End-of-Life Vehicle Rule Could Wipe ₹25,000 Crore Off Auto Industry Profits in FY26: Report

India's automobile industry is staring at a likely hit of around ₹25,000 crore to its bottom line for FY26, stemming from a clause in the Environment Protection (End-of-Life Vehicles) Rules 2025 that requires manufacturers to set aside funds to cover environmental compensation for vehicles sold over the past two decades, news agency PTI has reported.

Industry executives say that a provision buried within the rules, notified by the Ministry of Environment, Forest and Climate Change in January 2025, only came to the fore after auditors flagged the scale of its financial consequences.

The clause in question, Rule 4(6), states that if a producer ceases operations, it must fulfil its Extended Producer Responsibility obligations for all vehicles it has previously placed on the market.

"This rule triggers accounting standard IND AS 37, 'Provisions, Contingent Liabilities and Contingent Assets', which means automakers will have to make substantial financial provisions for the cost of EPR certificates for all vehicles sold over the past 20 years for private, and 15 years for commercial," one industry executive was quoted as saying, speaking on condition of anonymity.

A second industry official warned of broader consequences: "Due to the rule, automobile companies will have to make provisions for EPR for vehicles sold in the past even if they have no intention of exiting the market, thereby blocking funds and affecting profits."

The Society of Indian Automobile Manufacturers (SIAM) wrote to the ministry setting out the financial implications. 

"Once the environmental compensation cost is notified by CPCB, automobile manufacturers may be required to make substantial cumulative financial provisions under the accounting standards (IND AS 37). Preliminary estimates indicate a potential one-time industry impact of approximately ₹25,000 crore on a gross basis (around ₹9,000 crore on a discounted basis) in FY2025-26," SIAM said in a letter to the ministry, seen by PTI.

The industry body had urged the government to amend Rule 4(6) before the environmental compensation cost was formally notified, arguing that the clause as written could require cumulative provisioning even from manufacturers with no plans to exit the market. 

However, when the ministry issued an amendment to the rules on 27 March 2026, the specific clause was left unchanged.