What Not to Do With India’s Zero Emission Trucking Ecosystem

By Jaideep Saraswat & Nikhil Mall

India has demonstrated remarkable leadership on climate action, maintaining its momentum despite significant geopolitical headwinds. From solar energy to electric mobility, the country continues to make meaningful strides across clean energy technologies. Among large economies, India stands out as a serious contender in meeting both its near-term and long-term climate commitments.

In the transport sector, one of the biggest contributors to emissions, India has committed to making 30% of all vehicle sales electric by 2030. In FY 2024–25, EV penetration across the Indian automotive market stood at approximately 7.49%. Segment-wise, two-wheelers saw an EV penetration of 6.1%, while three-wheelers surged ahead with 57.3%. While the four-wheeler segment is gaining momentum,   we’re still in the early phases when it comes to commercial logistics— a crucial piece of the decarbonisation puzzle.

In the first quarter of 2025, only 1,754 electric commercial vehicles were sold in the goods transport category, with light goods vehicles accounting for 1,684 and medium & heavy goods vehicles just 70⁴. This is where Zero Emission Trucks (ZETs) enter the conversation with massive potential, but are still crawling due to systemic challenges. For this segment to thrive, all key stakeholders — policymakers, OEMs, fleet operators, and financiers — need to focus more intently.

But this blog is not about what more we should do. It is about what we must not do — missteps that could prematurely stifle a promising ecosystem.

1. Don’t Penalise Early Movers in Logistics Electrification

The few fleet operators that have adopted ZETs early on deserve recognition — not pressure. These pioneers have taken substantial risks and are shouldering the burden of resolving teething issues related to operations, charging infrastructure, and supply chains. They are not just adopting EVs — they are paving the way for the industry.

It is true that ZETs offer significantly lower operating costs, owing to higher efficiency and cheaper electricity compared to diesel. However, assuming these operators have recovered their investments from day one is a serious misconception. Unfortunately, this half-baked understanding is becoming common, especially among clients and partners who expect operators to immediately pass on cost savings — often even pushing for renegotiations or contract cancellations when those demands are not met.

Let’s be clear: operational savings are essential for helping early adopters recoup their substantial upfront investments. Imposing aggressive cost-cutting expectations on day one undermines the financial viability of these fleets and threatens to kill the sector before it has a chance to mature. A more reasonable approach would be to allow these fleet operators to reach breakeven before seeking shared savings.

2. Address the Inverted GST Structure for Electric Trucks

Another major hurdle is the inverted Goods and Services Tax (GST) structure faced by ZET manufacturers. Here’s the problem: the components used to build ZETs are taxed at an average GST rate of 22%, while the finished ZETs are sold with only 5% GST. This 17% mismatch leads to a large accumulation of input tax credits, which manufacturers must claim as refunds.

The consequences are far-reaching:

• Capital gets locked up in the refund cycle, which could have been used for R&D or scaling production.
• Startups, in particular, often rely on borrowed capital to bridge this working capital gap, incurring unnecessary interest costs.
• Meanwhile, many legacy OEMs — flush with capital but slower to act — continue to lag, while nimble startups risk running out of steam due to systemic financial constraints.

If India wants to foster healthy competition and accelerate the shift to zero-emission freight, resolving this inverted duty structure is vital. This isn’t just about fairness — it’s about keeping the most innovative players in the game.

The Road Ahead

India has the opportunity to become a global leader in clean logistics, and ZETs are central to that vision. But the growth of this ecosystem depends as much on what we avoid doing as on what we actively promote. Early movers must be protected from predatory pricing pressures. Manufacturers, especially startups, must not be bled dry by tax policy inconsistencies.

It’s time to create a synergistic ecosystem where ZETs are not just viable but central to our decarbonisation efforts.

This opinion piece first appeared on official portal of Vasudha Foundation.