Only three of 18 automakers qualify for government's electric bus manufacturing sops

The three companies—Tata Motors, EKA Mobility and Volvo Eicher Commercial Vehicles—have collectively received approvals for eight models of e-buses, the scheme's portal showed.

India's clean-mobility push comprises various schemes such as PM E-drive and PM eBus Sewa, which aim to boost demand for cleaner buses on Indian roads. Simultaneously, the PLI-Auto scheme provides incentives to manufacturers of electric vehicles, including buses. However, the PM E-drive scheme's target of reducing the upfront cost of 14,028 buses and PM eBus Sewa's target of deploying 10,000 e-buses cover only a small fraction of India's buses.

“Central government schemes are largely targeting the urban bus segment, which makes up only about 2% of the overall bus market. The big question is how to extend electrification to the remaining 98% of the bus market. That will be key to truly achieving scale," said Amit Bhatt, India managing director, International Council for Clean Transportation (ICCT).

Biggest challenge: local sourcing

The PLI-Auto scheme requires bus makers to source at least 50% of parts locally, which is likely to be the main hindrance for them, domain experts said, as India’s electric vehicle ecosystem is hugely dependent on imported Chinese components.

Bhatt said, “Sourcing bus components locally comes with two sets of challenges—technical and financial. The technical challenge is that many parts cannot yet be manufactured in India, while the financial challenge is that many components that can be produced domestically are still cheaper to import. The only way to make these components affordable for Indian manufacturers is to achieve scale by generating strong demand for e-buses. China, for instance, was able to build scale by ensuring robust and consistent demand for e-buses," he said.

E-buses saw a rise in overall demand in FY26, with over 2,000 units registered in the first half of the fiscal year. In FY25, e-bus sales dipped marginally to about 3,300 units from 3,500 units in FY24, according to data from the road ministry’s Vahan portal.

In PLI-Auto's first year of disbursal, FY25, the government provided ₹322 crore to three vehicle makers, Tata Motors Ltd, Mahindra & Mahindra Ltd and Ola Electric Mobility Ltd, and one component maker, Toyota Kirloskar Auto Parts Ltd. The government expects a surge in disbursals in FY26, with nine companies claiming ₹2,000 crore, Union heavy industries minister HD Kumaraswamy told Mint in June. The scheme provides a 13-18% benefit on annual incremental sales of zero-emission vehicles. It is set to run for five years.

EKA Mobility, a subsidiary of Pinnacle Industries Ltd, meets the government's localisation criteria in both the PLI-Auto and PM E-drive schemes, said Rohit Srivastava, its chief growth officer, adding that the Indian ecosystem for e-bus components would need more time to mature.

"Localisation in the EV ecosystem comes with challenges, particularly in areas like advanced battery cells and certain high-end electronics, where domestic manufacturing has already been initiated. While investments are flowing in with strong policy support, it will take reasonable time for this ecosystem to fully mature. However, for other critical systems, India already has a robust ecosystem that supports higher levels of localisation. The key lies in long-term policy stability, scale creation, and industry-government collaboration, which will help accelerate localisation across the entire value chain," he said.

A high bar

Several firms are ineligible for the PLI-Auto scheme owing to its high revenue and investment criteria. A spokesperson for e-bus maker PMI Electro said the company doesn't yet meet the scheme's creteria of ₹10,000 crore group revenue and ₹3,000 crore fixed investment, but remains compliant with its localisation standards.

"Localisation has been a core strategic focus for PMI Electro. As an OEM (original equipment manufacturer), the company is fully aligned with the localisation criteria outlined under the PLI-Auto scheme. PMI has proactively invested in building robust in-house manufacturing capabilities to support this objective," a spokesperson for the company said in response to Mint's queries. The company will participate in the PLI-Auto scheme once it meets the eligibility criteria, the spokesperson added.

Email queries to the heavy industries ministry, Tata Motors Ltd and Volvo Eicher Commercial Vehicles Ltd remained unanswered.

Shifting focus to public transport

The government’s area of focus in electric mobility has shifted from private vehicles to public transportation with the third iteration of a scheme meant to reduce the high upfront cost of electric vehicles. The PM E-drive scheme has allocated about 40% of its ₹10,900 crore outlay— ₹4,391 crore—for incentives to procurers of electric buses. Under the scheme, manufacturers sell electric vehicles to customers at a discount and the government reimburses them for it.

Earlier schemes with the same goal—specifically, the two iterations of the Faster Adoption and Manufacturing of Electric and Hybrid Vehicles (FAME) from FY15 to FY24—provided subsidies to buyers of electric scooters, three-wheelers and cars. To be sure, e-buses were also incentivised under the FAME schemes, but not nearly at the same level. Under FAME 1, about 280 e-buses were incentivised, while FAME 2 aimed to reduce the cost of 7,000 e-buses.

The PM E-drive scheme aims to incentivise 14,028 buses by FY28. Of these, the government has already allocated 10,900 buses to be procured by state transport utilities in five cities—Ahmedabad, Bengaluru, Delhi, Hyderabad and Surat. The remaining buses will be deployed in Mumbai, Pune, Kolkata and Chennai, and in hilly areas and tourism hubs.

Mint reported on 13 September that the ministry of heavy industries planned to allow electric truck and bus makers to import traction motors fitted with rare earth magnets without losing incentives under the PM E-Drive scheme. However, any relief would be temporary, lasting only until China resumes rare earth magnet exports, an official said, citing the recent thaw in relations between New Delhi and Beijing. The policy tweak comes amid a supply crunch that threatens production.

Integrated transport systems

In the Economic Survey before the February 2025 budget, chief economic advisor V Anantha Nageswaran said the government should prioritise electrifying public transportation rather than focusing only on private EV adoption.

“Given India’s vast size and limited land availability, public transportation is a more efficient alternative for a viable energy transition. National-level policies and local nudges must promote and facilitate its use, going beyond focusing on tailpipe emissions from private transportation choices," the survey said.

“To replicate the success of other nations, India must focus on developing integrated transport systems that efficiently connect buses, metro rails, and other modes of transit. Investing in making public transportation more efficient, reliable, comfortable, accessible and safe will also be a significant step towards achieving Net Zero goals while reducing our dependence on imports," it added.