Delhi's EV policy poses big risk if adopted by other states, warns report - here's why
Delhi's newly notified Electric Vehicle (EV) Policy 2026 could speed up the transition to cleaner mobility , but the bigger challenge for automobile manufacturers may arise if similar policies are adopted by other states, according to a Morgan Stanley report .
The brokerage said the immediate financial impact on automakers is likely to be modest because Delhi accounts for only a small portion of their domestic vehicle sales.
However, it warned that the policy could become a template for other states, potentially creating a much larger industry-wide impact.
"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.
Automakers may resist wider rollout
Morgan Stanley expects resistance from vehicle manufacturers and dealers, particularly in the motorcycle segment where electric alternatives remain limited.
The report cited Chandigarh as an example, noting that the Union Territory had earlier proposed banning new internal combustion engine (ICE) two-wheelers but later postponed implementation until 2027 following concerns raised by the industry.
The brokerage said companies with established EV portfolios, including Hero MotoCorp, Bajaj Auto and TVS Motor, are better placed to offset any impact through their electric offerings.
For Eicher Motors, it said the success of its newly launched electric motorcycle has become increasingly important under the evolving regulatory environment.
Morgan Stanley also argued that while reducing air pollution remains a legitimate policy objective, faster scrappage of ageing vehicles across all segments would be a more effective way to curb transport-related emissions.
It further stressed the need to localise battery cell manufacturing to strengthen India's energy security as EV adoption gathers pace.
Policy sets roadmap for phasing out ICE vehicles
The Delhi EV Policy 2026 lays out clear timelines to phase out new registrations of internal combustion engine vehicles in select segments while offering substantial incentives to encourage electric mobility.
"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, only electric three-wheelers and sub-3.5-tonne commercial vehicles will be eligible for fresh registration from January 1, 2027.
Registration of new petrol and CNG two-wheelers will end from April 1, 2028, after which only electric two-wheelers will be registered.
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, including plans to install around 32,000 EV charging points across Delhi.
Key incentives under Delhi's EV Policy
The Delhi government officially notified the EV Policy 2026 on Wednesday, bringing it into force from July 1, 2026, until March 31, 2030.
The brokerage said the immediate financial impact on automakers is likely to be modest because Delhi accounts for only a small portion of their domestic vehicle sales.
However, it warned that the policy could become a template for other states, potentially creating a much larger industry-wide impact.
"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.
Automakers may resist wider rollout
Morgan Stanley expects resistance from vehicle manufacturers and dealers, particularly in the motorcycle segment where electric alternatives remain limited.
The report cited Chandigarh as an example, noting that the Union Territory had earlier proposed banning new internal combustion engine (ICE) two-wheelers but later postponed implementation until 2027 following concerns raised by the industry.
The brokerage said companies with established EV portfolios, including Hero MotoCorp, Bajaj Auto and TVS Motor, are better placed to offset any impact through their electric offerings.
For Eicher Motors, it said the success of its newly launched electric motorcycle has become increasingly important under the evolving regulatory environment.
Morgan Stanley also argued that while reducing air pollution remains a legitimate policy objective, faster scrappage of ageing vehicles across all segments would be a more effective way to curb transport-related emissions.
It further stressed the need to localise battery cell manufacturing to strengthen India's energy security as EV adoption gathers pace.
Policy sets roadmap for phasing out ICE vehicles
The Delhi EV Policy 2026 lays out clear timelines to phase out new registrations of internal combustion engine vehicles in select segments while offering substantial incentives to encourage electric mobility.
"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, only electric three-wheelers and sub-3.5-tonne commercial vehicles will be eligible for fresh registration from January 1, 2027.
Registration of new petrol and CNG two-wheelers will end from April 1, 2028, after which only electric two-wheelers will be registered.
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, including plans to install around 32,000 EV charging points across Delhi.
Key incentives under Delhi's EV Policy
The Delhi government officially notified the EV Policy 2026 on Wednesday, bringing it into force from July 1, 2026, until March 31, 2030.
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