Tata Motors looks to establish vehicle scrappage centres under franchise

Tata Motors is looking to establish vehicle scrappage centres under a franchise set up with the first one expected to become operational in the first quarter of the next fiscal, a top company official said on Wednesday.

The auto major earlier this year had joined hands with the Gujarat government to support setting up of a vehicle scrappage facility at Ahmedabad in Gujarat.

"Today, it appears that about 25,000 trucks are dismantled every year in the country and we do not have proper systematic scrappage facilities. Now, we have tied up with a European expert and with his help, we have made a model scrapping centre.

"So, we have created this model, and this model we are going to deploy through franchise arrangement," Tata Motors Executive Director and President (Commercial Vehicles) Girish Wagh told reporters in an online press conference.

The company has already started sending out a letter of intent (LOI) to the franchise partners to set up the scrappage facilities, he added.

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"We should see the first one coming in the beginning of the next financial year," Wagh said when asked about the timelines for the start of the initiative.

He noted that the government is also quite keen regarding the setting up of the facilities as they see it is an employment generation opportunity.

The Ahmedabad-based scrappage centre, which will be for both passenger and commercial vehicles, will have a capacity to recycle up to 36,000 vehicles a year.

Tata Motors is setting up the centre in partnership with a partner.

When asked about the commercial vehicles sales outlook for the current fiscal, Wagh said, "In the first (quarter), the industry grew by 44 per cent and we grew more than the industry as our market share improved. We expect that GDP growth should be around 9-10 per cent this year as indicated by the RBI, we expect the industry to grow by about 20 per cent over the last year."

He added that the industry size should be around 7 lakh units and "we will continue with our market share growth".

He, however, noted that the growth seen this fiscal has so far been on a low base of COVID-19 hit last year and the industry is still far away from its peak levels witnessed a few years ago.

Wagh said that various headwinds like high commodity and fuel prices and chip shortage continue to impact the business.

"Increase in fuel prices has led to an increase in CNG vehicle sales. Today, in the intermediate and light commercial vehicles, more than 40 per cent of our portfolio has in fact migrated to CNG in a short period of time," he added.

On chip shortage, he noted that the company is dealing with the issue on a day-to-day basis and added that there could be an impact on the company's production of small commercial vehicles and intermediate commercial vehicles going ahead.

Wagh said that probably, the worst is over for the sector and there could be growth in the coming days.

"Going ahead, we (commercial vehicles business) should see strong growth. We have scratched the bottom and should start moving towards the next peak and this is generally being driven by mining, infrastructure growth, construction, overall consumption, e-commerce and also the growth of the rural economy.

"All these are leading to improvement in volumes on a year-on-year basis," Wagh said.

The auto major, which is the leading player in the domestic commercial vehicle segment, is looking to roll out new products, including electric and CNG versions of various models in order to cater to various sectors.