those vehicles,
by forcing them to buy back those products. The reality of the situation dictates that
these products would have to be purchased in order to cover the extra disposal costs
that dismantlers have to incur. Such a market-based approach would also ensure that the
scheme is taken up rapidly and efficiently by ELV participants, as opposed to legislation-
only options.

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 Dismantling training
The Story of a Dying Car in India Key Observations and Recommendations

Although the ELV industry is highly self-trained and knowledgeable about dismantling
current vehicles, some respondents within the industry cited the need for help with
technical training. When questioned further, it was clear these dismantlers were
relating to a struggle to keep up with the increasingly complex parts used by vehicle
manufacturers.

Chintan proposes that the EPR scheme include a focus on training the ELV dismantlers
and recyclers to deal with any new products. In many other countries, vehicle
manufacturers are required to produce detailed dismantling instructions for any vehicle
that they produce. In addition to merely producing such detailed instructions, in India,
these manufacturing companies should be encouraged to take the lead in disseminating
this information.

End-of-Life Vehicles are an economic and environmental challenge in many parts of the
world. In India, this report shows that the situation can be turned into an opportunity
to handle such vehicles, to safeguard the environment, create and upgrade informal
livelihoods, and promote the most efficient and optimal use of components and materials
to support resource efficiency.

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About this Study
Following the phenomenal expansion of the Indian automobile market over the last two
decades, the end-of-life management of vehicles must gain new centrality in debates
about the environment, material efficiency and the labour and social dimensions of
circular economies.

While the informality of the end-of-live vehicle (ELV) sector in India is judged to be
inadequate to meet the challenges of the next decades, very little is known about how
this sector currently operates. This poses a fundamental obstacle in devising effective
policies, and reinforces the stigma attached to informal economies of material
recovery as inefficient, undignified and polluting, in spite of their significant (if
imperfect) contribution to national welfare.

This study follows up a previous 2012 publication by GIZ and Chintan (Annexure 2)
that delved into ELV management in and around Delhi. The present effort draws
a broader and more systematic picture of the ELV sector in India, by looking
at five other major automotive production hubs, and the thriving ELV markets
that developed around them: Kolkata, Chennai, Pune, Jamshedpur and Indore.
By highlighting systemic links and nation-wide challenges, the report offers
insights that will be strategic to design a regulatory and legal framework that
reflects accurately the economic, social and environmental reality of the
Indian ELV landscape.

Central Pollution Control Board

Parivesh Bhavan, East Arjun Nagar, Delhi 110032
T: +91 11 43102207; F: +91 11 22307078
E: [email protected]

Indo-German Environment Partnership (IGEP) Programme

Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH
B 5/2, Safdarjung Enclave, New Delhi 110029, India
Phone: +91-11-4949 5353
Fax: +91-11-49495391
Web: www.igep.in, www.giz.de