MHI considers subsidy push for e-trucks in greener closed loop operations

A closed loop operation refers to these zero-emission vehicles running on shorter routes, with a focus on recycling energy, and reducing wastage through automated systems. 

This comes in the backdrop of Union government allocating ₹500 crore towards reducing e-truck ownership costs under the electric vehicle (EV) subsidy scheme announced in October 2024.

Stakeholder consultations for the rollout of e-truck subsidies are in progress, and incentivising these vehicles in closed loop operations was also discussed along with manufacturers, said one of the persons mentioned above, requesting anonymity.

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As part of these consultations, the government is also considering two subsidy models for e-trucks, either ₹5,000 per kilowatt-hour of battery size, or ₹7,500 per kilowatt-hour. This could provide e-truck buyers with a maximum one-time incentive of ₹19 lakh per unit, according to the persons mentioned above.

Battery recycling is a crucial part of closed loop e-truck operations. Companies which use e-trucks can recycle their used batteries to extract critical minerals such as lithium, cobalt, and manganese.

A November 2024 McKinsey study on e-trucks said that most large truck manufacturers are likely to pursue strategic partnerships for recycling in a closed loop. This would allow the truck maker to retain control over the metals in the battery throughout the life cycle, the study said.

PM E-drive continues the model of previous incentive schemes such as the two iterations of the Faster Adoption and Manufacturing of Electric (and Hybrid) vehicles, where the manufacturers sell EVs at a subsidized price, and the government reimburses them for the difference.

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The subsidy plan for e-trucks comes at a time when e-truck manufacturers in India are dealing with squeezed margins compared with their global counterparts.

Indian manufacturers operate with Ebitda margins typically below 10%, while their US and European counterparts achieve 12-15%, an April 2025 report by the Niti Aayog said. "Financial support and R&D subsidies are crucial to help Indian truck OEMs invest in advanced fuel technologies without financial strain," the report said.

It added that making standardized battery packs for e-trucks was a challenge due to unreliable supplies and cost of raw material such as lithium, manganese, and cobalt. "Developing alternative materials and recycling programmes can stabilize the supply chain for key raw materials like lithium, cobalt, nickel, and manganese," the report suggested.

E-trucks were identified as a sunrise sector for government subsidies under the PM E-drive scheme in an effort to reduce carbon emissions in the freight industry. But, with less than a year left in the scheme and localization guidelines for the zero-emission trucks yet to be notified, progress has been marginal.

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Mint reported on 6 April that the government was rushing to identify industries which could generate demand for e-trucks including steel, logistics, and ports. This came after e-truck makers had asked the ministry of heavy industries for an 18-month period to comply with localization norms under the scheme in November 2024.

E-truck subsidies are deemed important due to the high upfront cost of buying such vehicles. “E-trucks are significantly more expensive upfront—sometimes costing up to four times more than diesel counterparts," said Dhiraj Agarwal, chief business officer, Mufin Green Finance, a company that lends towards EVs.