India’s Public Transport Electrification Boosts Goal of Achieving Carbon Neutrality in Mobility Sector
- Largest E-Bus Tender in Indian History
- Manufacturing Capacity and Delivery Timeline
- CESL Confirms Strong Industry Participation
- Tender Model and Cost Concerns
- Incentive Structure and Cost Cap
- Dependence on Imports and Rare Earth Supply Challenges
- Market Leaders and Backlog Issues
- Distribution and Delivery Strategy
- Industry Optimism Despite Challenges
- Conclusion: Driving Toward a Greener Future
India’s electric mobility sector is witnessing intensified competition as at least six leading manufacturers, including Tata Motors Ltd, JBM Auto Ltd, and PMI Electro Mobility Solutions Ltd, gear up to bid for the country’s largest electric bus (e-bus) tender, floated by Convergence Energy Services Ltd (CESL).
The tender, set to close on November 6, aims to deploy 10,900 e-buses across Delhi, Ahmedabad, Surat, Hyderabad, and Bengaluru under the PM E-Drive scheme—a key initiative supporting India’s long-term goal of achieving carbon neutrality in the transport sector by 2070.
Other notable contenders include Olectra Greentech Ltd (a subsidiary of Megha Engineering and Infrastructure Ltd), EKA Mobility (Pinnacle Mobility Solutions’ arm), and Switch Mobility Ltd, backed by the Hinduja Group.
According to government officials, earnest money deposits (EMD) from these bidders are expected to be completed in the coming days, marking the final stage before the tender officially closes.
Largest E-Bus Tender in Indian History
The CESL tender represents a massive push toward sustainable public transportation, with an aim to electrify large segments of India’s bus fleets in major urban hubs.
According to a CareEdge Ratings report (March 2024), e-bus sales are projected to exceed 17,000 units by FY27, driven by strong government incentives and state-level adoption programs.
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However, the process hasn’t been without challenges. The tender—originally issued earlier this year—was deferred twice due to high bidding costs, with companies required to pay over ₹312 crore as EMD for participation across all five cities.
A senior government official confirmed, “There will be no further delays in the tender process. Major manufacturers have confirmed their participation.”
Manufacturing Capacity and Delivery Timeline
According to government sources, India’s total annual e-bus manufacturing capacity stands at around 33,000 units. Given the large volume of this tender, deliveries are expected to be completed within 2.5 to 3 years after final contracts are awarded.
Interestingly, the lowest bidder (L1) will form the primary contract with state transport authorities. However, due to the tender’s size, the second-lowest bidder (L2) may also be awarded a partial contract.
CESL Confirms Strong Industry Participation
In response to media queries, CESL confirmed strong industry interest. “During the pre-bid meetings, around 20 potential bidders—including all major domestic e-bus manufacturers—participated and showed keen interest,” CESL said.
The organization clarified that the final list of bidders and their EMD details will be made public only after the techno-commercial bids are opened.
Following Finance Ministry procurement guidelines, CESL maintained the EMD requirement at just 2% of the estimated contract value—lower than the standard 2–5% range—to encourage broader participation.
For example:
- For Hyderabad, the EMD is ₹33.2 crore for 1,085 buses.
- For Surat, it stands at ₹15.2 crore for 600 buses.
Cities like Mumbai, Pune, Chennai, and Kolkata have been excluded from this round. However, sources indicate that the government is already planning a separate tender for Pune and Mumbai, expected to launch soon after Maharashtra meets eligibility requirements.
Tender Model and Cost Concerns
The tender has been floated under a Gross Cost Contract (GCC) model, where the manufacturer retains ownership of the buses and is paid on a per-kilometre basis by the respective state transport corporations.
While this model aims to lower operational costs for transport agencies, it also imposes a significant asset burden on manufacturers, as the e-buses appear as capital assets on their balance sheets.
Tata Motors, for instance, has previously avoided tenders requiring asset-heavy ownership models. However, the company reportedly plans to re-enter select tenders through consortium arrangements, depending on the final structure of the PM E-Drive contracts.
The government’s total outlay for the PM E-Drive scheme is ₹4,391 crore, nearly 40% of which is earmarked for reducing the upfront cost of 14,028 e-buses across nine major cities.
Incentive Structure and Cost Cap
Each electric bus under the scheme is estimated to cost around ₹1 crore, with the incentive cap fixed at ₹1.25 crore per bus.
Unlike two-wheelers and three-wheelers—where incentives are paid directly to manufacturers—e-bus incentives will flow through state transport utilities, helping them offset operational expenses and lower per-kilometre rates.
This model aims to make electric buses financially viable for both operators and state governments, while accelerating India’s shift toward low-emission mobility solutions.
Dependence on Imports and Rare Earth Supply Challenges
A major challenge for Indian EV makers remains their heavy reliance on imported components, particularly lithium-ion batteries, which account for 40–50% of an e-bus’s total cost.
These batteries and their components are predominantly sourced from China, which continues to dominate the global electric vehicle supply chain.
The issue is compounded by the global scramble for rare earth magnets, crucial for electric vehicle motors. Earlier this year, China imposed export restrictions on these materials, sparking global supply concerns.
Recognizing the dependency, the Indian government relaxed localization norms under the PM E-Drive scheme in late September 2024. This amendment allows EV manufacturers to import traction motors containing rare-earth magnets without losing access to government subsidies—a move designed to keep the domestic manufacturing pipeline steady while local supply chains mature.
Market Leaders and Backlog Issues
According to CareEdge Ratings, Tata Motors, Olectra Greentech, JBM Auto, PMI, and Switch Mobility together held about 88% of India’s e-bus market share in FY24.
These companies reportedly had a combined order book of around 20,000 buses as of September 2024, scheduled for delivery over the next 1–2 years.
However, this growing backlog has led to supply delays. In May 2024, the Maharashtra government cancelled a ₹10,000 crore contract with Olectra Greentech for 5,150 buses due to missed deadlines. The deal was later reinstated with a revised staggered delivery plan, though delays persist.
A source familiar with the contracts noted that multiple state tenders are running simultaneously, causing strain on supply chains and manufacturing capacity.
Distribution and Delivery Strategy
Under the current CESL tender, cities will receive buses in staggered “lots”, ensuring more manageable delivery timelines for manufacturers.
Breakdown of proposed allotments:
- Hyderabad: 2,000 buses (in two lots of 1,085 and 915 units)
- New Delhi: 2,800 buses (two lots of 1,400 units each)
- Bengaluru: 4,500 buses (three lots of 3,500, 600, and 400 units)
- Ahmedabad and Surat: Remaining units distributed in single lots
This staggered approach is expected to ease production pressure and allow companies to align manufacturing schedules with component supply timelines.
Industry Optimism Despite Challenges
Despite the complexities of cost, supply chains, and localization hurdles, industry experts remain optimistic about the tender’s execution and its broader impact.
Ashim Sharma, Senior Partner at Nomura Research Institute Solutions and Consulting, stated:
“With all major players having validated products that have clocked millions of kilometres in operation, the delivery of 10,900 e-buses is achievable within the stipulated time. While some components will still be imported, key systems and designs have already been validated locally.”
The successful execution of this tender will mark a new phase in India’s e-bus adoption, significantly reducing urban transport emissions and setting a global benchmark for large-scale electric fleet deployment.
Conclusion: Driving Toward a Greener Future
As India accelerates toward a zero-emission transport future, this 10,900 e-bus tender stands as a pivotal milestone. It reflects the government’s commitment to clean mobility, while also testing the manufacturing and logistical capabilities of the nation’s top automakers.
If executed as planned, the initiative could help India reduce carbon emissions by millions of tonnes annually, strengthen EV infrastructure, and create thousands of green jobs in the coming years.
With Tata Motors, JBM Auto, Olectra Greentech, PMI, EKA Mobility, and Switch Mobility competing for the largest-ever e-bus order, India’s electric bus market is entering a transformative growth phase—one that will shape the future of sustainable urban mobility for decades to come.
Comment by Author
India’s electric mobility landscape is clearly at an inflection point. The massive CESL tender for 10,900 e-buses not only highlights the government’s strong commitment to clean transport but also tests the readiness of India’s EV manufacturing ecosystem.
With major players like Tata Motors, JBM, Olectra, and Switch Mobility in the race, the outcome could redefine the pace of public transport electrification.
If executed efficiently, this initiative will mark a turning point—reducing emissions, strengthening EV infrastructure, and setting India on a firm path toward sustainable urban mobility.
