This article is authored by Vijay Kumar, Founder and CEO, Tsuyo Manufacturing.The recent PMe-Drive notification mandates deep localization of traction motors and controllers by Sep’26. This creates a structural shift in manufacturing, especially for Tier-1 suppliers dependent on imported subsystems and materials such as high-grade rare earth magnets. A major risk emerges from China’s restriction on export of HRE materials used in high-performance IPMSM motors for specially towards N2/N3 segments. This shift and policy announcement surely outlines the imminent need to understand the real impact, risks, and a multi-layered mitigation strategy combining supply chain, technology, and manufacturing transformation.The Ministry of Heavy Industries has revised the phased manufacturing programme for electric trucks under the PM E-DRIVE scheme, introducing new domestic production requirements for key components in N2 and N3 categories. This initiative is for bringing more impetus towards localisation activities as part of component manufacturing for EV in phase wise manner to have a seamless transition internally aligned with ongoing supply chain practice in EV. This will also facilitate to curb the import which is currently a significant contribution in overall EV manufacturing.
Key Highlights & Policy Focus
The Ministry of Heavy Industries (MHI) issued a notification for amending the phased manufacturing programme (PMP) for electric trucks under the PM Electric Drive Revolution in Innovative Vehicle Enhancement (PM E-DRIVE) scheme. The revised provisions apply to N2 and N3 category electric trucks. Mandatory domestic manufacturing of rotor, stator, shaft, enclosure, connectors, cables,domestic assembly of traction motor and inverter , software flashing and controller integration in Indiawith recent timeline announcement as to have full compliance by Sep’26.
Scope of Amendments
The amendment focuses on updating requirements for key components used in electric trucks, including traction motors, traction motors integrated with transmission, and traction motor controllers with inverters. These changes modify earlier notifications issued in 2024 and 2025 and introduce phased timelines for domestic manufacturing.
Traction Motor Requirements
Under the updated rules, from September 1, 2026, manufacturers will be required to carry out domestic production of traction motors. This includes the assembly and fitting of rotor and stator components, shaft and bearings, enclosures, connectors, and cables. These requirements apply to both N2 and N3 categories, including cases where the traction motor is not integrated with transmission.
Integrated Motor and Transmission Rules
For systems where the traction motor is integrated with transmission, the notification sets a phased approach. From September 1, 2025, assembly of the traction motor, transmission, controller, and related software must be carried out within India. From September 1, 2026, additional requirements will apply, including domestic manufacturing of motor and transmission components, assembly of electronic parts such as semiconductors, and integration of high-voltage connectors and control systems.
Motor Controller and Inverter Requirements
In the case of traction motor controllers, including inverters, manufacturers must ensure domestic integration of assembled printed circuit boards, connectors, and related components from September 1, 2025. From September 1, 2026, the scope expands to include assembly of semiconductor components, integration of high-voltage systems, and installation of software and firmware within India. These requirements apply to both standalone controllers and those used with integrated transmission systems.
Key Risks & Impact for Tier-I companies
Considering the above guideline it has now become a mandatory practice for having independent magnets import for inserting magnets with Rotor. If we check the ongoing practice for N2 & N3 in view of IPMSM topology there is use permanent magnets which are HRE based and this is critical to be available through the import route to make the Rotor-Magnet Assembly. Thereby this raises a big question for all tier-1 electric motor manufacturer as how are they going to assure these HRE magnets availability. HRE elements like Dysprosium and Terbium are critical for high-temperature performance of IPMSM motors. China dominates the global supply and has imposed export controls, creating a supply bottleneck. So we have Critical Risk with HRE Magnet Dependency as mentioned below as part of this recent announcement for all Tier-I manufacturers: ▪ IPMSM motors rely on NdFeB magnets with Dysprosium/Terbium (HRE)▪ China controls >85% of global HRE supply▪ Export restrictions disrupt rotor manufacturing▪ High-performance segments (trucks, buses) most impacted
Specific Impact on Tier-1 Manufacturers
▪ Immediate supply chain disruption- This is in view of the missing link of the Sub-System expectation as Magnet + rotor ecosystem in India. How to secure this in view of majority of current usage is biased towards IPMSM topology and sudden shift or uptime to have magnets availability is next impossible. This will lead to Component flow breakdown, operational impact dur to line stoppage risk, vendor qualification delays and inventory distortion while sometimes lead to panic stock piling. ▪ Cost escalation (magnet prices may increase 2–3x): In view of limited global supply of HRE (Dy, Tb), export restrictions and Licensing delays, demand spike due to global EV ramp-up, cost escalation is very much likely to happen. This may also lead to margin compromise for having some early fixed OEM contracts and there is no hope of getting a pass-through and EBITDA erosion. There will be situation for having pricing conflict as OEMs expect lower cost in view of higher localization while there is a contradictory margin squeezing trap. ▪ Production delays: In view of having a new line or existing manufacturing set up grade, there is very likely to have ramp-up delay in view of having process validation, line approval, proto-batch proofing and associated licensing and certification if any. Considering revalidation requirement under PMe-Drive, new certification and also any design change will go for re-certification so in turn it will cause further production timeline extension. In view of aligning the upstream supply chain support for arranging magnets as per transformed manufacturing demand, new equipment lead time will further delay the production. ▪ OEM contract risks if not taken into consideration or declaration: In view of OEM incentives linked to PM e-Drive compliance, there could be loss of supplier nomination or onboarding risks in view of not meeting the localization criteria, delivery delays may hamper contract terms. OEMs may go for price negotiation, terms on localization commitment and other penalty clauses if OEM feels so. OEM may opt for Supply secure suppliers rather cost-efficient and tech specific.▪ Localization compliance pressure: Considering the current notification and policy announcement emphasizing on creating mandate over process-level localization rather having just value %. This will surely lead to Capex explosion, will check for the capability assessment over the required steps in the manufacturing, time pressure. Overall, this may create a long-lasting impact starting as short term impact like supply shocks, cost spikes and OEM pressure while migrating into medium level impact towards capex heavy phase and partial localization along with long and significant impact as towards consolidation with few strong tier-1 winners with many exist, acquisitions or JV. This policy is not going to be an easy regulatory while it is going to reset industry in more forced manner. Overall, the revised PMP framework introduces a phased timeline to increase domestic value addition in electric truck manufacturing, with a focus on localising key components used in electric powertrains.Disclaimer: Views and opinions expressed in this article are solely those of the original author and do not represent any of The Times Group or its employees.