India's Electric Buses And Trucks Under PM E-Drive Scheme May Get Localization Norms Relaxation For Importing Rare Earth

(MENAFN- Live Mint)

NEW DELHI: India's electric mobility push may get a breather. The ministry of heavy industries is planning to allow electric truck and bus makers to import traction motors fitted with rare earth magnets without losing incentives under the ₹10,900-crore PM E-Drive scheme, according to two officials aware of the development.

However, any relief would be temporary, lasting only until China resumes rare earth magnet exports, one of the officials said, citing the recent thaw in relations between New Delhi and Beijing.

The policy tweak comes amid a supply crunch that threatens production.

Mint reported on 18 July that the government had tasked the Automotive Research Association of India (ARAI) with assessing whether localization rules under the PM E-Drive and the production-linked incentive (PLI) scheme for automobiles and auto parts should be relaxed, after appeals from the industry.

“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 mentioned above. Both officials spoke to Mint on the condition of anonymity.

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Experts said the relaxation applies only to trucks and buses because the components in these larger vehicles-batteries, traction motors, power electronics, integrated chips, and advanced PCBs-are much harder to indigenize than those used in two- and three-wheelers.

Email queries sent to the heavy industries ministry and ARAI remained unanswered till press time.

While the industry has been mulling alternatives, there are challenges.

“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 pointed out that vehicles running on high-powered motors cannot run on anything but 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.

Why trucks and buses?

The ministry is weighing ARAI's recommendation weeks after extending the scheme by two years for these segments. The PM E-Drive scheme will lapse for electric two- and three-wheelers in March 2026, but allocated funds for zero-emission buses and trucks will continue to be disbursed through March 2028.

About half of the scheme's ₹10,900 crore outlay is dedicated to electric trucks and buses, with ₹4,391 crore earmarked for electric buses and ₹500 crore for clean trucks.

Under the scheme, manufacturers must comply with localization conditions outlined in the phased manufacturing programme, which lists components eligible for import to ensure the domestic auto parts ecosystem develops, aligned with Prime Minister Narendra Modi's vision of self-reliance.

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“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 noted that the relaxation is likely limited to trucks and buses due to differences in the components used 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.

Alternatives and industry responses

The localization relaxation comes as tensions between New Delhi and Beijing ease. Chinese Foreign Minister Wang Yi recently visited India, while Prime Minister Narendra Modi visited China over the past month. Chinese officials have said they will resume rare earth magnet exports, critical for defence, electronics, automobiles, and renewable energy, following an export control order in April.

Dependence on China might be deployed as a geo-economic tool in a future crisis with China, said Sankalp Gurjar, professor of geopolitics at Gokhale Institute of Politics and Economics.

“The arrival of Donald Trump and his tariffs have quickened the process of thaw between India and China. Both countries have sought to repair their relationship as seen in Prime Minister Narendra Modi's attendance at the SCO summit," he said.

Supplies, however, have not yet restarted, with applications from Indian companies still awaiting approval.

Mint reported on 5 August that automakers have explored alternatives, such as using light rare earth magnets importable from China or rare earth-free motors. But these solutions may not suit all vehicle segments.

Sona Comstar's Singh said that while more domestic production was preferable in the long term, the immediate priority was reopening heavy rare earth magnet supplies from China, and that he remained optimistic about the situation improving soon.

Sona Comstar, listed on the exchanges as as Sona BLW Precision Forgings, is among India's largest importers of rare earth magnets used in traction motors.

Scale of EV rollout

About 3,000-4,000 electric buses are sold in the country every year. Only medium and heavy goods carriers (trucks) get incentives under PM E-drive. Approximately 200-300 such trucks were sold in the country in FY24 and FY25.

India imported approximately $200 million worth of rare earth magnets in FY25 from China, said rating agency Icra in a note in June this year, adding that most Indian automakers had stocks of these magnets that would last till July.

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“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 installation or importing motors already fitted with rare earth magnets. Some have tried these alternatives, along with 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 rollout of localization rules.

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