Monday, May 04, 2026
By Kamal Swami
ELV Rules to Impact Auto Sector by Rs25,000 Cr
India’s automobile sector may face a huge financial impact of almost Rs25,000 crore in FY2025-26 due to a provision related to the newly notified End-of-Life Vehicles (ELV) Rules, 2025, according to industry estimates. The rules, initiated by the Ministry of Environment, Forest and Climate Change in January 2025, include a clause that has raised concerns among automakers after auditors highlighted its potential accounting implications. The clause activates provisions under Indian Accounting Standard (Ind AS) 37, requiring companies to account for environmental compensation liabilities.
This provision applies to vehicles sold during the past 20 years for private use and 15 years for commercial use. As a result, manufacturers may need to set aside substantial funds to meet Extended Producer Responsibility (EPR) obligations once compensation costs are finalized. The Society of Indian Automobile Manufacturers (SIAM), in a communication to the ministry, warned that once the compensation framework is notified by the Central Pollution Control Board (CPCB), the cumulative financial burden could be substantial. It is believed that the one-time gross impact on automakers will be Rs25,000 crore, which could be approximately Rs9,000 crore on a discounted basis for FY2025-26.
Segment-wise, the financial burden is expected to be higher for four-wheeler manufacturers, who may bear costs of about Rs 14,623 crore. Whereas, two- and three-wheeler makers could face an additional burden of Rs 9,650 crore. Industry experts warn that the policy could restrict automakers’ ability to invest in innovation and future technologies. Companies may be forced to allocate capital for vehicles sold in the past, potentially affecting profitability and delaying expansion or development plans.
