India’s Electric Bus Market on Fast Track Despite Challenges

Key Highlights

• E-bus share to reach 10–12% by FY27.

• PM E-DRIVE outlay of ₹10,900 crore.

• Subsidy up to ₹35 lakh per bus.

• Supply chain issues delay deliveries.

• Focus on expanding e-buses to smaller cities.

India’s electric bus (e-bus) market is moving ahead with strong momentum, as the country targets cleaner public transport and reduced carbon emissions. According to India Ratings and Research (Ind-Ra), the share of electric buses in total new bus sales is expected to rise from 5% in FY25 to 10–12% by FY27, showing a sharp growth trend over the next two years.

Government Push Fuels Growth

The growth of India’s e-bus market is being driven by multiple factors — the government’s strong decarbonisation push, lower operating costs compared to diesel and CNG buses, and targeted policy support.

This focus aligns with India’s broader climate goals of achieving a 45% reduction in carbon intensity by 2030 and net-zero emissions by 2070. Road transport currently contributes around 12% of India’s total energy-related CO₂ emissions, and buses along with trucks, account for nearly half of that share, despite making up just 4% of the total vehicle fleet, as per a NITI Aayog study cited by Ind-Ra.

PM E-DRIVE Scheme: Boosting Electrification

To support the shift to cleaner transport, the government launched the PM E-DRIVE Scheme in FY25 with a total outlay of ₹10,900 crore. The scheme focuses on deploying e-buses and expanding charging infrastructure across the country.

It offers subsidies of up to ₹10,000 per kilowatt-hour, capped at ₹35 lakh per bus, for electric buses purchased by state transport undertakings (STUs). In addition, it provides financial assistance for depot and charging infrastructure and ensures timely payments to operators through a payment security mechanism.

PM e-Bus Sewa Scheme Promotes Public-Private Partnership

Alongside PM E-DRIVE, the PM e-Bus Sewa Scheme aims to encourage public-private partnerships (PPP) in the e-bus sector. This approach helps states expand their fleets efficiently while also reducing financial risks.

According to Ind-Ra, such initiatives, along with the favourable cost efficiency of e-buses, will keep driving market demand.

Cost Efficiency and Expanding Reach

Although e-buses have higher upfront costs, their total cost of ownership (TCO) is lower than diesel or CNG buses because of reduced fuel and maintenance expenses. The report notes that CNG availability remains limited to a few major cities, while charging infrastructure is easier to develop and expand.

Currently, most e-bus operations are concentrated in metro cities such as Delhi, Mumbai, Bengaluru, Ahmedabad, and Lucknow. However, the government plans to expand deployment to tier-2 and tier-3 cities, which could significantly boost market potential in the coming years.

Supply Chain Bottlenecks Pose a Challenge

Despite strong policy and market support, Ind-Ra pointed out several ongoing challenges. The industry faces delays in delivery due to global supply chain shortages, especially for key components like batteries, chassis, and powertrains.

The top five OEMs have a combined order backlog of over 25,000 e-buses for delivery within the next one to two years. However, supply disruptions continue to slow progress.

India is currently investing in domestic battery manufacturing, but Ind-Ra said it will take time before a self-reliant local ecosystem fully develops.

Need for Private Sector Inclusion

Most government incentives currently focus on state transport undertakings, which account for just 5–7% of India’s total bus fleet. These STUs often suffer from financial losses and low utilisation rates, which limit large-scale adoption.

Ind-Ra cautioned that excluding private operators from subsidy benefits could delay wider electrification, as private players hold the potential to accelerate the shift at scale.

Long-Term Outlook: Strong and Sustainable

Despite short-term challenges, Ind-Ra expects medium- to long-term prospects for the e-bus sector to remain strong and promising. With rising demand, government support, and India’s sustainability goals, the electric bus market is set to play a major role in the country’s urban transport transformation.

The agency emphasized that collaboration between policymakers and industry players will be key to addressing supply and infrastructure hurdles, ensuring that electric mobility becomes central to India’s transport future.

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CMV360 Says

India’s electric bus market is speeding toward a cleaner and more sustainable future. While supply bottlenecks and limited private participation remain challenges, supportive government schemes and cost advantages are set to make e-buses an essential part of India’s public transport system in the years ahead.