Charging Ahead or Falling Behind: The EV Transition and the Trials of India's Auto Industry

In 2023, when Nitin Gadkari took the mic earlier this year and announced that India would eliminate diesel and petrol vehicles by 2034, the message was loud, blunt, and impossible to ignore for automakers. "Say goodbye to diesel," he warned automakers, proposing punitive taxes attempting to usher in the electric vehicles (EVs) era in India. More than just another policy change, it was a declaration of war on internal combustion engines (ICEs) that was linked to specific timelines. It was a vision that inspired the nation to become the world's largest EV manufacturer by 2034. However, it presented some automakers with a mountain to climb and possibly a death knell for some.

Between Applause and Alarm

The automotive industry's initial reactions were twofold: some praised the policy initiative but privately grew concerned about its longevity. Leaders in the EV sector predictably embraced the vision. Others, who were riding two horses-ICEs and EVs-increased their efforts and focused on scaling up EV operations. Automakers entrenched with ICE vehicles expressed quiet dissent and wondered how they could manufacture EVs for their price-sensitive buyers, for whom EVs remained unaffordable. These reactions, however, masked their real anxiety, which stemmed from their capabilities-or the lack thereof. For many managers, the policy shift represented the most significant managerial challenge they had ever faced in their esteemed and distinguished careers.

Challenges for Indian Commercial Vehicle Makers in the EV Transition

EVs were substantially different from ICEs, and transitioning to EVs was almost like starting a new company, or at least partially. Five key challenges summarize why the transition is daunting.

Establishing New Battery Supply Chains

Supply chains for the "heart" of an EV, batteries, for the most part, are located outside India. To embrace EVs, automakers will need to establish new supply chains from scratch. Over 70% of EV batteries, the lifeblood of electric vehicles, are associated with the cost of lithium-ion cells, and virtually all of these are imported, largely from China.

This heavy import dependence has the potential to create strategic vulnerabilities. The recent depreciation of the rupee has further increased the costs of battery cells and power electronics, highlighting the sector's vulnerability to currency fluctuations.

Although the Indian industry and government are racing to localize battery manufacturing through increased investments to increase domestic cell capacity to 2030 from its current 1% of the global volume in 2025, their execution will take time. Until the scale of local production improves, the battery supply chain remains a cornerstone challenge, with Indian automakers effectively at the mercy of global markets for their most expensive electric vehicle (EV) component: the battery.

Retrofitting Production Lines: A Capital-Intensive Overhaul

Transitioning from diesel trucks and buses to electric ones isn't as simple as just swapping engines. It requires a massive retooling of factories and the retraining of workers on a large scale. Since most Indian plants are designed around internal combustion engines (ICE), producing EVs means installing new assembly processes for battery packs, electric drivetrains, and high-voltage electronics. This retrofitting can be operationally challenging in addition to being capital-intensive. Tata Motors, for example, spent ₹1,300 crore to retool the Sanand plant, which it had acquired from Ford for EV production,  allowing it to build the Nexon EV alongside its ICE models. That single reconfiguration over the ₹725 crores it shelled out for acquiring the facility illustrates the level of investment needed to make an existing plant "EV-ready." It also highlights why many legacy manufacturers face tough decisions on whether to convert old lines or build new ones. Ashok Leyland is investing approximately ₹500–700 crore in domestic EV powertrain development,  while its UK-based EV subsidiary Switch Mobility plans to spend nearly $200 million on new electric models. This is in addition to the new ₹1,000 crore plant in Uttar Pradesh, which it plans to use exclusively for electric buses.  These figures underscore the need to bet big today and invest crores into building new lines, retrofitting existing lines, and training, all in the hope of reaping competitive advantage in an uncertain electric era that will also see the emergence of new upstarts like Olectra Greentech.

Sourcing EV-Specific Components and Supplier Gaps

Building electric commercial vehicles requires an entirely new ecosystem of parts. Electric buses and trucks require high-powered traction motors, inverters, battery management systems, regenerative braking systems, and software-laden control units – components that are largely absent from the traditional internal combustion engine (ICE) supply chain. Indian automakers have found that domestic component suppliers are not fully prepared to provide many of these EV-specific parts, especially given the still-low volumes of commercial EVs.  An example is that of electric drivetrains, which comprise traction motors. Trade data shows India imported around $1 billion worth of electric motors in 2021, over half of them from China,  given that local manufacturing of advanced motors and the semiconductor-based electronics that control them remains limited. The component sourcing challenge isn't limited to big items like battery cells and motors; it extends to chargers, power electronics, and even raw materials. India lacks domestic sources of lithium, cobalt, nickel, and rare-earth magnets, all essential for EV parts - making automakers reliant on new suppliers and networks.

Inadequate Charging Infrastructure, Especially for Commercial and Rural Use

Even the best EVs are only as good as the charging network they can access. Although India's charging infrastructure has expanded rapidly in recent years, it remains woefully inadequate, especially for heavy commercial vehicles that ply outside major cities. ,  Even the 23,000–25,000 public charging stations installed are mostly concentrated in urban and peri-urban areas and in five leading states, Karnataka, Maharashtra, Delhi, Uttar Pradesh, and Tamil Nadu, which collectively account for about 60% of the country's charging points, while vast rural stretches have few to none. This imbalance means that outside of big cities and highways, commercial EV operators face a "desert" of charging options. As S&P Global observes, charging disparities in Tier-2 cities and rural areas is a major hurdle, slowing EV adoption in those regions, with these challenges even steeper for commercial vehicles due to their higher energy needs. Some private players have stepped in to fill the void. LeafyBus deployed India's first 360kW charger for its Delhi-Dehradun e-bus.  Still, such examples remain rare. With the charging infrastructure in India being patchy, especially in rural areas, automakers will also need to co-invent a charging solution that works for most car owners, many of whom belong to India's middle class.

Tenders and the Strategic Effects on Manufacturers

For certain automotive manufacturers, particularly those engaged in the production of buses, the process of marketing electric vehicles (EVs) may diverge considerably from that of internal combustion engine (ICE) vehicles, thereby requiring the establishment of new competencies in this domain as well. Presently, the government is the biggest buyer of electric buses. The government procures electric buses through centralized tenders, which invite bids from manufacturers under a long-term Gross Cost Contracts (GCCs) system. This system enables large-scale orders but imposes tight margins and operational commitments. Under this system, manufacturers will also have to become service providers responsible for running and maintaining fleets. In summary, the government's tendering model for electric buses will force automakers to develop new capabilities. In addition to developing manufacturing capability, manufacturers will also have to act as service providers to gain market share and acquire long-term competitive advantages.

Navigating Uncertainty for ICE Component Suppliers

The transition to electric vehicles (EVs) in India presents non-trivial challenges for suppliers of internal combustion engine (ICE) components. EVs require fewer parts and are anticipated to reduce the demand for traditional components, including engines, transmissions, and exhaust systems. It is estimated that approximately 90% to 100% of ICE powertrain parts may become obsolete, significantly impacting ICE auto component manufacturers, especially in regions such as Haryana, Maharashtra, and Tamil Nadu. This transition endangers the viability of numerous suppliers, particularly micro, small, and medium enterprises, which often lack the financial resources to pivot to manufacturing EV-specific components, such as electric drivetrains and power electronics.  The possibility that suppliers anticipating discontinuity without clear pathways for adaptation may possibly hold up current supplies in the hope of negotiating a more certain future exacerbates short-term risks for automakers. Effectively managing the transition to EVs without disrupting the existing ICE-based supply networks will be crucial in facilitating a seamless transition for automakers.

Software as the New Engine of EVs

Electric vehicles are increasingly becoming "computers on wheels," with far fewer moving parts than ICE vehicles and a growing reliance on embedded software to manage everything from motor control and battery performance to real-time diagnostics and over-the-air (OTA) updates. ,  This shift is especially significant in India's commercial vehicle sector, where legacy manufacturers like Tata Motors and Ashok Leyland are rapidly expanding their software capabilities through in-house teams, strategic partnerships such as, for example, Ashok Leyland's joint venture with Japan's Nidec and OTA-enabled platforms. ,  These firms are investing in talent and digital infrastructure to stay competitive in a market where software is not just enabling smarter, more connected vehicles but also unlocking new business models like fleet analytics, predictive maintenance, and energy optimization.  Offerings like Ashok Leyland's iAlert telematics system exemplify this evolution.  As EVs become increasingly defined by their software, Indian OEMs that successfully embrace this transition have to not only positioned themselves as vehicle makers, but as mobility tech providers as well.

A High-Stakes Transition

Although EVs represent the future of automobiles, India's policy shift poses significant challenges for ICE-based incumbent automakers. To successfully adapt to the emerging electric vehicle (EV) era, incumbents will need to establish new supply chains, retool their factories, acquire new capabilities, and reimagine their business models. EVs are thus both a risk and an opportunity for incumbents. While a few incumbents are attempting to capitalize on the EV opportunity by investing in local R&D and enhancing workforce skills, aiming to grab market share in the emerging EV segment, other firms that fail to adapt risk steep decline when policy and market forces eventually align against fossil fuel. The rise of nimble startups and global entrants further threatens slow-moving incumbents. History warns that technological inertia can be fatal; without bold transformation, some legacy players could vanish. The EV transition may be a national success but might also have a few casualties. For India's CV sector, the message is clear: evolve now or be left behind.

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[1] ICRA, “EV Battery Localization and Import Dependence,” Autocar Professional, Jul. 2023.

[2] “Rupee depreciation raises EV component costs,” Electronics For You, Jan. 2024.

[3] “Tata Motors invests ₹1,300 crore to revamp Sanand plant,” Times of India, Oct. 2023.

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[5] “Ashok Leyland’s greenfield EV bus plant in UP,” PTI Newswire, Feb. 2024.

[6] A. Urbano and A. Sanghvi, “A Supply Chain & Capability Perspective on India’s EV Industrial Transition, Harvard Kennedy School, 2024.

[7] Harvard Kennedy School, “India’s EV Supply Chain and Import Dependence,” 2023.

[8] S&P Global, “India EV Infrastructure: Challenges and Trends,” Feb. 2024.

[9] B. Badami, “Charging infrastructure in India: Incentives under FAME II and considerations for PM E-DRIVE,” The International Council on Clean Transportation, Oct. 2024.

[10] “LeafyBus launches 360kW ultra-fast EV charger,” Energetica India, Feb. 2024.

[11] iFOREST, “Auto Industry Workforce Transition in India,” Apr. 2024.

[12] NITI Aayog and RMI, “India’s Electric Mobility Transformation,” Government of India, 2023.

[13] “Ashok Leyland software transition strategy,” The Hindu BusinessLine, Feb. 2024.

[14] “Tata Motors’ EV strategy: Going software-first,” Economic Times Auto, Jan. 2024.

[15] CEEW, “Software in the Driver’s Seat: Role of Digitalization in EV Adoption,” 2023.

[16] “Ashok Leyland-Nidec e-mobility partnership,” Business Standard, Mar. 2024.

[17] “Mahindra & Mahindra adopts Sibros OTA platform,” Autocar India, Apr. 2024.