Budget's vehicle scrappage policy: How the idea works in other countries

Finance Minister Nirmala Sitharaman announced scrappage policy on Monday in her Budget speech.
Personal vehicles older than 20 years and commercial vehicles more than 15 will be eligible for exchange, according to a new voluntary vehicle scrappage policy Finance Minister Nirmala Sitharaman announced on Monday in her Budget speech.

All such vehicles would have to undergo fitness tests after that period. Here is how scrappage work in some other parts of the world.

Germany: The country has one of the most ambitious scrappage programmes in Europe, incentivising car owners with a $3,320 discount when trading a car older than nine years for a new one. Old cars were not to be re-used but supposed to sent to junkyards. A study by Halle Economic Institute, a think tank, estimated that the German government had to spend $3.5 billion to fund the programme.

USA: The Car Allowance Rebate System (CARS), also known as ‘cash for clunkers’, was meant to be big boost to the US automobile industry and is probably the world’s most famous scrappage scheme. Any vehicle less than 25 years old could be traded in for a new vehicle and get credits of up to $4,500. This amount was to be reduced from the purchase price by the car dealer who in turn would be compensated by the US government. A new vehicle's cost should have been less than $45,000. A long list of cars of various brands was ineligible for the scheme.

Japan: Vehicles older than 13 could be traded for a new car in a scheme introduced by the Japanese government in 2009. Discounts of up to $2500 were given to buyers while buying a new car. Concessions were also offered to those who bought smaller cars in terms of engine displacement and horsepower.

UK: Like much of recession-hit Europe, the UK too introduced a scheme to boost its automobile sector. The financial burden fell equally on the government and the automobile industry. Buyers could trade a vehicle older than 10 years and get up to 2000 GBP discounts on their new car purchase.

Russia: Reports suggest that Russia introduced a vehicle scrappage scheme twice: once in 2010 and another in 2014. Cars older than 10 years could be traded in with discounts on new purchases as high as $1,700. However, the new car purchased should be Russian-made. In the scheme announced in 2014, cars older than six years could be traded. The discounts for new purchases was less than that announced in the previous scrappage policy in 2010.

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel