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CSE Assessment : India’s electric vehicle industry needs a regulatory mandate for production and sale of e-vehicles


  • More policy instruments needed to scale up the market, build ambition   
  • Zero Emissions Vehicle (ZEV) mandate that sets targets for a percentage of annual production and sales of EVs needed
  • CSE’s consultation with the industry representatives and other target groups highlights varying degree of support for this strategy; stronger support from two-/three-wheeler industry
  • Doable, as the industry expects faster growth in EV market in next five years
  • Possible to start with a mandate for a small percentage share in 2025 and ramp it up to meet higher share in 2030
  • ZEV mandate, as seen globally, can help expand and diversify product range, provide roadmap for innovation and investments, push down prices, promote investments in promotion and charging infrastructure, and build confidence of investors and consumers
  • Industry can earn tradeable credits to meet the target flexibly and earn revenue 
  • India needs to tighten the fuel economy standards for all vehicle segments that will require more EVs in the fleet to meet the targets
  • Without these strategies, difficult for India to meet its commitments on zero emission transition for low carbon transport and clean air 

By Mazharuddeen Khan, New Delhi. Despite various incentives that India is providing to popularise electric vehicles (EVs), the share of these vehicles in the total number of new vehicles registered in the country is a miniscule 4.72 per cent. What is urgently needed is a regulatory mandate for the vehicle industry to have a certain percentage of their production and sales as zero emissions vehicles (ZEV) – says a new assessment from Centre for Science and Environment (CSE), released here today.

Even though industry representatives from different vehicle segments – two- and three-wheelers, cars and buses — have taken a varying and conditional view of the prospect of implementing a ZEV mandate, nearly all have supported this strategy. This was evident in the course of consultation meeting and dialogue organised by CSE with the vehicle manufacturing industry, government and other target groups, with technical support from CITI Forum, a think tank.

The CSE assessment comes in the backdrop of the hype created over EVs, with almost every auto major showcasing EV models at the ongoing Annual Auto Expo in Greater Noida, near the national capital.

It is clear that in addition to incentives for consumers and fleet operators to purchase EVs (such as FAME II, or Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles and EV policies of state governments), an additional lever of ZEV mandate that requires manufacturers to sell a minimum specified number of ZEVs as a share of their overall sales in the market is necessary to push the zero emissions transition. As seen globally, this can help increase and diversify the product range, provide a roadmap to the industry to plan innovation and investments, push down prices, stimulate industry investments in promotion and charging infrastructure, and build confidence of investors and consumers,” says Anumita Roychowdhury, executive director, research and advocacy, CSE.

This is needed to meet India’s intended targets and global pledges. These include the ministerial announcements of 30 per cent electrification by 2030; Niti Ayog’s ambition of 70-80 per cent electrification of the two- and 3-wheeler markets by 2030; and India signing on to the global zero emissions vehicle declaration of 100 per cent transition by 2030-2040 with specific mention of two- and three-wheelers. India is also a member of the ZEV Transition Council that represents 17 of the world’s largest vehicle markets.

In addition, as many as 21 state governments have notified EV policies with varying targets, incentives and mandates for infrastructure. Even the Society of Indian Automobile Manufacturers (SIAM) has stated its voluntary target for 40 per cent of new vehicle sales by 2030 and all new vehicle sales by 2047.

Key highlights of the assessment

Besides the consultation with the vehicle industry, CSE conducted a dialogue with urban transport experts and state transport corporations, besides a retail consumer survey. This was backed by an assessment of markets and price trends and a review of policy instruments like the ZEV mandate and fuel economy regulations as accelerators for ZEV transition.


Share of EVs in new sales picking up from a low base, but needs faster growth to meet targets: Currently, as per the VAHAN database of the Ministry of Road Transport and Highways (MoRTH), the share of EVs in new vehicle registration was about 4.72 per cent in 2022. The market is led by two- and three-wheelers. In the overall EV stock registered in the year 2022, 62.34 per cent were two-wheelers and 33.65 per cent three-wheelers. E-rickshaws formed the major share of the electric three-wheelers at 86 per cent. Four-wheelers were 3.77 per cent in the total EV fleet registered in the country. Buses and the goods segment were 0.19 per cent and 0.05 per cent, respectively. The next level of challenge is to expand electrification in all vehicle segments.

Incentive for electrification under the current fuel economy regulations need to be stronger: Already, the current fuel economy norms for passenger cars allow super-credits or extra points for predefined technology solutions and sale of hybrids and electric vehicles to meet the fleet-wide fuel consumption norms. But some of the technology approaches that are allowed to qualify for earning points are very ineffectual. For instance, six-speed transmission (that normally all luxury cars use) and tyre pressure monitoring depend on a driver’s behaviour (and not on technological innovations). These have weakened the targets that need to be phased out. More points need to be given for EVs to help the OEMs meet the fleet average fuel economy norms. Otherwise, the current standards can be easily met with small and incremental improvements in ICE vehicles, with very little electrification. As seen in Europe, stringent fuel economy or carbon dioxide reduction targets have speeded up electrification.


Globally, ZEV mandate is being adopted to fast-track change and diversify markets: There is enough global evidence to validate the mandate-based regulation as an effective accelerator. California, China and Europe have adopted varying approaches to create opportunities for a mandate for the industry. California has taken the lead to adopt ZEV mandate that is now followed by 14 other states in the US. This is supported by ZEV percentage credit requirement in which credits are awarded based on ZEV sales that can be traded. Non-compliance leads to financial penalties. California’s market share is more than four times the American average. It has more ZEV models than the rest of the US.


China’s New-Energy Vehicle (NEV) mandate policy for passenger cars (electric and hybrid) requires manufacturers to meet credit-based requirements. Excess credits earned under the NEV mandate can offset deficits in their fuel economy compliance. Non-compliance can lead to penalty.


In the European Union (EU), instead of a mandate for ZEVs, the manufacturers have the option of meeting voluntary ZEV quotas and claim compliance offsets against the post-2021 corporate average standards. Manufacturers that exceed these voluntary targets can receive specified levels of relaxation on their standards. Vehicles with zero total emissions get full creditEU has also made its CO2 standards so stringent that it requires more aggressive electrification to be compliant.


Japan is working towards a carbon offset market for net zero emissions — to sell certain percentages of EVs within the product mix. Companies failing to meet the thresholds can buy GHG emissions credits from compliant industry peers.


The way forward

As zero emissions transition is inevitable for low carbon and clean air action, a clear mandate-based roadmap for production and sales of EVs is necessary for longer term policy visibility and to bring more certainty in investments and markets. The importance of a mandate has also been demonstrated in Delhi’s CNG programme that could find a foothold only because of a mandate. ZEV transition will also require this strategy.

  • Implement ZEV mandate-based regulations in phased manner from 2025 to 2030 with supportive policies. There is varying degree of support from the industry for this strategy – industry participation is needed to take this forward.
  • Adopt supportive policies of ZEV credit trading mechanism and regulations. Modalities and rules of trading, system of banking, trade and transfer, penalty system etc need to be detailed out.
  • Tighten fuel economy targets for different vehicle segments to accelerate electrification by creating more incentives with super-credits and multipliers and preferential emissions accounting for ZEVs.
  • Continue to reform and strengthen other ZEV schemes including demand and purchase incentives, support for charging infrastructure, and battery ecosystems.


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