Mahindra to build India's first automobile shredding plant

A unit of autos-to-technology group Mahindra intends to set up a network of automobile shredding plants, an executive told Reuters on Thursday after announcing plans to build India's first such facility with a state firm.

India is considering introducing a policy to scrap old vehicles, like the cash-for-clunkers programme the United States tried during the global economic recession to boost auto sales.

India also plans to enforce stricter vehicular emission rules, potentially opening up an opportunity for companies like Mahindra, India's top utility vehicle maker by sales with a market capitalisation of $17 billion, to recycle older cars and trucks.

Mahindra Intertrade will set up the first plant in partnership with state-controlled MSTC Ltd near a port, aiming to begin operations within a year, said Sumit Issar, Mahindra Intertrade's managing director.

Issar did not disclose exact investment plans but said the equipment to scrap vehicles alone would cost more than 1 billion rupees ($15 million), apart from land and construction costs.

"I see a huge opportunity in India. The idea is to make the first plant successful and then expand pan-India," Issar said, adding the company was open to scrapping ships and machines too.

India currently does not have an organised car breaking industry, with most of the dismantling done by independent workshops that do not have the right tools for recycling.

As a result, most of the scrap needed by steelmakers and other industries is imported. The planned shredding plant could replace imported scrap and cut India's foreign exchange outflow, the steel ministry said in a statement.

Though vehicles are typically licensed to run for only 15 years in India, there are about 30 million vehicles on roads that pre-date 1990.

"Even if you take a percentage of that you can imagine the kind of feedstock you can get over a period of time," Issar said.

Issar did not detail the likely size of the plant, but said it would need to be able to handle at least 100,000 units a year to be viable.

Mahindra Intertrade has the largest network of steel service centres in India and processes automotive steel as well as electrical steel for power and home appliance applications.

Setting up a shredding unit will feed into its own business and Mahindra could also provide scrap to India's steelmakers and other industries, said Issar.