Scrapped cars a gold mine for India-Japan recycling venture

NEW DELHI – A joint venture between an Indian and a Japanese company has uncovered a treasure trove in India in the form of auto parts salvaged from some of the roughly 10 million cars scrapped in the country as the government puts tighter emissions standards in place.

Abhishek Group, an Indian maker of air bags and other auto parts, has begun tearing down used cars and recycling parts, such as headlights, taillights and hoods, for resale in its joint venture with Kaiho Industry, a leading Japanese auto recycling company based in Kanazawa, Ishikawa Prefecture.

The venture, Abhishek K Kaiho Recyclers, was founded in 2019 and began operating a plant in the northern Indian state of Haryana in June, with an eye toward building a total of seven plants across the country within three years.

The business of recycling cars has strong growth prospects in India, with government aiming to set up two to three recycling plants in each region to create jobs, said Road Transport and Highways Minister Nitin Gadkari at the opening ceremony of the Abhishek-Kaiho plant in May . The plant began operating with a workforce of 20 earlier this month after the planned launch was delayed by the COVID-19 pandemic.

In 2021, the Indian government announced guidelines for disposing of vehicles in an effort to regulate the industry and replace older, dirtier vehicles with newer ones. Commercial vehicles that have been in service for 15 years or more and private cars over 20 years old are inspected and scrapped if they fail to meet emissions standards.

US consultancy AT Kearney estimates there are around 10 million so-called retired cars in India. The country’s Supreme Court announced a ruling in 2018 banning cars from operating on public roads in the capital, New Delhi, unless they meet clean air regulations, prompting state governments to work out detailed rules on their own. The market for disposal of cars is expected to expand as electric and other environment-friendly vehicles catch on.

Abhishek K Kaiho Recyclers tears down used vehicles, buying them from local dealers, and sells usable parts to auto repair shops. It also sells steel, aluminum and other materials obtained from the scrapped vehicles, which can then be used to create building materials. For the present, the joint company plans to strip down 100 to 350 vehicles a month and aims for 100 million rupees ($ 1.28 million) in sales in its first year.

Abhishek K Kaiho Recyclers tears down used vehicles purchased from local dealers, and sells off lamps, hoods, bumpers and other parts to auto repair shops. (Photo by Moyuru Baba)

The venture traces its roots to an internet search by Abhishek in 2016. The Indian company sent an email to Kaiho, expressing a desire to address environmental problems in India by working with the Japanese auto recycler, which has operations around the world.

Kaiho brings to the venture more than 50 years’ experience in dismantling used vehicles. Until around 30 years ago, this was its main business. Since then, Kaiho has expanded into exports of auto parts, after a Kuwaiti businessperson visited Japan and bought a large number of used auto parts from it at high prices.

Kaiho then introduced its own standards for assessing the condition of used parts and established an integrated system spanning everything from procuring and dismantling of used cars to the sale of parts. It has expanded into 90 countries, including Thailand, Kenya, Nigeria and Ghana.

“With a population 10 times or more than Japan’s, India is full of energy and growth potential,” said Takayuki Kondo, Kaiho’s president. “I think we can contribute to the world as a whole by dealing with environmental problems in the populous nation of India.”

Kaiho will negotiate with governments of Indian states and build plants where car scrapping policies are adopted, Kondo said.

Maruti Suzuki India, the country’s biggest automaker, and others are also recycling auto parts. Last year, Swedish air quality research specialist IQAir rated New Delhi the world’s most polluted capital. It is thus essential to curb the city’s air pollution, which comes mostly from vehicle exhaust.

In fiscal 2021, 3.65 million passenger cars were produced in India, up 19% from the previous year, according to the Society of Indian Automobile Manufacturers. Middle-class Indians are increasingly hungry for cars as their incomes rise.

Although auto production has slowed in India due to the global shortage of semiconductors, demand remains strong. With the government aiming to raise the share of electric vehicles to 30% of total sales by 2030, the pile of used cars requiring disposal – and the pile of treasure – will only grow.

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