Big EV reset: New rules could change the way electric trucks are manufactured in India

This article is written by Vijay Kumar, Founder and CEO, Tsuyo Manufacturing.The recent PME-Drive notification mandates deep localization of traction motors and controllers by September 26. This creates a structural shift in manufacturing, particularly for tier-1 suppliers dependent on imported sub-systems and materials such as high-grade rare earth magnets. A major risk emerges from China’s ban on exports of HRE materials used in high-performance IPMSM motors, particularly for the N2/N3 segment. This change and policy announcement certainly underlines the imminent need to understand the real impacts, risks and a multi-layered mitigation strategy combining supply chain, technology and manufacturing changes.The Ministry of Heavy Industries has revised the phased manufacturing schedule for electric trucks under the PM e-Drive scheme, incorporating new domestic production requirements for key components in the N2 and N3 categories. This initiative is to bring in greater incentives towards localization activities as part of component manufacturing for EVs in a phased manner so that there is a seamless transition to EVs internally along with the ongoing supply chain practice. This will also facilitate curbing imports which currently contribute significantly to overall EV manufacturing.

Main features and policy focus

The Ministry of Heavy Industries (MHI) issued a notification for amendment to the Phased Manufacturing Program (PMP) for electric trucks under the PM Electric Drive Revolution in Innovative Vehicle Enhancement (PM e-Drive) scheme. The revised provisions apply to N2 and N3 category electric trucks. Mandatory domestic manufacturing of rotor, stator, shaft, enclosure, connector, cable, traction motor and inverter, domestic assembly of software flashing and controller integration in India will be in full compliance by September 26 with the latest timeline announced.

scope of amendment

The revision focuses on updating the requirements for key components used in electric trucks, including traction motors, traction motors integrated with transmissions, and traction motor controllers with inverters. These changes modify earlier notifications issued in 2024 and 2025 and introduce a phased-in timeline for domestic manufacturing.

Traction Motor Requirements

Under the updated rules, manufacturers will have to produce traction motors domestically from September 1, 2026. This includes the assembly and fitting of rotor and stator components, shafts and bearings, enclosures, connectors and cables. These requirements apply to both N2 and N3 categories, including cases where the traction motor is not integrated with the transmission.

Integrated Motor and Transmission Rules

For systems where the traction motor is integrated with the transmission, the notification sets out a phased approach. Assembly of traction motor, transmission, controller and associated software must be done within India from September 1, 2025. Starting September 1, 2026, additional requirements will go into effect, including domestic manufacturing of motor and transmission components, assembly of electronic parts such as semiconductors, and integration of high-voltage connectors and control systems.

Motor Controller and Inverter Requirements

In case of traction motor controllers including inverters, manufacturers will have to ensure domestic integration of assembled printed circuit boards, connectors and related components from September 1, 2025. From September 1, 2026, the scope is expanded to include assembly of semiconductor components, integration of high-voltage systems and installation of software and firmware within India. These requirements apply to both standalone controllers and controllers used with integrated transmission systems.

Key Risks and Implications for Tier-I Companies

Keeping the above guideline in mind it has now become a mandatory practice to import independent magnets for inserting magnets with the rotor. If we examine the ongoing practice for N2 and N3 in view of the IPMSM topology the use of permanent magnets which are HRE based and available through the import route for making rotor-magnet assemblies is important. This raises a big question for all Tier-1 electric motor manufacturers as to how they will ensure the availability of these HRE magnets. HRE elements such as dysprosium and terbium are important for the high temperature performance of IPSM motors. China dominates global supply and has imposed export controls, which are creating supply constraints. We therefore have serious risks with HRE magnet dependence as explained below as part of this recent announcement for all Tier-I manufacturers: IPMSM motors rely on NdFeB magnets with dysprosium/terbium (HRE) China controls 85% of global HRE supply Export restrictions hamper rotor manufacturing High-performance segments (trucks, buses) most affected

Specific impact on Tier-1 manufacturers

Immediate supply chain disruption – This is in view of the missing link of sub-system requirement in the form of magnet + rotor ecosystem in India. How to secure this, as the majority of current usage is biased towards IPMSM topology and sudden changes in magnet availability or uptime are next to impossible. This will lead to component flow breakdowns, line stoppage risks during operational impacts, vendor qualification delays and inventory distortion, while sometimes leading to panic stock accumulation. Increase in costs (magnet prices may increase by 2-3x): Given the limited global supply of HRE (DY, TB), export restrictions and licensing delays, increase in demand due to global EV ramp-up, costs are very likely to increase. This may also lead to margin compromise for some early negotiated OEM contracts and is not expected to bring down pass-through and EBITDA. Pricing will be a conflict as OEMs expect lower costs given higher localization while there is a paradoxical margin squeezing trap. Production delays: In view of a new line or existing manufacturing set up being up to grade, there is a high possibility of delays in ramp-up in view of process validation, line approval, proto-batch proofing and associated licensing and certification, if any. Keeping in mind the requirement of revalidation under PME-Drive, the new certification and any design changes will be sent for re-certification, which in turn will lead to further extension in production timelines. In view of aligning upstream supply chain support to provision magnets according to changed manufacturing demand, there will be further delays in production due to new equipment lead times. OEM contract risks if consideration or declaration is not considered: Considering OEM incentives linked to PM e-Drive compliance, not meeting localization criteria may result in loss of supplier enrollment or onboarding risks, delivery delays may disrupt contract terms. OEMs can go for negotiations on price, localization commitment terms and other penalty provisions if they feel like it. The OEM can opt for supply secure suppliers rather than cost-efficient and technology specific ones. Localization compliance pressure: In view of the current notification and policy announcement, the emphasis has been on creating a mandate on process-level localization rather than just value %. This will definitely lead to capex explosion, steps required in manufacturing, capacity assessment under time pressure. Overall, this could create a long-lasting impact, which starts off as short-term impacts like supply shocks, cost spikes and OEM pressures, while shifting to medium-level impacts towards capex heavy phaseout and partial localisation, with longer and significant impacts towards consolidation with a few strong tier-1 winners with multiple survivals, acquisitions or JVs. This policy is not going to be an easy deregulation whereas it is going to reset the industry in a more forced manner. Overall, the revised PMP framework offers a phased timeline to enhance domestic value addition in electric truck manufacturing, with a focus on localizing key components used in electric powertrains.Disclaimer: The views and opinions expressed in this article are solely those of the original author and do not represent the Times Group or any of its employees.