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Car In, Cube Out: All about Maruti Suzuki-Toyota’s new plant in Noida

The Maruti Suzuki-Toyota Tsusho Group’s new MSTI plant in Noida is a step in the direction of a government-led initiative to institute a circular economy in auto sector. While the economics of the process is still evolving, tax incentives are a draw

Written by Pranav Mukul , Anil Sasi | New Delhi |
Updated: April 10, 2022 1:21:21 pm
Maruti Suzuki, Maruti Suzuki India Ltd, Toyota, Toyota Tsusho Group, MSTI plant, Business news, Indian express business news, Indian express, Indian express news, Current AffairsBodyframes of two Maruti Suzuki cars (right) after being stripped off their parts and components sitting adjacent to the hydraulic baler. On the left, three metallic cubes of car frames after being compressed in the baler. Pranav Mukul

The operator of the baler, a hydraulic press that crushes and shapes the body frame of a car into a metallic cube, says a small prayer as he switches on the machine. In less than a minute, the baler crushes the frame and converts the body shell into a crumpled metal cube — marking the final stage in the process of dismantling end-of-life vehicles (ELVs) at Maruti Suzuki and Toyota Tsusho Group’s new MSTI plant in Noida, on the outskirts of Delhi.

The crushed frame is then sent to steel mills, which process it in a smelter to eventually extract the steel and turn it into billets for use as construction inputs. But steel is not the only material that comes out of a scrapped car. Other major components include aluminium and copper, in addition to parts such as batteries and electronic systems that the company sells to recyclers as is.

The plant is a step in the direction of a government-led initiative to institute a circular economy in the auto sector, primarily with the aim of moving the end-of-life disposal of cars from a largely unorganised set-up to the organised side to ensure environment-friendly dismantling of these ELVs.

The Noida-Greater Noida belt is emerging as a hub, with the 10,993-sq m Maruti Suzuki-Toyota Tsusho facility that has a capacity to scrap and recycle over 24,000 ELVs annually falling within 10 km of MMRPL, a joint venture between Mahindra and state-owned MSTC Limited, which set up one of India’s first auto shredded plant operating out of Greater Noida in a campus spread across five acres.

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Under the government policy, automated testing stations and scrapping facilities such as the MSTI and MMRPL are to be set up in phases, with plans to set up 50–70 facilities for scrapping vehicles in the next 4–5 years. The policy proposes a number of incentives for vehicle scrappage including a 5 per cent rebate on new vehicle purchase, an up to 25 per cent discount on road tax and a waiver of vehicle registration fee.

Effective April 1, the government has notified the concession on motor vehicle tax for the vehicle registered against submission of “certificate of deposit”.

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While the remaining incentives are yet to be announced, they are expected to be among the key drivers initially leading owners of ELVs to organised scrappage units instead of simply discarding the cars by parking them on the streets of a city or taking them to unorganised vehicle scrappers — who typically have better economics on the process than their formalised counterparts.

From a sentimental point of view, a car being torn down and then crushed into a cube of metal is generally perceived as a painful visual experience for owners.

But the first car that rolled into the MSTI facility — a red WagonR — was driven in by Atul Jain, a Noida-based legal professional, quite enthusiastically, replete with dhol players to add to the atmospherics. Stories of both Jain and the MSTI baler operator are proofs that Indians attach an emotional value to their vehicles, particularly those they owned for more than a decade.

The incentives in the form of tax waivers is a big draw, but some of this still is in the process of being worked out in practical terms.

Explained

Hurdles remain

Among the biggest challenges that formalised vehicle scrappage units face is the competition from their informal counterparts, who derive better economics by deploying a less meticulous process. For formal units to be sustainable in the long-run, MSTI officials said, a minimum scale of operation will be necessary. And for more people to bring their vehicles to these units, several different stakeholders — including the Centre, state governments and auto manufacturers — will have to come to an agreement over the incentives being provided. Recycling of end-of-life vehicles also promises a greater contribution to the circular economy, and potential recycling of high value goods like semiconductors raw materials in the future.

There are four main processes:

Vehicle collection: These end-of-life vehicles are either collected from the customer’s house and brought to the scrapping facility in Noida, like Jain’s WagonR, or sourced through dealers.

Depollution: After the removal of battery, engine oil, transmission oil, brake oil, coolant are drained with zero waste; freon AC gas is recovered from the vehicle without any discharge to the atmosphere. That’s where the scrapping facilities in the organised sector are markedly different from the ones operating in the unorganised sector, where much of these oils and gases are largely released into the open.

Dismantling: All parts except body shell are progressively removed: the engine, transmission, and all body parts, panels, plastic components, glasses suspension parts, muffler etc. The chassis number is cut and preserved as per government guidelines.

Extraction of recycled materials: Materials are segregated into ferrous, non-ferrous, plastic and disposed to authorised recyclers. The body frame, once crushed by the baler, is then dispatched to steel mills.

The economics of the process is still evolving, and would need policy support to bridge the pricing advantage that the unorganised segment enjoys. While the price varies between Rs 25,000 to Rs 80,000 per vehicle that MSTI pays to owners, the unorganised sector tends to pay more. But the catch is the incentive on the new vehicle, which, according to MSTI managing director Masaru Akaishi, is a bigger draw for customers. Apart from owners getting scrap value equivalent of around 3-5 per cent of ex-showroom price of new vehicles, there is the provision of zero registration fee for new vehicle purchase.

States are also being persuaded to give up to 25 per cent and 15 per cent rebate on road tax for personal and commercial vehicles, respectively, but a lot of these proposals are still on the table. There’s a push to manufacturers to give up to 5 per cent discount for buying new vehicles, which is tricky for carmakers at a time when input pricing pressure is straining margins.

According to the Ministry of Road Transport and Highways, India has an estimated two crore vehicles that are older than 20 years, with the most in Karnataka, followed by Delhi, Uttar Pradesh, Kerala, Tamil Nadu and Punjab. Most of the organised scrapping hubs are coming up around auto hubs, like Noida-Greater Noida and the Gujarat automotive belt.

According to the Union Government, there are nine vehicle scrapping centres functional in the formal sector — eight in the Delhi area and one in Chennai.

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