Why India's auto sector is staring at a ₹25,000cr hit
What's the story
The Indian automobile industry is bracing for a major financial blow. The Environment Protection (End-of-Life Vehicles) Rules 2025 are expected to cost the sector around ₹25,000 crore. The rules require automakers to set aside funds for environmental compensation retroactively on vehicles sold in previous years. This requirement is based on "Rule 4 (6)" of the regulations notified by the Ministry of Environment, Forest and Climate Change in January 2025.
Compliance costs
IND AS 37 mandates fund allocation for EPR certificates
The rule states that if a producer stops operations, they must comply with their Extended Producer Responsibility (EPR) for vehicles sold until the closure. This triggers accounting standard IND AS 37, which mandates automakers to set aside funds for EPR certificates of vehicles sold in the last 20 years (private) and 15 years (commercial). Industry executives have expressed concerns over this requirement, saying it could block funds and affect profits even if companies don't plan to exit the market.
Industry concerns
SIAM raises concerns with ministry, estimates financial burden
The Society of Indian Automobile Industry (SIAM) has also raised the issue with the ministry, stressing on the financial burden of environmental compensation under IND AS 37. In a letter to the ministry, SIAM said that once notified by CPCB (Central Pollution Control Board), automakers may need to make huge cumulative financial provisions under accounting standards. The industry body estimated a potential one-time impact of around ₹25,000 crore on a gross basis (around ₹9,000 crore) on discounted basis in FY2025-26.
Regulatory response
Potential impact on investment and growth for manufacturers
Despite SIAM's concerns, the ministry's amendment notification to the Environment Protection (End-of-Life Vehicle) Rules, 2025 on March 27, 2026 did not change this particular clause. Industry estimates suggest that four-wheeler makers will be hit by around ₹14,623 crore due to this rule, while two and three-wheeler makers will face a total impact of ₹9,650 crore. The new policy could severely affect manufacturers' ability to invest in new technologies and growth plans.