Delhi EV policy may become template for other states; key risk for auto sector: Morgan Stanley
New Delhi, July 3
Delhi's Electric Vehicle Policy 2026 could accelerate the transition to clean mobility, but the larger challenge for the automobile industry may emerge if similar policies are replicated across other states, according to a Morgan Stanley report.
Morgan Stanley believes the immediate financial impact on automobile manufacturers is likely to remain limited because Delhi contributes only a small share to their overall domestic sales. However, the brokerage cautioned that the broader implication lies in the possibility of other states adopting similar measures.
"Delhi as a percentage of sales is small, and consumers can go to neighbouring states to buy vehicles, so the net adverse impact on OEMs will be modest, but the risk is that this policy is followed by other states," the report said.
The report expects resistance from vehicle manufacturers and dealers, particularly in the motorcycle segment where electric alternatives remain limited. It pointed to Chandigarh, which had earlier proposed a ban on ICE two-wheelers but later deferred implementation to 2027 following industry concerns.
Morgan Stanley added that companies with established EV portfolios, including Hero MotoCorp, Bajaj Auto and TVS Motor, are better positioned to offset the impact through electric offerings. For Eicher Motors, the success of its newly launched electric motorcycle assumes greater significance under the evolving regulatory landscape.
The brokerage maintained that while air pollution remains a legitimate concern, faster scrappage of ageing vehicles across segments would be the most effective way to curb transport-related emissions. It also underscored the importance of localising battery cell manufacturing to strengthen India's energy security as electric vehicle adoption gathers pace.
Delhi EV policy introduces a clear roadmap for phasing out internal combustion engine (ICE) vehicles in select segments while offering substantial incentives to boost electric vehicle adoption. "In a first, policy proposes timelines to ban new ICE 2W, 3W, and sub-3.5-tonne vehicles over time," the report noted.
Under the policy, fresh registrations of electric-only three-wheelers and sub-3.5-tonne commercial vehicles will be allowed from January 1, 2027, while new two-wheeler registrations will shift to electric from April 1, 2028. The government has also mandated that 30 per cent of school bus fleets be electric by March 2030.
The policy is backed by Rs 70 billion in direct incentives and Rs 80 billion in indirect incentives and infrastructure investments, besides plans to install around 32,000 charging points across the national capital.
— ANI
Reader Comments
The 30% school bus mandate by 2030 is a great initiative! My kids' school still uses old diesel buses that smoke up the neighbourhood. But Delhi's EV policy alone won't solve air pollution - we need similar action in UP, Haryana and Punjab too. Otherwise vehicles from neighbouring states will still pollute our air
As someone who just bought a petrol car last year, this is worrying. The government should have given more notice before banning ICE vehicles. Also, what about resale value of existing vehicles? Middle class families can't afford to switch to EVs every few years. Need a proper transition plan.
Great to see Morgan Stanley's analysis! But I disagree that Delhi's share is "small" - it's a major market for premium bikes and cars. More importantly, this sets a national precedent. Other states will definitely follow, so auto companies better start investing in EV tech now.
The Rs 70,000 crore incentive is impressive but will it be enough? Look at how many charging stations are needed - 32,000 for Delhi alone! And what about electricity supply? We already have power cuts in summer. Need to fix the grid first, otherwise EVs will just add to the load.
Interesting analysis from Morgan Stanley. The point about battery localisation is crucial - India cannot depend on China for battery imports while promoting EVs. Need to ramp up domestic cell manufacturing under PLI scheme. Also, the scrappage policy for old vehicles should be implemented more aggressively alongside EV push.
We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.