India’s electric bus market is dealing with a conundrum. Demand for electric buses is rising despite the absence of private companies, mostly due to state transport undertakings (STUs). Less than 7% of India’s almost 2 million registered buses are owned and run by STUs. The remaining ones are tourist or private intercity routes. The bottom line? For the first time since the pandemic, the sector’s sales fell in FY25.
In FY25, over 3,570 electric buses were sold, a 3.5% decrease from the 3,700 sold in the prior fiscal year. According to JMK Research & Analytics data, the proportion of electric buses in total bus sales also decreased, going from 4.46% in FY24 to 3.39% in FY25.
However, experts say that the reason behind the decline in sales is not the segment’s slowing demand but rather OEMs’ incapacity to fulfil orders. The Maharashtra government’s deal for 5,150 electric buses from Olectra Greentech was apparently cancelled as a result of this.
Maharashtra’s transport minister, Pratap Sarnaik, wrote on X in May that the state’s road transport corporation had suggested terminating the tender deal because the company in question had not delivered 5,150 electric buses.
But as soon as Olectra provided updated supply schedules, the decision was overturned.
According to data from JMK Research & Analytics, Olectra had a sales share of roughly 25% in FY25, making it the second-largest participant in the electric bus industry after Tata Motors (29%).
Demand is no longer a limiting factor. In May of this year, Olectra’s CFO, B. Sharat Chandra, warned analysts that the company’s backlog of orders was the primary problem facing the entire industry.
According to industry analysts, the cancellation would have caused a delay in the state’s electric bus deployment because it would have been hard for any other manufacturer to match the high demand at such short notice.
Robot-aided commercial production is anticipated to start by the end of this fiscal year, and Olectra is now enhancing automation at its Hyderabad manufacturing facility. Chandra had stated on the analyst call that automation might increase the present 200-person yearly production capacity to 5,000.
During the analyst call, Chandra had stated, “We will be ramping up the production in the next financial year (FY26) and be able to meet the deliveries.”
OEMs in the electric bus industry will face the difficulty of relying on imports for vital parts like batteries and motors if they wish to expand their operations, according to Aanchal Jain, CEO of PMI Electro Mobility.
Nomura Research Institute principal Preetesh Singh agrees. He claims that the industry’s reliance on imports for vital parts like motors and batteries is causing serious capacity issues. The two elements may account for as much as half of an electric vehicle’s price.
“Delays have been caused by battery-related powertrain components and some chassis-related components,” Olectra’s Chandra had stated in May.
It has become more challenging for OEMs to increase output in the near future due to geopolitical concerns and tariff conflicts.
“The situation would have been different if they had long-term contracts with their suppliers,” Singh argues, implying that increased supply chain localisation is necessary to prevent future interruptions of this kind.
These difficulties would jeopardise the government’s National Electric Bus Program goal of delivering 50,000 electric buses by 2027. Only 10,870 electric buses were in service as of December 2024, a Lok Sabha response stated. An average of 13,000 buses must be deployed annually to reach the 2027 target, which is a difficult undertaking given the existing situation.
Singh continues, “Governments typically set aggressive targets that are frequently revised later—for example, in the case of the FAME I and II schemes.”
The government had intended to subsidise more than 7,200 electric buses under FAME II. But just 4,766—or 66% of the goal—were actually subsidised.
In order to deploy 10,900 electric buses in five metro areas, the Centre has recently released a new tender. Companies in the sector are optimistic about their prospects for the future, despite analysts’ doubts about the industry’s ability to meet this demand.
While some are concentrating on running electric buses for state transport undertakings (STUs), others are venturing into the manufacturing sector.
EaseMyTrip has declared its intention to invest ₹200 crore in the production of e-buses. The business has won the first intercity electric bus tender in Madhya Pradesh through its subsidiaries, YoloBus and Easy Green Mobility.
In the meantime, EKA Mobility will provide the Uttar Pradesh State Road Transport Corporation (UPSRTC) with 70 electric buses, together with charging facilities. To guarantee operating effectiveness, a 10-year maintenance agreement is part of the ₹150 crore contract.
In order to increase capacity across its three production units, the EV company also intends to invest ₹600 crore. For 1,500 electric buses, it now has an order book valued at ₹3,000 crore.
These changes coincide with the government allocating a sizable sum of money under the PM E-DRIVE programme to hasten the electrification of public transportation.
Nonetheless, there is a definite business risk due to the industry’s strong reliance on governmental directives.
According to Mahesh Babu, CEO of Switch Mobility, “Government initiatives have driven the majority of deliveries in the last five to six years.”
Of the approximately 2,000 vehicles in Switch Mobility’s order book, just 5–10% are from private customers. We delivered over 100 cars to private organisations last year. Even though we anticipate delivering 100–200 cars this year, private orders will still only make up 5–10% of our whole order book. STUs are the main force behind this, Babu says.
Under the Pradhan Mantri e-Bus Sewa programme, fleet operator Chartered Speed intends to run more than 900 e-buses in 13 cities. Government contracts also account for the majority of PMI Electro Mobility’s order book, which consists of 3,000 units.
Although these contracts provide market validation and stability, experts caution that relying too much on government auctions may increase the risk of concentration.
According to Saket Mehra, a partner at Grant Thornton Bharat, “Any changes in government policy or delays in orders can severely impact business operations.”
Furthermore, concentrating mostly on government contracts prevents OEMs from accessing the private sector, which has enormous growth potential, and inhibits market diversification.
The adoption of electric buses has been hampered by the absence of specific incentives for commercial operators.
“With an allocation of ₹4,391 crore, the PM e-Bus Sewa scheme primarily supports public transport bodies—leaving private players underserved,” Mehra claims.
Babu asserts that only until operators get confidence in the market will private sector deployment increase. However, it is unclear if the industry can handle significant private demand given its current difficulties meeting public sector demands.