India Automotive Scrap Supply Chain Faces EU Curbs

EU Proposal Could Restrict India's Metal Scrap Access

India Automotive Scrap Supply Chain is facing a potential change in access to imported recycled metal after the European Commission proposed removing India from the list of non-OECD markets authorized to receive EU metal waste. If adopted, the exclusion would take effect from May 2027. The draft delegated regulation, published on September 18, says India has demonstrated sound management of several non-hazardous waste streams, including paper, wood, rubber, textiles, glass, and mineral waste. Its assessment is more critical of metal waste, stating that India has not demonstrated environmentally sound management of that material. The proposal remains subject to the EU adoption process, with the first authorized country list due by November 21, 2026.

For Sanjay Mehta, president of the Material Recycling Association of India, the process has exposed the limited negotiating leverage available to Indian recyclers. “We don't have any choice. We are going to be the beggar, let me be honest with you,” he said. Mehta said the European Union sent Indian authorities a list of roughly 5,600 HS codes in February 2025 covering waste items shipped to India and asked whether the country wanted to continue receiving them under the revised compliance framework. The association represented the trade before the environment ministry and confirmed India's interest on behalf of its members. Compliance requirements for receiving facilities are still being developed in Brussels.

Authorization Process Could Change From May 2027

Access remains open under the current arrangement until the proposed May 2027 change takes effect. Mehta said, “As of today, till May 2027, anyone can import scrap from Europe. There are no such stringent compliances,” while adding that recyclers would need to clear the coming audits to retain access after the deadline. India applied for continued access in February 2025 and provided additional information to the Commission in November 2025 and January 2026. The Commission's assessment found that India met requirements for several non-metal waste streams but did not provide sufficient evidence for metal waste. The draft can still be amended before the final list is adopted.

The two EU measures under discussion operate through different mechanisms. The Waste Shipment Regulation does not simply impose an audit on each Indian recycler as the first condition for access. Instead, a non-OECD country must demonstrate that a specific waste stream will be managed in an environmentally sound manner, while separate requirements apply to facilities receiving exported waste. India's immediate issue therefore concerns country-level authorization for metal waste rather than a blanket finding that individual Indian recycling plants have failed. That distinction matters because continued access depends first on the country and waste-stream assessment, after which facility-level compliance requirements can determine which recyclers remain eligible.

Automotive Sector Depends on Secondary Aluminum

The exposure for the automotive sector is significant because aluminum scrap supplies India's secondary aluminum industry, which is an important source of material for vehicle manufacturing. India imported about 3,66,000 tonnes of aluminum scrap from the European Union during calendar 2025. European Aluminium put the 2024 flow at about 3,45,600 tonnes and identified India as the European Union's largest direct destination for that material that year. A restriction on access would therefore affect an established feedstock route rather than a marginal source. The potential disruption is especially relevant to manufacturers that depend on recycled aluminum for cost and material supply planning.

The Society of Indian Automobile Manufacturers' August 2026 commodity monitor puts automotive production's share of aluminum use at 21% and its share of hot-rolled steel consumption at 9%. India produces nearly half of its 4.2 million tonnes of aluminum through the secondary sector and relies substantially on imported scrap from the European Union, the United States, and the Middle East. Those figures connect the waste-policy dispute directly with vehicle production economics. Any reduction in imported scrap availability could increase pressure on recyclers and automakers to secure alternative feedstock or expand domestic recovery capacity.

A separate European Union proposal that would have imposed a 15% export duty on aluminum scrap has already been dropped. The Commission abandoned that measure in September after concerns about its implications for trade with India. Primary and secondary aluminum producers within the European Union had supported the duty, arguing that additional material was needed for their own expansion. MRAI challenged that position using European production figures. Mehta said, “Out of 6 million tonnes of aluminium production in Europe, only 1.2 million tonnes goes out of Europe. The remaining 4.8 million tonnes is consumed within Europe itself,” arguing that exported grades were largely those European industry did not use. The Waste Shipment Regulation now represents the more immediate policy risk for Indian buyers.

India's Domestic Vehicle Recycling Network Remains Underused

India's external supply exposure is developing while its domestic vehicle-recycling network is still being scaled. The Environment Protection (End-of-Life Vehicles) Rules, 2025 were notified on January 6, 2025, with extended producer responsibility obligations for vehicle manufacturers and annual scrapping targets beginning in FY2025-26. Registered Vehicle Scrapping Facilities are responsible for receiving end-of-life vehicles and carrying out depollution, dismantling, segregation, and scrapping. The framework is intended to create a formal recycling channel that can recover materials from retired vehicles. Its development is particularly relevant to the scrap question because a stronger domestic system could eventually provide more recycled metal feedstock within India.

The formal network has expanded but remains underused. A January 2026 NITI Aayog report, using Ministry of Road Transport and Highways data, found 117 operational Registered Vehicle Scrapping Facilities across 21 states and Union Territories, with 178 approved as of September 1, 2025. The report estimated that 227 facilities would be required by 2027 and reported current utilization below 20%. This gap means India's recycling infrastructure is not yet operating at the level implied by the potential future need for domestic secondary material. Increasing capacity alone may not solve the problem if facilities cannot secure enough vehicles, achieve sustainable economics, and compete effectively with informal scrapping operations.

The economics help explain why formal capacity remains underused. NITI Aayog's analysis assumes an average 1,500-kilogram vehicle contains about 60% steel, or roughly 900 kilograms, and uses a steel scrap price of ₹35,000 per tonne in its model. At full capacity, the report found the Registered Vehicle Scrapping Facility model commercially viable, while noting that low utilization materially weakens financial performance. Mehta summarized the industry challenge by saying, “The industry will work only on economics. There has to be profitability, the cycle has to run properly, and then only the system will work.” The issue is therefore not only physical recycling capacity but also the financial conditions needed to keep that capacity operating.

The informal sector still processes substantially more vehicles than the formal network. A NITI Aayog survey covering more than 200 informal scrapping units across 17 states and Union Territories estimated annual informal scrapping capacity at 2-3 lakh end-of-life vehicles, compared with about 72,000 vehicles processed by Registered Vehicle Scrapping Facilities in FY2024-25. Its sample analysis found that an informal operator could offer around ₹38,000 for a Swift Dzire-equivalent vehicle, compared with about ₹23,000 from a formal facility. The difference illustrates why vehicle owners may continue choosing informal channels and why formal recyclers face difficulty obtaining sufficient feedstock even as policymakers seek to expand organized recycling.

Extended Producer Responsibility Could Support Formal Recycling

The government has sought to narrow that gap through extended producer responsibility certificates. NITI Aayog says transactions between Registered Vehicle Scrapping Facilities and vehicle manufacturers are intended to provide a financial buffer to formal facilities, while the EPR framework creates compliance-driven demand for certificates. The report also argues that existing targets remain too low to generate enough certificate revenue to make many facilities economically viable. Mehta said, “There is a responsibility of the OEM as well. As producers, they have to build the ecosystem that will eventually help them sell more cars. The benefit will show in three to five years, but they have to invest now, the same way it is done abroad. Only the mindset has to change, and that has to happen in India.”

India has spent years developing secondary aluminum capacity around a global scrap market, while its formal end-of-life vehicle system is still being expanded. If the European Union proposal remains unchanged, the restriction would remove a major source of imported feedstock from a supply chain already dependent on overseas scrap. For automakers, the issue increasingly becomes one of supply-chain design: how much recycled metal can be recovered domestically, how quickly formal vehicle recycling can scale, and how much dependence remains on imported material as overseas access becomes more constrained. The outcome will depend on the final EU authorization decision, the compliance framework applied to Indian recyclers, and India's ability to improve the economics and utilization of its domestic recycling network.

Industry Impact & Outlook

The proposed restriction could push India's automotive recycling and materials ecosystem to reduce its dependence on imported European scrap while accelerating efforts to improve domestic recovery. Automakers, secondary aluminum producers, formal recyclers, and vehicle manufacturers could all face pressure to secure reliable feedstock and improve the economics of end-of-life vehicle collection. The regional impact is most direct in India because European Union scrap has become an established source of secondary aluminum material. The next steps will depend on the final EU country authorization list, the compliance requirements imposed on receiving recyclers, and India's ability to increase formal vehicle-scrapping utilization. The development therefore matters as both a trade-policy issue and a supply-chain resilience challenge.

Frequently Asked Questions

Could the EU restriction affect India's automotive recycling supply?
The proposed EU restriction could affect India's access to imported metal scrap by making continued authorization dependent on environmental management evidence and facility-level compliance. If the draft is adopted without material changes, metal waste shipments to India would face a new authorization framework from May 2027. The practical effect for automotive manufacturers would depend on how many recyclers pass the required audits, how quickly alternative domestic or overseas feedstock can be secured, and whether India can expand formal vehicle recycling. The proposal remains subject to the EU adoption process.

Can India's domestic recycling network replace imported scrap?
India's domestic recycling network could reduce some exposure to imported scrap, but current capacity and utilization remain below the levels identified by NITI Aayog. The January 2026 report identified 117 operational Registered Vehicle Scrapping Facilities and 178 approved facilities as of September 1, 2025, against an estimated 227 required by 2027. It also reported utilization below 20%. Increasing formal vehicle collection, improving facility economics, strengthening extended producer responsibility incentives, and encouraging automakers to support the ecosystem could help increase domestic recovery of secondary materials.