India’s electric vehicle drive may get a temporary respite. The ministry of heavy industries is considering permitting electric truck and bus manufacturers to import traction motors equipped with rare earth magnets without forfeiting benefits under the ₹10,900-crore PM E-Drive programme, two officials familiar with the matter said.
However, any concession would be short-lived, lasting only until China resumes exports of rare earth magnets, one of the officials added, referencing the recent easing in ties between New Delhi and Beijing.
The adjustment in policy comes amid a supply shortage that endangers output.
The government had asked the Automotive Research Association of India (ARAI) to evaluate whether localization requirements under the PM E-Drive and the production-linked incentive (PLI) scheme for automobiles and auto parts should be eased, following requests from industry players.
“ARAI came back to us suggesting that the relaxation be given to electric trucks and buses. But not to two-wheelers and three-wheelers,” said the other official cited above.
Experts said the suggested looseness would apply only to trucks and buses because the parts in these larger vehicles—batteries, traction motors, power electronics, integrated chips, and advanced PCBs—are far harder to localize than those used in two- and three-wheelers.
While the sector has been exploring substitutes, there are obstacles.
“The science behind rare earth magnets is what will determine the policy here,” said Vivek Vikram Singh, managing director and group chief executive officer, Sona Comstar.
Singh noted that vehicles powered by high-output motors cannot use anything other than heavy rare earth magnets. “While it is possible to use alternatives such as light rare earths for smaller vehicles such as electric two-wheelers and three-wheelers, perhaps even a small car, these alternatives may not be the best case for electric buses and trucks,” he added.
The ministry is considering ARAI’s suggestion weeks after extending the scheme by two years for these categories. The PM E-Drive programme will expire for electric two- and three-wheelers in March 2026, but funds allocated for zero-emission buses and trucks will continue to be disbursed through March 2028.
About half of the scheme’s ₹10,900 crore allocation is set aside for electric trucks and buses, with ₹4,391 crore designated for electric buses and ₹500 crore for clean trucks.
Under the programme, manufacturers must meet localization conditions specified in the phased manufacturing programme, which identifies components that may be imported to ensure the domestic auto-parts ecosystem matures, in line with Prime Minister Narendra Modi’s self-reliance objective.
“The objective of these schemes is very clear–support the private sector to manufacture components and technologies at scale and develop domestic capabilities,” said Sharif Qamar, associate director of Transport and Urban Governance at The Energy and Resources Institute (Teri). “Therefore, it becomes important for having a localization constraint. However, this should be revisited and rationalized on account of declining levels of investment and manufacturing capacity commitment.”
Qamar observed that the relaxation is likely limited to trucks and buses because of the variance in components across vehicle types. “The parts and components used in bigger size vehicles such as trucks and buses are very different compared to the two-wheeler and three-wheeler segments. Therefore, it becomes immensely difficult for the OEMs to indigenize, particularly for items such as batteries, traction motors, power electronics, integrated chips, and advanced PCBs,” he said.
“Electric 2Ws and 3Ws have been in manufacturing for a relatively long period now, and therefore a large supply chain of components has been tied up within the Indian ecosystem,” he added.
The localization relaxation comes as tensions between New Delhi and Beijing ease. Chinese officials have indicated they will restart rare earth magnet exports, vital for defence, electronics, automobiles, and renewable energy, following an export control order in April.
Reliance on China could be used as a geo-economic lever in a future crisis with Beijing, said Sankalp Gurjar, professor of geopolitics at Gokhale Institute of Politics and Economics.
Supplies, however, have not yet resumed, with applications from Indian firms still pending approval.
Automakers have hunted for alternatives, such as using light rare earth magnets importable from China or rare earth-free motors. But these fixes may not fit all vehicle categories.
Sona Comstar’s Singh said that while boosting domestic production is preferable over the long haul, the immediate priority is reopening heavy rare earth magnet supplies from China, and he remained hopeful the situation would improve soon.
Sona Comstar, listed on the exchanges as Sona BLW Precision Forgings, is among India’s largest importers of rare earth magnets used in traction motors.
About 3,000-4,000 electric buses are sold in the country every year. Only medium and heavy goods carriers (trucks) qualify for incentives under PM E-Drive. Around 200-300 such trucks were sold in the country in FY24 and FY25.
India imported roughly $200 million worth of rare earth magnets in FY25 from China, rating agency Icra said in a note in June, adding that most Indian automakers had stocks of these magnets that would last until July.
“While the trade value may appear modest, the strategic dependence it reflects is anything but. The supply uncertainty has cast a shadow on production planning,” the note said.
Automakers had considered sending motors to China for magnet fitting or importing motors already equipped with rare earth magnets. Some have tried these routes, in addition to using light rare earth magnets or rare earth-free motors. No data was available on traction motors fitted with rare earth magnets imported prior to the introduction of localization rules.
For those considering a used electric vehicle, it’s important to understand the essential guide to checking EV battery health when buying used.
Auto and lifestyle writer who loves simplifying complex topics into easy-to-understand insights.
Leave a Reply