Auto Industry Faces ₹25,000 Crore FY26 Hit From End-of-Life Vehicle Rules

India’s automobile industry could take a ₹25,000 crore hit to profits in FY26 because of the new Environment Protection (End-of-Life Vehicles) Rules, 2025, according to industry executives cited by The Economic Times.

What Has Changed?

The rules were notified by the Ministry of Environment, Forest and Climate Change in January 2025. A key clause, Rule 4(6), has now become the centre of concern after auditors flagged its financial implications.

The rule effectively requires automakers to create provisions for environmental compensation related to the recycling and disposal of end-of-life vehicles. Because accounting standards require companies to recognise such liabilities when obligations become clearer, automakers may now have to set aside money for vehicles already sold over previous years.

What Makes The Impact So Large?

According to industry estimates, four-wheeler manufacturers may take a potential hit of ₹14,623 crore and two-wheeler and three-wheeler manufacturers may see a possible loss of ₹9,650 crore. That takes the total estimated impact close to ₹25,000 crore.

The biggest concern is that the provision appears retrospective. Companies are being asked to account for environmental obligations tied to vehicles sold in earlier years. This will not only adversely affect their FY26 earnings but also reduce their capital, which was meant for investment in EVs and other new technologies.

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What Happens Next?

These rules are put in place to ensure old and even discarded vehicles are recycled responsibly as per the global trend of the Extended Producer Responsibility (EPR).

Reports suggest the industry has already raised concerns with the government. Automakers are expected to push for a phased implementation, more clarification on retrospective conditions and clauses, and changes to how the accounting is to be done. But whether the government will consider tweaking these rules is yet to be seen.

Sources:

The Economic Times

Business Standard