Hike in vehicle registration renewal may not lead to jump in new vehicle demand

A customer walks inside a Mahindra cars showroom in Chandigarh. Representational image

A customer walks inside a Mahindra cars showroom in Chandigarh. Representational image

The Ministry of Road Transport and Highways’ (MoRTH) decision to hike fees for renewal of registration of almost all types of vehicles is not expected to have any significant impact on sales of new personal vehicles.

Market watchers pointed out that the number of personal vehicles aged 15 years or more that are still plying on the roads is negligible. MoRTH has proposed to hike fees for renewal of the certificate of registration by three to eight times on two-wheelers and four-wheelers.

“The average age of vehicles at the time of replacement by their owners is not more than 10 years in India. Used-car buyers also don’t hold on to vehicles aged above 15 years for obvious reasons like high maintenance costs and reduced efficiency,” said a Bengaluru-based auto analyst.

Road worthiness check

The validity of the registration certificate (RC) of a vehicle is for 15 years from the date of issuance of the certificate. In other words, the RC of a new vehicle is valid for 15 years. If the vehicle has to be used after the 15-year period it is mandatory to procure a fitness certificate from the regional transport office (RTO), certifying its road worthiness.

While primary buyers (of new vehicles) typically own their vehicle for around eight years, in urban pockets, this average dips to 4-5 years, according to passenger vehicle makers.

The numbers are not very dissimilar for the two-wheeler segment, with the exception that owners in rural markets hold on their vehicles for a slightly longer period than their urban counterparts.

Government estimates indicate that there are nearly 3.4 million light motor vehicles that are older than 15 years and 5.1 million motor vehicles that are older than 20 years.

According to MoRTH, the older fleet, typically manufactured before the year 2000, constitutes less than 1 percent of the total fleet but contributes around 15 percent of total vehicular pollution. These older vehicles pollute 10-25 times more than modern vehicles.

Commercial vehicles

The government’s focus could be on trucks and buses as there are many such old commercial vehicles in dilapidated condition that are widely considered to be more polluting than other kinds of automobiles. Estimates suggest that there are 17 lakh medium and heavy commercial vehicles older than 15 years plying on Indian roads without valid fitness certificates.

The fee for renewal of the certificate of fitness for heavy goods and passenger motor vehicles older than 15 years is proposed to be Rs 12,500 and for medium goods and passenger vehicles a fee of Rs 10,000 has been proposed. At present, the cost of renewing the RC of a heavy goods and passenger motor vehicle is Rs 1,500. For medium goods and passenger motor vehicles, it is Rs 1,000.

Consumers likely to bear the brunt

“Fleet owners are looking forward to the scrappage incentive scheme. This decision to hike fees for renewal of certificates is a welcome move but would hardly make a difference since the added cost would be passed on to the consumer in the form of freight rates,” said a sales and marketing executive at one of India’s top five truck and bus makers.

Typically, a new medium-sized truck would cost under Rs 25 lakh. Though the scrappage incentive scheme has not yet been finalised, under it, the government will provide a subsidy to the truck owner for upgradation. The owner will still have to fork out a large sum compared to the paltry penalty of Rs 50 for each day of delay in renewing an expired fitness certificate that has been proposed by MoRTH.