End-Of-Life Vehicle Rule Impact on Auto Industry To Cost it ₹25,000 Cr

New environmental mandates for end of life vehicles spark financial concerns as Indian automakers face a multi crore hit to their bottom line and investment capacity

According to industry observers, the Indian automobile industry could see a hit of about ₹25,000 crore to its profits in FY26 due to provisions in the Environment Protection (End of Life Vehicles) Rules 2025 mandating an accounting standard (IND AS 37) clause. This Vehicle Rule Impact on Auto Industry can be measured in terms of automakers having to account for environmental compensation (EC) for vehicles sold in the past in their respective budgets. The aforementioned rule was notified by the Ministry of Environment, Forest, and Climate Change in January 2025 as Rule 4(6), requiring producers to make substantial financial provisions for the cost of Extended Producer Responsibility (EPR) certificates for all vehicles sold over the past 20 years for private, and 15 years for commercial.

Furthermore, automakers would have to make provisions for EPR even if they had no intention of exiting the market, thereby blocking funds and affecting profits. In this regard, the Society of Indian Automobile Industry (SIAM) is understood to have taken up the matter with the ministry, highlighting the adverse financial impact on automakers’ bottom line. The auto industry has sought to resolve the loss by amending Rule 4(6) before the notification of EC cost to clarify that cumulative budgetary provisioning is not required.

However, the ministry, in its latest amendment notification to the Environment Protection (End of Life Vehicles) Rules 2025 on March 27, did not alter the specific clause. The overall industry impact on four- wheeler and two and three-wheeler makers is estimated to be ₹ 14,263 crore and ₹9,650 crore, respectively. CIO Bulletin views this development as a cause of concern for the auto industry in terms of not only affecting their bottom line but also preventing them from making investments in new technologies to further their growth plans.