Inside India’s Largest Informal Vehicle Scrap Hub That Policy Couldn’t Displace
India’s formal scrappage push falters as Mayapuri’s informal market pays more cash, highlighting policy gaps, weak incentives and execution challenges.
The Gist
- Despite an estimated 12 million vehicles eligible for scrapping, only a small fraction are processed through registered facilities.
- Financial incentives for formal scrapping remain weak compared to the immediate cash offered by informal markets.
- Experts advocate for integrating informal networks into the formal economy to enhance efficiency and safety.
As you walk into West Delhi’s Mayapuri Industrial Area Phase-II, you notice several auto spare-part shops and vehicle service centres. But as you keep walking inside, there lies a market that exists in its own silo. What looks like a disorganised cluster of spare-part shops from the main road quickly reveals itself as a sprawling, high-velocity funeral ground for the scrap of old vehicles that cannot ply on roads.
The roots of the Mayapuri scrap market, Asia’s largest, reach back to the mid-1970s, establishing it as the final destination for India’s end-of-life vehicles. For half a century, the hub has stood as a paradox of industrial resilience.
While persistent complaints regarding toxic pollution, road encroachments, and unsafe working environments have sparked numerous legal crackdowns, the market continues to thrive. It attracts dismantled vehicles from across the region, fueled by a persistent gap in formal policy execution.
India’s vehicle scrapping policy, introduced in 2021, was designed to force old engines off the road and formalise vehicle scrappage in the country. The Core visited the Mayapuri market, which functions as a largely informal economy, to see if the policy had made any difference. For now, it looks like it has failed to dismantle a half-century-old shadow economy that offers car owners far more cash than any official incentive.
Mayapuri in Delhi, and similar places across the country, continue to be the unofficial hub of India's vehicle scrappage despite the government push to formalise things.
The Anatomy
The soundtrack here is relentless: hammers meeting hollowed-out chassis, high-pitched scream of traffic bottlenecks, and the groan of rickshaws burdened with several kilos of sorted metals.
The terrace of each building is covered with vehicle body parts, neatly arranged on one another. Then there are narrow alleys; in every lane, there is a distinct hierarchy of labour. Men with grease-blackened forearms carry vehicle axles across their shoulders, while others sit on oil-slicked asphalt, manually separating wiring from husks with the precision of surgeons, but wearing zero safety gear.
These businesses, now in their third generation, operate in unison, with their collective guard instantly rising at the sight of an outsider.
This paranoia is perhaps a scar from the violent April 2019 crackdown on the area, ordered by the National Green Tribunal (NGT), when several units were shuttered. Seven years later, the market operates as usual, but the underlying fear is palpable.
A similar scrap market is known to exist in Mumbai’s Kurla and Chennai’s Guindy, but this one remains the largest in India.
The Economics
Accidental vehicles are the most prized arrivals in Mayapuri’s scrap market. These are vehicles so mangled that insurance firms have dubbed them a total loss, as the repair estimates cross the 75% threshold of their insured value. For the owner, the vehicle becomes a liability, but for the Mayapuri trader, it is a goldmine of spare parts.
“Accidental cars that come here are sold somewhere between Rs 40,000 to Rs 1.5 lakh, depending on their life cycle, model, and condition. It takes less than an hour to dismantle it,” an insider told The Core.
This life cycle is critical, as a 2023 SUV with a crushed front might fetch a premium for its pristine rear-axle and interior electronics, whereas a 2012 hatchback is bought solely for its weight in iron and aluminium.
The Invisible Map
To a casual visitor, Mayapuri is an undifferentiated maze. However, the market follows an unwritten zoning plan known only to its existents. Block D is the retail hub where dismantled components are available for sale. It is a second-hand shopper’s place where a genuine part for a mass market or luxury car, two-wheeler, truck and even a tractor can be found at 30% of the showroom price.
Blocks W and E are the heavy scrappers. This is where the last rites of auto body parts are performed. These blocks house the heavy dismantling units and gas cutters. It is darker and more industrial, focusing on the raw recovery of metals.
The Regulatory Tightrope
While Mayapuri is mostly informal, a few shops with official licenses handle the paperwork and issue Certificates of Destruction to vehicle owners. This document is crucial and required to avail incentives and benefits for purchase of a new vehicle.
Once the vehicle is in, viable components are salvaged and channelled into second-hand retail shops, while the remaining carcasses are handed over to scrap dealers for industrial metal segregation.
This market stands in sharp contrast to the corporate-backed Registered Vehicle Scrapping Facilities (RVSFs) like Tata ReWire, Mahindra CERO, Maruti Suzuki Toyotsu India. As of 2026, there are 129 operational RVSFs across India, but Mayapuri remains the preferred destination for many.
While official facilities offer government-backed incentives, Mayapuri wins on immediate cash payouts and the ability to salvage parts. “Why would I go there when I can get 2x-3x more at Mayapuri,” a car owner shared anonymously.
Traders at Mayapuri are able to pay a premium to car owners because they profit from the second-hand retail value of auto parts. However, RVSFs are strictly prohibited from reselling parts. They must shred the entire car into raw scrap for metal recovery.
Policy Ambition
The government’s vehicle scrapping policy aims to phase out unfit, polluting vehicles. Under the current framework, vehicles that fail mandatory fitness tests will be declared end-of-life vehicles (ELVs). At an RVSF, owners receive a Certificate of Deposit (CoD), which unlocks OEM discounts of up to 5% on a new vehicle, tax waivers of up to 25% concession on road tax, and registration fee waivers for the new purchase.
Industry executives that The Core spoke to applauded the government’s shift in the scrappage policy from an earlier ‘age-based’ to ‘fitness-based’ mandates, as it would provide respite for vehicle owners having old vehicles which are fit for usage, generally due to lower running costs throughout the vehicle's age.
One old truck or bus with BS-IV engine has emissions equal to 14 new trucks with BS-VI engine. Similarly, one old car’s emissions with BS-IV are equal to 11 new cars with BS-VI. This clearly reflects how the replacement of end-of-life vehicles could lead to a 15–20% reduction in overall emissions, as projected by the government policy.
However, execution is the key.
Incentive Mismatch
Despite policy push and gradual infrastructure expansion, scrappage levels remain modest, driven primarily by weak financial motivation. India has an estimated 12 million vehicles eligible for scrapping, including 4.5 million medium and heavy commercial vehicles and 7.5 million light vehicles. Yet, only about 350,500 vehicles were scrapped at registered facilities between August 2022 and July 2025 — less than 3% of the total eligible fleet.
In case of cars, informal scrappers could offer Rs 15,000– Rs 20,000 higher payouts than formal facilities for a mid-range vehicle such as the Maruti Suzuki Swift Dzire.
Typically, the resale value of an ageing medium or heavy commercial vehicle is in “multiples of realisable raw material scrap value, which weakens the financial incentive for voluntary scrappage and encourages continued circulation of older vehicles,” Hemal Thakkar, director at Crisil Intelligence, told The Core.
Commercial vehicles are income-generating assets for fleet owners. So operators tend to extend vehicle life as long as residual earning potential remains.
Kinjal Shah, Senior Vice President and Co-Group Head, Corporate Sector Ratings, ICRA, said that fleet operators generally use medium and heavy commercial vehicles as goods carriers for 7-8 years on the highways or longer commutes, post which the vehicles are used for another 2-3 years for short haul usages. “The incentives are often not sufficient to aid faster adaptation of the scrappage policy.”
The Lag
Instead of giving the vehicle for scrap, some owners continue to hold onto their assets or sell them in other states where enforcement is weaker. Others have complained of procedural complexity with a rigorous digital process at RVSFs and a lagging payout mechanism, as opposed to the immediate financial and physical closure of deals at an informal setting in Mayapuri.
In January this year, government think tank NITI Aayog said limited availability of automated testing stations (ATS), underutilised RVSFs, complex deregistration procedures and low public awareness remain key bottlenecks to implementation of the policy.
"The policy’s intent is right, but its impact so far remains limited. There is a need for stronger political and administrative will to implement it in letter and spirit, and in some ways, it has even backstepped instead of progressing,” Arun Malhotra, auto industry expert and former MD at Nissan India, told The Core.
He added that all the industry stakeholders have a role to play. Until clearer regulations, greater public awareness and stronger financial incentives are in place, registered scrapping facilities will remain underutilised, and owners will continue to turn to the informal sector.
The government aims to scrap more than 5 lakh vehicles annually by 2026, but progress lagged behind targets in 2025, S&P Global Mobility said in a report.
Experts suggest the need for integration, as the informal sector has an incredibly resilient and wide-reaching sourcing network that the formal sector currently lacks.
“While it is easier said than done, we should consider cooperation instead of policing. Instead of displacement, we should focus on professionalising the informal network through safety certifications, insurance and financial incentives for the people working there. This would turn a hazardous grey market into a legitimate, high-efficiency feedstock sourcing engine for the circular economy,” Ashim Sharma, Senior Partner at Nomura Research Institute, told The Core.
NITI Aayog has recommended slashing GST rates for registered scrapping facilities. It said that while fitness tests and Extended Producer Responsibility (EPR) are now in place, tax relief is the final lever to ease financial pressure on RVSFs and incentivise formal market participation.
The formal end-of-life (ELV) scrapping value chain is subject to non-uniform GST rates across stages. This was earlier at 12%–18% on ELV procurement, 18% on metal scrap sales, and 28% on resale of spare parts. Under the revised GST slabs effective last September, these products will continue to fall under two different rates of 5% and 18%, with most in the higher 18% bracket. In contrast, informal operators face no comparable GST burden, putting RVSFs at a cost disadvantage.
While the policy is central to India’s net-zero efforts and circular economy goals, implementation remains uneven across states and definitely has a long way to go. Until then, the informal sector continues to thrive.
