This article is written by Vijay Kumar, Founder and CEO, Soove Manufacturing.The recent PMe-Drive notification has mandated deep localization of traction motors and controllers by September 26. This creates a structural shift in manufacturing, particularly for Tier-1 suppliers that rely on imported subsystems and materials such as advanced rare earth magnets. China’s ban on the export of HRE materials used in high-performance IPMSM motors, particularly for the N2/N3 segments, poses a major threat. This change and policy announcement certainly outlines the need to understand the real impacts, risks, and a multi-layered mitigation strategy that integrates supply chain, technology, and manufacturing change.The Ministry of Heavy Industries has revised the phased manufacturing program for electric trucks under the PM E-DRIVE scheme, introducing new domestic production requirements for key components in the N2 and N3 categories. This initiative is intended to further drive localization activities as part of component manufacturing for EVs in order to have a smooth transition internally with ongoing supply chain practices in EVs in a phased manner. It will also facilitate curbing imports which are currently a major contributor to overall EV manufacturing.
Key highlights and policy focus
The Ministry of Heavy Industries (MHI) has issued a notification amending the phased manufacturing program (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, traction motor and inverter in-house assembly, software flashing and controller integration in India with recent timeline announced to be fully compliant 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 transmissions, and traction motor controllers with inverters. These changes amend 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 produce traction motors domestically. This includes assembly and fitting of rotor and stator components, shafts 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 the transmission.
Integrated motor and transmission roles
For systems where the traction motor is integrated with the transmission, the notification lays down a step-by-step approach. From September 1, 2025, assembly of traction motor, transmission, controller, and associated software must be done 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 will have to ensure domestic integration of assembled printed circuit boards, connectors and related components from 1 September 2025. From September 1, 2026, the scope will widen to include assembly of semiconductor components, integration within high voltage software and software installation. These requirements apply to both stand-alone controllers and those used with integrated transmission systems.
Key risks and implications for Tier-I companies
Considering the above guidelines it has now become a mandatory practice to import independent magnets to insert magnets with the rotor. If we check the current practice for N2 and N3 in view of IPMSM topology, there is use of permanent magnets which are based on HRE and these must be available from import route to make the rotor magnet assembly. This thus raises a big question for all Tier-1 electric motor manufacturers as to how they will ensure the availability of these HRE magnets. HRE elements such as Dysprosium and Terbium are important for the high temperature performance of IPMSM motors. China dominates global supply and has imposed export controls, which are disrupting supply. 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) were the most affected.
Specific impact on Tier-1 manufacturers
▪ Immediate Supply Chain Disruption – This is in view of the missing link of subsystem expectation as magnet + rotor ecosystem in India. How to secure it Given the majority of current usage is biased towards the IPMSM topology and sudden shifts or uptime next to magnet availability is impossible. This will lead to disruption of component flow, operational impact due to risk of line stoppage, delay in vendor qualification and inventory deterioration while sometimes causing panic. ▪ Cost increase (magnet prices may increase by 2–3x): Given limited global supply of HRE (Dy, Tb), export restrictions and license delays, increased demand due to global EV ramp-up, cost increase is likely. It may also lead to margin compromise for some early-stage OEM contracts and no expectation of pass-through and EBITDA erosion. There will be a pricing conflict as OEMs expect lower costs due to higher localization while there is a conflicting margin squeeze trap. ▪ Delay in production: In view of new line or existing manufacturing set upgrade, process validation, line approval, proto-batch proofing and related licensing and certification are likely to be delayed in ramp-up if any. Considering the need for re-certification under PMe-Drive, new certification and any design changes will be subject to re-certification thus further extending the production timeline. New equipment lead times will further delay production, given the need to align upstream supply chain support to align magnets to changing manufacturing demand. ▪ OEM Contract Risks If Not Considered or Announced: Given the OEM incentives associated with PM e-Drive compliance, supplier nomination or onboarding risks due to not meeting localization criteria may be reduced, delivery delays may prevent contract terms. OEMs can go for price negotiation, localization commitment terms and other penalty clauses if the OEM feels like it. OEM can choose safe supply suppliers rather than cost effective and tech specific ones.▪ Pressure to comply with localization: Considering the existing notification and policy declaration rather than insisting on making a mandate on process level localization only the value of %. This will certainly lead to capex explosion, required steps in manufacturing, testing capacity assessment under time pressure. Overall, this can create a long-lasting impact starting as short-term impacts such as supply shocks, cost increases and OEM pressures while medium-term impacts migrate towards capex-heavy phases and partial localization to long-term and significant impacts as well as consolidation with a few strong tier-1 winners with many existing, acquisition or JV’s. This policy will not be easy regulatory while it is going to reset the industry more forcefully. Overall, the revised PMP framework introduces a phased timeline for domestic value addition in electric truck manufacturing, with a focus on indigenization of key components used in electric powertrains.Disclaimer: The views and opinions expressed in this article are solely those of the original author and do not represent those of The Times Group or its employees.
