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As cleaning up India’s air becomes more crucial than ever, is the lack of strong policies to electrify buses a critical piece missing in the puzzle? Being the world’s second-largest automotive market in both vehicle production and consumption (OICA, 2024), India’s transition to electric mobility is pivotal for achieving its climate targets. Most critically, buses will play a crucial role in reducing carbon emissions by 1 billion tonnes by 2030 and reaching net zero by 2070.
But why are buses so critical to India’s story of reducing footprint? Road transport contributes over 10% of India’s total CO₂ emissions, with heavy-duty vehicles (HDVs) like buses and trucks accounting for nearly 40% of transport emissions despite representing only 2% of the vehicle fleet (ICCT, 2021). This disproportionate footprint highlights the urgent need to prioritise the decarbonisation of buses and trucks. Despite this, the current pace of electrification remains slow.
In FY2024-25, only 3% of total bus sales in India were electric, with just 3,400 e-buses sold compared to over 1 lakh Internal Combustion Engine (ICE) buses. This is starkly insufficient against India’s commitment under the EV30@30 campaign, which targets 40% of all new bus sales to be electric by 2030. This is barely five years from now.
Projections by ITDP India under the business-as-usual scenario estimated that India will only achieve 11% e-bus sales by 2030, far below the target of 40% under the EV30@30 initiative for buses. At this rate, only around 10,000 e-buses would be produced annually by 2030, whereas achieving the 40% target necessitates scaling production to 40,000 units per year—a four fold increase. Compounding this challenge is the limited manufacturing capacity of Indian e-Bus Original Equipment Manufacturers (OEMs), which collectively produce just 3,000 units per year as of 2025. Bridging this gap requires a paradigm shift—one that moves beyond demand-side incentives to a comprehensive policy framework anchored in Zero Emission Vehicle (ZEV) mandates.
What are ZEV Mandates?
A Zero Emission Vehicle (ZEV) mandate is a regulatory policy that requires automakers to sell a certain percentage of zero-emission vehicles — such as battery electric vehicles (BEVs), hydrogen fuel cell vehicles (FCEVs), or plug-in hybrid electric vehicles (PHEVs) — each year relative to their total sales.
In many regions, ZEV mandates are also extended to fleet operators, requiring them to procure a defined percentage of zero-emission vehicles within their fleet procurement cycles.
Manufacturers that fail to meet these quotas must purchase credits from compliant companies or face penalties. ZEV mandates are designed to accelerate the transition away from internal combustion engine (ICE) vehicles and help countries meet their climate and clean air goals.
How ZEV Mandates Helped EU and China
India’s EV penetration rate currently stands at 12.9%, driven largely by three-wheelers leading at 53.3% of sales, the adoption of larger vehicles such as buses and heavy-duty trucks has been considerably slower.
Currently, electric buses account for only 3% of total new bus sales in India, despite the country being the world’s second-largest bus market with annual sales averaging over 1 lakh units. In comparison, China introduced its New Energy Vehicle (NEV) mandate in 2017. Within just six years of cumulative efforts, the mandate has led China to achieve a stock of over 6,70,000 e-buses on its roads as of 2024. The share of electric buses in new sales in China became over 20% by 2023 (Source: IEA Global EV Outlook 2023). Meanwhile, the European Union (EU) has also progressed steadily, with 8% of electric buses in new sales in 2023, amounting to around 12,000 e-buses. In contrast, India lags significantly behind these global leaders, with only 10,500 e-buses on the road as of 2025, despite ambitious national targets. This highlights the urgent need for India to shift from a demand-side incentive approach to a supply-side mandate framework like the ZEV and Zero-Emission Buses (ZEB) mandates adopted internationally.
Globally, ZEV mandates have proven effective in accelerating EV adoption in:
- China: The New Energy Vehicle (NEV) mandate introduced in 2017 resulted in a 90% compound annual growth rate (CAGR) for EV sales, making China the largest EV market with over 670,000 electric buses.
- EU: The EU’s fleet CO₂ regulations have spurred a significant shift toward zero-emission buses, with 36% of new city bus sales being electric in 2023.
- California: The state’s ZEV mandate has led to 7.8% of new vehicle sales being zero-emission, supported by credit trading mechanisms to ensure compliance.
Why E-Bus Adoption is Slow in India Despite Several Incentives
Despite numerous government incentives and policies, several structural and operational challenges impede the widespread deployment of e-buses in the country.
Over the past eight years, India’s push toward electric mobility has relied heavily on demand-side incentives through schemes like FAME I, FAME II, the PM E-Bus Sewa, and the proposed PM E-Drive scheme. These initiatives have successfully spurred EV adoption in two- and three-wheelers. However, in the critical heavy-duty segment — specifically buses — the progress is fragmented, tender-driven, and lacks long-term certainty.
Below are the key factors hindering the growth of the e-bus sector:
- State Road Transport Undertaking (STU) Centric Policies and Incentives: The existing policy framework for e-buses heavily prioritises STUs, which account for only 8% of the total bus fleet in India. Meanwhile, the private sector, operating a staggering 92% of the buses, remains largely neglected.
- The Private Sector Missed the Electrification Bus: The private sector faces multiple challenges that hinder its participation in the e-bus transition. High upfront cost of e-buses, combined with inadequate financial incentives, makes e-buses prohibitively expensive for private operators who are managing nearly 21.50 lakh buses in India. (Vahan Dashboard, MoRTH Road Transport Book). Furthermore, the lack of robust charging infrastructure exacerbates operational inefficiencies and range anxiety, i.e how far the vehicle will go in a single charge. Despite accounting for 86% of total bus purchases annually, private operators are largely excluded from policies and incentives, leaving them reluctant to make large-scale investments in e-bus adoption.
- Delay in E-Bus Delivery: OEMs struggle to scale e-bus production due to fragmented and uncertain demand from STUs, which dominate the e-bus market with large but ad hoc orders. In the ICE bus market, OEMs have a sustained demand from private bus operators, which has enabled them to scale their production. For example, 95,000 new diesel and CNG buses were added to the roads last year alone. Due to this, unlike the ICE bus market, where large orders of 1,000 buses are typically delivered within six months and annual production reaches 10,000–15,000 units per manufacturer, e-bus orders of the same scale often take over a year or even two years to fulfill, with production capacities limited to just 500–600 units annually. This monopsony market, where there is only one buyer for a product or service, but many sellers, is heavily reliant on government procurement, restricts Original Equipment Manufacturers (OEMs) from diversifying their customer base or achieving economies of scale, thereby contributing to delivery delays.
- Overburden of responsibilities on OEMs: Most e-buses in India procured by STUs are being brought in under the Gross Cost Contract (GCC) model. In this model, OEMs not only manufacture but also act as operators for e-buses, as traditional private bus operators lack the capacity to procure and supply e-buses on GCC to STUs due to financial constraints. While this model has been instrumental in the past, launching the e-bus market for STUs, it is not sustainable in the long term for OEMs. The dual role burdens OEMs with operational responsibilities that require significant upfront capital, and operational expertise, including staff management, which many manufacturers lack. As a result, scaling production? Sales? Operations? under the GCC model remains a significant challenge for OEMs.
- Targets Without Mandates: Although national and state-level policies have established electrification targets for STUs, these targets are not supported by robust mandates or a clear roadmap for implementation. The lack of enforcement mechanisms leads to inconsistent adoption and undermines the efficacy of these policies. Without mandatory guidelines for both public and private operators, the transition to e-buses remains fragmented and slow.
Need for Supply-Side Mandates in India
To meet its EV30@30 and net-zero targets, India must explore alternative measures beyond demand-side incentives to boost manufacturing. While initiatives like FAME-I, FAME-II, State schemes, and PM E-Bus Sewa have spurred initial growth, they are insufficient alone. Without a shift toward supply-side mandates, such as Zero Emission Vehicle (ZEV) mandates, the country risks falling short of its goals. These mandates would compel manufacturers to scale up production significantly, addressing the current gap in manufacturing capacity and ensuring a steady supply of electric buses to meet the ambitious targets. They can ensure that clean mobility is no longer voluntary or incentive-dependent, but a legal and scalable requirement.
According to the Economics of Energy Innovation and System Transition (EEIST) assessment, which evaluated the effectiveness of various policy instruments across four regions worldwide, mandates consistently emerged as the most effective tool for driving the transition to electric vehicles (EVs). According to the report:
- Mandates ensure a shift to zero-emission technology, leaving nothing to chance. They compel manufacturers to produce a certain percentage of zero-emission vehicles, thereby guaranteeing a steady supply of EVs in the market.
This approach is crucial for India, where the current manufacturing capacity of electric buses is significantly below the required levels to meet the EV30@30 targets. Sales must increase by atleast four times. - Subsidies and taxes, when used without the support of regulations or mandates, are relatively ineffective due to limited consumer awareness and access.
While financial incentives like FAME-I, FAME-II, State schemes, and PM E-Bus Sewa have spurred initial growth, they are insufficient alone to meet India’s ambitious electrification goals. These incentives often fail to create a sustained market demand for EVs, as they do not address the supply-side constraints. - Regulations are generally more cost-effective than financial incentives for driving the transition to electric vehicles. By setting clear targets and compliance requirements, mandates provide a predictable and stable policy environment that encourages investment in EV manufacturing and infrastructure. This regulatory certainty is essential for scaling up production and achieving the necessary economies of scale.
Supply-side mandates, such as Zero Emission Vehicle (ZEV) mandates, will be crucial in bridging the gap in manufacturing capacity and ensuring a steady supply of electric buses. These mandates will compel manufacturers to significantly scale up production, addressing the current shortfall and ensuring that India remains on track to meet its electrification goals.
Key Takeaways:
- Subsidies and tax benefits provide only limited progress, as seen in the US, Europe, and India where EV deployment remains low without regulatory backing.
- Regulations and supply-side policies drive higher adoption, particularly in China and Europe, where emission limits and industry obligations accelerate electrification.
- ZEV mandates are the single most effective policy tool, ensuring that EV adoption continues consistently and at scale across all major regions.
- India lags significantly in EV adoption under its current policy structure, reinforcing the need for legally binding mandates to drive large-scale transformation.
Driving Toward a Sustainable Future
India’s journey toward zero-emission transportation represents not just an environmental imperative but a transformative opportunity for the nation’s mobility sector. By adopting comprehensive Zero Emission Vehicle (ZEV) mandates, the country can overcome long-standing challenges such as limited private sector participation, insufficient manufacturing capacity, and fragmented policy frameworks. Learning from global leaders like China, the EU, and California, India has the potential to scale up electric vehicle adoption across high-impact segments like buses and trucks.
Supply-side ZEV mandates, combined with prioritising local manufacturing, targeting commercial fleets, and fostering market-driven compliance, will enable India to achieve its ambitious EV30@30 and net-zero targets. With the right policies and collaborative efforts, India can lead the way in creating a cleaner, greener, and more equitable future for mobility.
Written by Aditya Rane S- Senior Associate, Transport Systems and Electric Mobility
With inputs from Vaishali Singh, Programme Manager, Transport Systems and Electric Mobility
Edited by Donita Jose, Senior Associate, Communications
