WORKING PAPER MARCH 2024

© 2024 INTERNATIONAL COUNCIL ON CLEAN TRANSPORTATION (ID 115)

Designing a zero-emission vehicle

sales regulation for two-wheelers
in India
Sunitha Anup, Shikha Rokadiya

INTRODUCTION
A recent ICCT life-cycle analysis found that electric motorcycles and scooters in India
emit 33%–50% lower greenhouse gas emissions than average new gasoline models.1
Internal combustion engines (ICEs) continue to dominate the market, however: as of
fiscal year 2022-2023, 95% of new two-wheelers sold in India were ICE vehicles—with
92% of total market share held between five manufacturers—while only 5% were
electric vehicles. 2 This latter share is far lower than the target set by the Government of
India that 80% of new two- and three- wheelers sold be electric by 2030. 3

To significantly increase the share of electric two-wheelers in this short time frame,
there is a need for policy intervention. Globally, governments in leading auto markets
are deploying two key regulatory pathways to promote electrification across various
vehicle segments: setting stringent limits on carbon dioxide (CO2) emissions from the
fleet through fuel consumption or CO2 emission standards, 4 and zero-emission vehicle
(ZEV) sales regulations that require manufacturers to sell a minimum percentage of
ZEVs. These pathways need not be mutually exclusive and can be designed to have
complementary effects in achieving emission reductions from the segment. To date, India
has not adopted a fuel consumption standard nor a ZEV regulation for two-wheelers.

1 Georg Bieker, Life-Cycle Greenhouse Gas Emissions of Combustion Engine and Electric Passenger Cars and
Two-wheelers in India (Washington, DC: ICCT, 2021), https://theicct.org/publication/life-cycle-greenhouse-
gas-emissions-of-combustion-engine-and-electric-passenger-cars-and-two-wheelers-in-india/.
www.theicct.org
2 “Vahan Dashboard,” Government of India, accessed August 2023, https://vahan.parivahan.gov.in/
vahan4dashboard/vahan/vahan/view/reportview.xhtml.
3 “Govt Intends to Have EV Sales Penetration of 30% for Private Cars by 2030: Nitin Gadkari,” The Economic communications@theicct.org
Times, October 8, 2021, https://economictimes.indiatimes.com/industry/renewables/govt-intends-to-have-
ev-sales-penetration-of-30-for-private-cars-by-2030-nitin-gadkari/articleshow/86864936.cms?from=mdr. @theicct.org
4 In this paper, the terms “CO2 emissions” and “fuel consumption” are used interchangeably.

Acknowledgments: The authors thank all colleagues who have helped in the shaping of this publication: Dale
Hall, Hongyang Cui, Zifei Yang, Anh Bui, Ilma Fadhil, and Ben Sharpe for their critical review; Amit Bhatt,
Namita Singh, and Sumati Kohli for key insights and data; and Jan Dornoff and Pete Slowik for their help with
an earlier version of this report. The authors also thank the editorial and publications team at the ICCT for all
their support.
To comply with fuel consumption standards, manufacturers are free to choose the
most cost-effective technology packages at their discretion. However, as standards
become more stringent, introducing more ZEVs into the fleet can be a more cost-
effective option than investing in incremental technological advancements to improve
ICE fuel efficiency. For example, a 2021 ICCT study found that setting a fleet-average
standard of 20.5 gCO2 /km for two-wheelers in India would have the potential to
electrify about 60% of the sector by 2030. 5 On the other hand, a ZEV regulation is
the most direct way to ensure the growth of ZEVs in a market over time, because it
requires that manufacturers earn a minimum number of credits proportional to their
ZEV sales each year.

Building on the ICCT’s previous study of the potential for bringing more electric
two-wheelers to the market in India through fuel consumption standards, this paper
analyzes the role that ZEV sales regulations can play in increasing sales shares. The
research questions and structure of this paper are as follows:

1. What are the impacts of ZEV sales regulations based on international practices?

2. Could the existing institutional framework in India support the adoption of ZEV
sales regulations?

3. What are the important elements to consider when designing a ZEV sales
regulation, and what are the emerging best practices?

We assume that all zero-emission two-wheelers in India will be fully battery-electric

vehicles (BEVs). While hydrogen fuel-cell electric vehicles also produce zero tailpipe
emissions, their deployment in the two-wheeler segment is not anticipated in India
in the near term due to their greater cost, lack of refueling infrastructure, and model
availability. 6

INTERNATIONAL BEST PRACTICES FOR ZEV SALES

REGULATIONS
California has been a pioneer in ZEV sales regulations, which were first introduced
in the state in the 1990s as part of vehicle exhaust standards for light-duty vehicles.
Its program has evolved significantly since then, and ZEV sales requirements were
included as part of the Advanced Clean Cars (ACC) regulation for model years
2015–2025 and the Advanced Clean Cars II (ACC II) regulation for model years 2026-
2035.7 Several other states have adopted California’s sales requirements under ACC
and ACC II. 8

China has implemented a modified version of California’s program for passenger cars
as part of the country’s Parallel Management Regulation for Corporate Average Fuel
Consumption and New Energy Vehicle Credits, referred to as the dual-credit policy.
Phase I of China’s policy set ZEV sales requirements for 2019–2020, 9 Phase II for

5 Sunitha Anup, Ashok Deo, and Anup Bandivadekar, Fuel Consumption Reduction Technologies for the Two-
Wheeler Fleet in India (Washington, DC: ICCT, 2021), https://theicct.org/publication/fuel-consumption-
reduction-technologies-for-the-two-wheeler-fleet-in-india/.
6 Ashok Deo and Sunitha Anup, “What to Know About the Potential of Hybrid Technology in Two-Wheelers
in India?” ICCT Staff Blog, August 25, 2021, https://theicct.org/what-to-know-about-the-potential-of-
hybrid-technology-in-two-wheelers-in-india/.
7 Anh Bui, Dale Hall, and Stephanie Searle, Advanced Clean Cars II: The Next Phase of California’s Zero-
Emission Vehicle and Low-Emission Vehicle Regulations (Washington, DC: ICCT, 2022), https://theicct.org/
publication/accii-zev-lez-reg-update-nov22/.
8 “Clean Vehicle Programs: State Tracker,” Sierra Club, accessed March 7, 2024, https://www.sierraclub.org/
transportation/clean-vehicle-programs-state-tracker.
9 Hongyang Cui, China’s New Energy Vehicle Mandate Policy (Final Rule) (Washington, DC: ICCT, 2018),
https://theicct.org/publication/chinas-new-energy-vehicle-mandate-policy-final-rule/.

2 ICCT WORKING PAPER | DESIGNING A ZERO-EMISSION VEHICLE SALES REGULATION FOR TWO-WHEELERS IN INDIA
2020–2023,10 and Phase III for 2024–2025.11 The United Kingdom has finalized ZEV
sales requirements for passenger cars and vans from 2024 to 2035.12 In Canada, where
provincial sales requirements for light-duty vehicles are already in effect in Quebec
and British Columbia, the government has finalized a national ZEV sales regulation,
the Electric Vehicle Availability Standard, due to come into effect in 2026 and set
annual sales requirements through 2035 and beyond.13 The sales regulations adopted
by California, the United Kingdom, and Canada are legally binding mandates towards
ensuring 100% electrification of new sales of light-duty vehicles by 2035.

Amid growing adoption of sales regulations in the light-duty segment, California was
also the first jurisdiction in the world to adopt sales requirements for medium- and
heavy-duty vehicles under the Advanced Clean Trucks (ACT) regulation.14 The ACT
regulation comes into effect in 2024 and requires up to 75% new ZEV sales in the
segment by 2035. As with sales regulations in the light-duty segment, several other
U.S. states have also adopted California’s sales requirements under ACT.

CONCEPT OF ZEV CREDITS AND TARGETS

As ZEVs can vary significantly in terms of market price and technical parameters
such as range and electrical energy consumption, governments globally have used a
credit-based regulatory design to achieve sales goals. In a credit-based ZEV regulation,
manufacturers are obligated to acquire a minimum threshold value of credits annually,
referred to as their annual credit targets.15 For example, assuming a credit value of 1 is
assigned to each ZEV sale, a manufacturer who sells 100,000 total vehicles in a given
compliance period would need to sell at least 5,000 ZEVs to comply with a ZEV credit
target of 5% for that period (see Text Box).

Example: Manufacturer A
Total sales in compliance year: 100,000 units
Credit target for compliance year: 5%
Minimum credits to acquire from ZEV sales: 5% * 100,000 = 5,000 credits
Minimum ZEV sales to meet credit target: 5,000 credits / 1 credit per ZEV = 5,000 ZEVs

While this example assumes that each ZEV sale counts as one credit, in practice, each
jurisdiction’s regulation sets out criteria for the number of credits that can be allocated
depending on a ZEV’s technical specifications and/or market parameters. Technical

10 Zhinan Chen and Hui He, The Second Phase of China’s New Energy Vehicle Mandate Policy for Passenger
Cars (Washington, DC: ICCT, 2021), https://theicct.org/publication/the-second-phase-of-chinas-new-
energy-vehicle-mandate-policy-for-passenger-cars/.
11 Ministry of Industry and Information Technology Equipment Industry Development Center, “Notice of the
Ministry of Industry and Information Technology on Matters Related to the Average Fuel Consumption
of Passenger Vehicle Enterprises and the Point Management of New Energy Vehicles in 2024–2025,”
December 28, 2023, http://www.miit-eidc.org.cn/art/2023/12/28/art_1657_10272.html.
12 UK Department of Transport, Consultation on a Zero Emission Vehicle (ZEV) Mandate and CO2 Emissions
Regulation for New Cars and Vans in the UK (London: Department of Transport, March 2023), https://
assets.publishing.service.gov.uk/media/64537b0ffaf4aa0012e132a8/zev-mandate-co2-emissions-
regulation-consultation-document.pdf.
13 Government of Canada, “Canada’s Electric Vehicle Availability Standard (Regulated Targets for Zero
Emission Vehicles),” December 19, 2023, https://www.canada.ca/en/environment-climate-change/
news/2023/12/canadas-electric-vehicle-availability-standard-regulated-targets-for-zero-emission-
vehicles.html.
14 Claire Buysse and Benjamin Sharpe, California’s Advanced Clean Trucks Regulation: Sales Requirements
for Zero-Emission Heavy-Duty Trucks (Washington, DC: ICCT, 2020), https://theicct.org/publication/
californias-advanced-clean-trucks-regulation-sales-requirements-for-zero-emission-heavy-duty-trucks/.
15 We use the term “credit” to refer generally to the unit of compliance accounting under various global
regulations, though terminology may differ between jurisdictions. In ACC-II, for instance, these are referred
to as “values.” In the United Kingdom, the term “credit” is used in reference to earning credits or avoiding
the use of allowances for non-ZEV sales, which is equivalent to earning compliance.

3 ICCT WORKING PAPER | DESIGNING A ZERO-EMISSION VEHICLE SALES REGULATION FOR TWO-WHEELERS IN INDIA
specifications might include electric range, electrical energy consumption, and battery
energy density, while market parameters may emphasize low cost-pricing, equitable
access to ZEVs, and shared mobility business models.

Each regulation also sets eligibility criteria for determining if a ZEV qualifies for credit
allocation. Most policies have a range-based cutoff for eligibility. Regulations such
as ACC II also define additional assurance criteria involving durability, warranty, and
charging requirements, which apply to all ZEVs sold in the jurisdiction. Manufacturers
must meet these assurance criteria regardless of whether the ZEV can earn credits. This
regulatory approach serves to help ensure that high-quality ZEVs enter the market.

The following sections review the eligibility, assurance, and credit allocation methods
adopted under ZEV regulations for light-duty vehicles in California, China, and the
United Kingdom.

ELIGIBILITY AND ASSURANCE CRITERIA

Table 1 presents the credit eligibility criteria for ZEV models, including minimum range
based on laboratory testing, along with other assurance criteria such as warranty and
charging requirements.

Table 1
Comparison of eligibility and assurance criteria adopted under global ZEV regulations

Minimum ZEV
Jurisdiction range Other criteria

California 50 miles (two-

ACC cycle test) a

• A durability requirement of 70% of certified range

value for 10 years or 150,000 miles for model years
2026–2029, and 80% of certified range value for 10
years or 150,000 miles for model year 2030 onwards.
• A battery warranty requirement of 8 years or 100,000
miles, with 70% battery state of health for model years
200 miles (Urban 2026–2030 or 75% for model year 2031 onwards.
California Dynamometer
• A propulsion-related parts warranty of 3 years or
ACC II Driving Schedule,
50,000 miles, or 7 years or 70,000 miles for high-priced
UDDS)
parts.
• Service information disclosure to independent repair
shops and battery labeling for recyclability and
repurposing.
• On-board charger of at least 5.76 kW, 20-feet certified
charging cord and connector.

100 km (China
China Light-Duty Vehicle
Test Cycle, CLTC)b

• Battery warranty of 3 years or 60,000 miles for the

100 miles full vehicle and 8 years or 100,000 miles for traction
(Worldwide batteries, hydrogen fuel cells, and hydrogen tanks.
United
harmonized Light
Kingdom • The battery warranty must provide for replacement
vehicles Test
Procedure, WLTP) of the traction battery if it falls below 70% capacity for
cars or 65% for vans during the covered period.
a
Two-cycle tests include the UDDS test and the first 505 seconds of the U.S. Environmental Protection Agency
(EPA) Federal Test Procedure (FTP-75).
b
The CLTC was developed by China Automotive Technology & Research Centre.

4 ICCT WORKING PAPER | DESIGNING A ZERO-EMISSION VEHICLE SALES REGULATION FOR TWO-WHEELERS IN INDIA
CREDIT ALLOCATION METHODS
Credit allocation mechanisms under California’s ACC regulation and China’s dual-credit
policy have evolved significantly since their inception. This evolution is also seen in how
the United Kingdom defines its ZEV mandate’s credit allocation system.

Earlier policies emphasized driving range, such that long-range models could earn
significantly more credits than lower-range models. With rapid advancements in
technology, subsequent policy phases have moved away from such range-based
distinctions in their approaches to credit allocation. For example, while ACC II and the
United Kingdom allocate all eligible ZEVs with a single baseline credit,16 China’s Phase
II policy was amended in July 2023 to significantly reduce the weightage allocated to
electric range in the base credit formula. For example, a 300 km range ZEV in China
would qualify for 4.4 base credits under Phase I, 2.08 under Phase II pre-amendment,
and 1.22 post-amendment. China’s Phase III policy retains the same amended credits as
in Phase II.

Each jurisdiction also adopts different approaches to allowing manufacturers to

claim additional credits for a given ZEV. For example, beyond the single credit that
is allocated to all eligible ZEVs under ACC II, additional partial credit values are
available based on three different environmental justice pathways. Similarly, under UK
regulations, additional partial credits are available for wheelchair accessible ZEVs and
ZEVs deployed in car clubs.

China’s Phase II policy specifies three separate multipliers or adjustment coefficients

on the base credit value based on electric range, power consumption, and battery
energy density. An additional range-based multiplier (over and above range factoring
in the base-credit function) implies that range has a compounding effect under the
Phase II policy in China. Notably, China’s multiplier system allows the possibility of
both increasing and decreasing the original base-credit value, depending on whether
vehicles meet set thresholds for the given parameters. For example, under the Phase
III policy, energy consumption multipliers vary between 0.5 to 1.5, while the battery
energy density multiplier ranges between a value of 0 to 1, acting as a deterrent for
batteries below a threshold density.

Table 2 summarizes the evolution of credit allocation mechanisms for ZEVs in

California, China, and the United Kingdom.17

16 We use the term “baseline credit” broadly, though this term is not used in any of the regulations. China’s
regulations, for instance, refer to such credits as a base credit value.
17 This table summarizes credit allocation mechanisms for battery-electric vehicles only. Plug-in hybrid
electric vehicles and other transitional technologies are not included under the scope of the review.

5 ICCT WORKING PAPER | DESIGNING A ZERO-EMISSION VEHICLE SALES REGULATION FOR TWO-WHEELERS IN INDIA
Table 2
Comparison of credit allocation mechanisms under zero-emission vehicle regulations in various jurisdictions

United
California China Kingdom

NEV mandate NEV mandate NEV mandate

Jurisdiction ACC ACC II Phase I Phase II Phase III ZEV mandate

Compliance Model year Model year Calendar year Calendar year Calendar year Calendar year
period 2012–2025 2026–2035 2019–2020 2021–2023 2024–2025 2024–2035

Range- based Range-based function allowing multiple credits

function per ZEV, with weightage assigned to range in the
allowing base credit function reduced over successive policy
multiple credits periods:
All eligible • Phase I: BC = 0.012 * ER + 0.8 All eligible
Baseline credit per eligible
ZEVs earn 1 ZEVs earn 1
(BC) system ZEV: • Phase II: BC = 0.0056 * ER + 0.4
credit. credit.
• BC = 0.01 *
electric range • Phase II: BC = 0.0034 * ER + 0.2, capped at 2.3
(ER) + 0.50, (Aug - Dec 2023)
capped at 4 • Phase III: 0.0034 * ER + 0.2, capped at 2.3

Extra credits
available for: Until August 2023, multipliers
• Authorized based on:
sales of used • Vehicle electric energy
ZEVs (up to consumption (0.5 up to 1.5)
0.25)
Multipliers • Battery energy density (0 up to 0.5 extra credits
• ZEVs sold 1.0) available for:
based on
through • ZEVs sold to
Opportunities to vehicle • Electric range (0 up to 3.4)
community- car-clubs
earn additional None electric
based Since August 2023, multipliers
credits energy • Wheel-chair
discount based on:
consumption accessible
programs • Vehicle electric energy
(0.5 up to 1.2) ZEVs
(0.5) consumption (0.5 up to 1.5)
• All sales of • Battery energy density (0 up
low-cost to 1)
ZEVs below
a given retail • Electric range (0.7 up to 1)
price (0.1)

Maximum credits
possible per
ZEV (including 4 1.5 6 5.1 3.45 1.5
any additional
credits)

IMPACT OF A ZEV SALES REGULATION ON THE

TWO-WHEELER MARKET IN INDIA
Electric two-wheelers are gaining momentum in India and the market is well-positioned
for policies to encourage faster adoption of battery-electric vehicles. We define the
impact of a ZEV sales regulation on the two-wheeler market based on how it affects
consumers (demand) and manufacturers (supply). Among the various factors, model
availability and reductions in the price of ZEVs have an impact on consumers, and
market competitiveness and investor certainty impact ZEV manufacturers.

Model availability. One of the most significant impacts of a ZEV regulation is an

increase in the number of ZEV models available to consumers on the market. To
comply with their ZEV sales obligations, manufacturers look for more opportunities to
expand their market share and introduce a greater number of electric vehicle models
to attract consumers. The ZEV market in the U.S. state of California illustrates the
relationship between sales of battery-electric passenger cars and increased model
availability. As of 2019, the top metropolitan areas in terms of electric vehicle sales in

6 ICCT WORKING PAPER | DESIGNING A ZERO-EMISSION VEHICLE SALES REGULATION FOR TWO-WHEELERS IN INDIA
the United States—Los Angeles, San Jose, San Francisco, and San Diego—each had
more than 30 electric models available.18 Other U.S. states that adopted regulations
similar to California, such as New Jersey, New York, Washington, Maryland, Oregon,
and Colorado, also saw growth in electric model availability.19 ZEV sales regulations
thus not only impart a sense of certainty to both the market and manufacturers, but
also foster an uptick in model availability for consumers.

Price reduction of ZEVs. A ZEV sales regulation compels manufacturers to produce

and sell electric two-wheeler models. With more models in the market, the volume
of ZEVs would increase and, due to economies of scale, there would eventually be a
reduction in the cost of batteries, ultimately leading to consumer price benefits.

For example, a 2022 ICCT analysis of light-duty vehicles in the United States estimated
that an acceleration of annual reductions in battery costs from 7% to 9% expedites the
path toward price parity between electric and conventional vehicles by approximately 1
to 2 years. Conversely, lowering annual battery cost reductions by 3% typically extends
the timeline for parity by about 1 to 4 years. 20 For the passenger car and sports utility
segments in China, the cost of battery packs is anticipated to decrease from ¥0.9
per watt-hour (Wh) in 2020 to around ¥0.4 per Wh by 2030 due to advancements in
technology and production scale. Price parity between 300–400 km electric-range
vehicles and conventional cars and sport utility vehicles is expected to happen
between 2026 and 2029. 21

For two-wheelers in India, projections indicate that when electric vehicle battery
production and assembly cost decrease in alignment with accelerated electrification
scenarios, shorter-range battery-electric vehicles covering 150–200 km can achieve
price parity by 2024–2026. BEVs with 250–300 km of range are expected to follow
suit around 2026–2029, with the longest-range BEVs, spanning 350 to 400 km,
projected to attain price parity by 2029–2032. 22 India has an opportunity to localize the
production of electric vehicles and batteries, a crucial step in cost reduction. A robust
regulatory framework could instill confidence in investors and propel the electric
two-wheeler market towards accelerated growth.

Market competitiveness. Manufacturers can comply with their sales obligations under
ZEV mandates through the production of ZEVs or the purchase of surplus credits from
other manufacturers who overachieve their ZEV sales obligations. In practice, the
monetary value of ZEV credits will depend on the supply and demand of ZEVs in the
market. Under such a scheme, manufacturers who are slow to embrace electrification
can lose market competitiveness. This is because such manufacturers would have to
buy credits and will likely distribute these costs across their ICE models. Similarly,
manufacturers who gain revenue from the sale of excess credits could potentially pass
on benefits across their electric models by selling them at lower cost. In leading electric
vehicle markets, governments have prioritized stronger electrification policies to help
manufacturers retain their positions in the market. For instance, China’s New Energy

18 Anh Bui, Peter Slowik, Nic Lutsey, Update on Electric Vehicle Adoption Across U.S. Cities (Washington, DC:
ICCT, 2020), https://theicct.org/wp-content/uploads/2021/06/EV-cities-update-aug2020.pdf.
19 Anh Bui, Peter Slowik, and Nic Lutsey, Evaluating Electric Vehicle Market Growth Across U.S. Cities
(Washington, DC: ICCT, 2021), https://theicct.org/publication/evaluating-electric-vehicle-market-growth-
across-u-s-cities/.
20 Peter Slowik, Aaron Isenstadt, Logan Pierce, and Stephanie Searle, Assessment of Light-Duty Electric
Vehicle Costs and Consumer Benefits in the United States in the 2022-2035 Time Frame (Washington, DC:
ICCT, 2022), https://theicct.org/publication/ev-cost-benefits-2035-oct22/.
21 Nic Lutsey, Hongyang Cui, and Rujie Yu, Evaluating Electric Vehicle Costs and Benefits in China in the
2020-2035 Time Frame (Washington, DC: ICCT, 2021), https://theicct.org/publication/evaluating-electric-
vehicle-costs-and-benefits-in-china-in-the-2020-2035-time-frame/.
22 Shikha Rokadiya, Anup Bandivadekar, and Aaron Isenstadt, Estimating Electric Two-Wheeler Costs in India
to 2030 and Beyond (Washington, DC: ICCT, 2021), https://theicct.org/publication/estimating-electric-
two-wheeler-costs-in-india-to-2030-and-beyond/.

7 ICCT WORKING PAPER | DESIGNING A ZERO-EMISSION VEHICLE SALES REGULATION FOR TWO-WHEELERS IN INDIA
Automobile Industry Plan (2021–2035) targets 20% of vehicle sales to be ZEVs by
2025, to achieve international competitiveness for China’s ZEV industry. 23

Investor certainty. Establishing clear quantities of ZEV two-wheelers to be sold in India

each year could deliver increased confidence to investors in the market. In addition,
having guaranteed numbers of ZEVs on the road would allow charge point operators
to accelerate investment in charging infrastructure. A ZEV regulation coupled with
EV ecosystem investment thus has the potential to deliver significantly improved
consumer choice and a better user experience.

Government policies to create robust frameworks for the electric vehicle market
have led to market advancements in other countries and regions, such as China and
Europe. 24 Experience from these markets suggests that establishing explicit volume
goals and offering financial incentives ultimately engages governments and companies
in the development of an electric vehicle market and manufacturing infrastructure. 25
Countries such as Germany and the United Kingdom are formulating national-level
charging roadmaps designed to establish networks with extensive geographical
coverage and sufficient power capacity to meet vehicle sales targets. These mandatory
installation targets offer increased legal and policy certainty, which are in turn
anticipated to spur increased investment by private-sector actors. 26

In the following sections, we discuss potential institutional frameworks and credit

design approaches for adopting a ZEV sales regulation for two-wheelers in India.

VENUE AND INSTITUTIONAL FRAMEWORK FOR

IMPLEMENTATION OF A ZEV CREDIT PROGRAM IN
INDIA
Issuance of ZEV credit obligations on manufacturers would have to be backed by
requisite legal authority, and program success would also require a well-established
supporting institutional framework. In other countries and regions, ZEV regulations are
authorized by legislation linked to air quality improvement, climate change mitigation,
or fuel consumption reduction. China and the United Kingdom to some extent interplay
ZEV regulations with fuel consumption standards.

In India, supply side regulations and market-based compliance mechanisms have been
deployed in the power sector. The Renewable Purchase Obligation (RPO) stipulates
that all electricity distribution licensees must acquire or generate a minimum specified
quantity of their electricity needs from renewable energy sources, in accordance with
the Indian Electricity Act of 2003. The Renewable Energy Certificate mechanism serves
as a market-based instrument to encourage renewable energy usage and streamline
compliance with RPOs. Its objective is to rectify the disparity between the availability of
renewable energy resources in a state and the obligation of entities to fulfil their RPOs. 27

23 International Energy Agency, “Global Outlook 2021: Policies to Promote Electric Vehicle Deployment”
(2021), https://www.iea.org/reports/global-ev-outlook-2021/policies-to-promote-electric-vehicle-
deployment.
24 Anh Bui, Peter Slowik, and Nic Lutsey, Power Play: Evaluating the U.S. Position in the Global Electric Vehicle
Transition (Washington, DC: ICCT, 2021), https://theicct.org/publication/power-play-evaluating-the-u-s-
position-in-the-global-electric-vehicle-transition/.
25 Nic Lutsey, Mikhail Grant, Sandra Wappelhorst, and Huan Zhou, Power Play: How Governments are Spurring
the Electric Vehicle Industry (Washington, DC: ICCT, 2018), https://theicct.org/publication/power-play-
how-governments-are-spurring-the-electric-vehicle-industry/.
26 Marie Rajon Bernard, Irem Kok, Tim Dallman, and Pierre-Louis Ragon, Deploying Charging Infrastructure
to Support an Accelerated Transition to Zero Emission Vehicles (Washington, DC: ZEV Transition Council,
2022), https://theicct.org/publication/deploying-charging-infrastructure-zevtc-sep22/.
27 Ministry of Power, “Government of India, Ministry of Power Redesigns Renewable Energy Certificate
Mechanism,” Press release, September 29, 2021, https://pib.gov.in/PressReleasePage.aspx?PRID=1759300.

8 ICCT WORKING PAPER | DESIGNING A ZERO-EMISSION VEHICLE SALES REGULATION FOR TWO-WHEELERS IN INDIA
A review of major legislation related to automobiles, the environment, and energy and
fuel consumption in India suggests that a ZEV credit program could be implemented
at both national and state levels, under several pathways. Table 3 summarizes this
assessment. 28

Table 3
Summary of enabling statutory authority for issuance of ZEV regulation in India

Key administrative
Pathway Venue actors Enabling authority

Fuel/energy
Ministry of Power, Bureau Energy Conservation
consumption National
of Energy Efficiency Act
reduction

Air quality Ministry of Road Central Motor Vehicles

National
improvement Transport and Highways Act

Ministry of Environment,
Air quality
Forest, and Climate Environment Protection
improvement National
Change, Central Pollution Act, Air Act
Control Board

Air quality State Pollution Control

State Air Act
improvement Boards / Committees

Commission on Air
Commission on Air
State (National Quality Management in
Air quality Quality Management in
Capital Region and National Capital Region
improvement National Capital Region
Adjoining Areas) and Adjoining Areas
and Adjoining Areas
Act

In addition to the above agencies with statutory powers, it is also important to

emphasize the unique roles of the National Board of Electric Mobility (NBEM) and
the National Council on Electric Mobility (NCEM), two bodies formed under the
National Electric Mobility Mission Plan 2020. This plan aims to address multiple
strategic objectives in India, including enhancing energy security, mitigating adverse
environmental impacts, and boosting domestic manufacturing of electric vehicles.
The NCEM and NBEM are chaired by the heads of the Ministry of Heavy Industries and
the Department of Heavy Industries, respectively. The NCEM and NBEM have been
granted powers to recommend and approve broad policy frameworks in the interest of
promoting electric vehicles and their manufacturing in India. 29 The bodies also possess
extensive authority to suggest to the central government any new legislation, policy,
or amendment to current measures that would advance the production and utilization
of electric vehicles in the country. In that respect, the NCEM and NBEM could help to
enable the implementation of a ZEV sales regulation in India.

Judicial intervention in the interest of the environment, air quality, and public health
has also played a key role in regulating transport in India. For example, in 1998, the
Supreme Court of India ordered the conversion of all public transport in Delhi to run
on compressed natural gas (CNG), following a writ petition. 30 More recently, in 2015,
the Supreme Court ordered that all taxis running in the National Capital region should
run on CNG by early 2016; the Court also banned new sales of all diesel cars with

28 ICCT appointed a legal consultant to undertake an assessment of authorities available at the national and
state level in India for the issuance of ZEV mandates, including credit programs. While this paper focuses
on two-wheelers, regulatory authority discussed is independent of vehicle segment.
29 Ministry of Heavy Industries and Public Enterprises, “Notification of National Council on Electric Mobility,”
March 2017, https://heavyindustries.gov.in/sites/default/files/2023-09/ncem.pdf.
30 Anuj Bhuwania, “The Case that Felled a City: Examining the Politics of Indian Public Interest Litigation
Through One Case,” South Asia Multidisciplinary Academic Journal 17 (2018), https://journals.openedition.
org/samaj/4469.

9 ICCT WORKING PAPER | DESIGNING A ZERO-EMISSION VEHICLE SALES REGULATION FOR TWO-WHEELERS IN INDIA
an engine capacity of 2,000 cc and above. 31 Businesses altered their operations to
ensure compliance with these rulings. For example, following the 2015 order, transport
network companies like Ola received bulk purchase discounts from manufacturers for
CNG models and passed the benefits to drivers to help with cost feasibility. 32 In other
words, once the Supreme Court mandate was declared, market transitions occurred via
business responses, even without subsidies.

Over and above the legal authority to impose regulations on manufacturers, there
are other aspects of ZEV sales regulations that require institutional coordination
and action for successful implementation. One such aspect is the deployment of
charging infrastructure. One of the major reasons that the ICE vehicle market is
so well-established in India is its well-adapted refueling infrastructure. For electric
two-wheelers to compete effectively with their ICE counterparts, their development
and cost optimization must be coordinated with the deployment of adequate
charging infrastructure. The government, power and utility companies, industry, and
standardization organizations all will play important roles in this regard.

Technology, research, testing, and funding organizations are other key stakeholders in
the rollout of a ZEV credit program. These include government and non-government
think-tanks, technology and policy research organizations and institutions, industry
bodies, vehicle and emission testing and certification agencies, government funding
agencies, and financial institutions.

KEY DESIGN ELEMENTS FOR CONSIDERATION OF A

ZEV SALES REGULATION IN INDIA
As noted above, global programs are moving away from relying heavily on electrical
range as a basis for allocating ZEV credits. In the Indian context, we delve into the
uncertainties associated with a credit function that largely depends on range using a
hypothetical ZEV target and credit function. We base this illustration on two-wheeler
sales data from Maharashtra, as the state has expressed a readiness to explore a ZEV
credit program in its state electric vehicle policy, which was notified in 2021 and targets
10% ZEV penetration among new vehicle registrations by 2025. 33

Assuming a 5% ZEV credit target for the top five manufacturers of two-wheelers in
Maharashtra, 34 we calculate the ZEV credits required by such manufacturers based
on their annual sales in FY 2021–2022. We assume that electric two-wheelers with a
minimum range of 80 km are eligible to earn 1 credit, 35 while electric two-wheelers with
a range of 300 km and above are eligible for a maximum of 4 credits. Based on this
assumption, the resulting linear function for credit allocation is:

credits earned per model = 0.0136 x electric range – 0.0909.

We further assume three scenarios through which manufacturers generate credits to

comply with their credit targets. In the first scenario, manufacturers sell equal numbers
of both short- and long-range models. In the second, they sell only short-range 80 km
models, and in the third, they sell only long-range 300 km models.

31 Sakshi Dayal, “Another Supreme Court Order 18 Years Ago and Delhi’s First Brush with CNG”, India Express,
May 3, 2016, https://indianexpress.com/article/cities/delhi/supreme-court-ban-on-diesel-taxis-2781490/.
32 Press Trust of India, “Ola to Offer Rs 1 Lakh to Drivers to Move to CNG,” Times of India, August 26, 2015,
https://timesofindia.indiatimes.com/tech-news/ola-to-offer-rs-1-lakh-to-drivers-to-move-to-cng/
articleshow/48684166.cms.
33 “India: State Level EV Policies,” Transportpolicy.net, https://www.transportpolicy.net/standard/india-state-
level-ev-policies/.
34 Collectively, these manufacturers represent 83% of the two-wheeler market in the state.
35 We assume a minimum range eligibility of 80 km in alignment with the eligibility criteria for electric two-
wheelers under the Indian government’s national incentive scheme, FAME-II.

10 ICCT WORKING PAPER | DESIGNING A ZERO-EMISSION VEHICLE SALES REGULATION FOR TWO-WHEELERS IN INDIA
As shown in Table 4, the penetration of electric two-wheeler sales varies under these
scenarios between 1.3% if manufacturers choose to comply with their credit target by
selling only long-range models and 5.0% if they sell only short-range models.

Table 4
Scenarios of ZEV credits earned based on electric two-wheeler range

ZEV Electric model Electric model

credit ZEV credit deployment deployment
No. target compliance strategy (top-5 manufacturers) (all manufacturers)

50% of sales are short-

range models, while
Scenario 1 5% 3.6% 3.3%
50% of sales are long-
range models

All sales are short-

Scenario 2 5% 5.0% 4.6%
range models

All sales are long-

Scenario 3 5% 1.3% 1.1%
range models

Based on this example, we see that the electrification target under Maharashtra’s EV
policy can be achieved faster under Scenario 2 than under Scenarios 1 and 3, in which
longer-range models are part of the compliance strategy and result in excess credits.

Considering that petrol scooters and motorcycles in India typically deliver 300–800
km of range when fully charged, Indian consumers may prefer long-range electric
models. 36 However, the market for electric two-wheelers in India is still relatively new
and there are insufficient data to ascertain long-term consumer preferences regarding
model range. In comparison to four-wheelers, two-wheelers travel shorter distances
per trip and have lower dependence on public fast charging. Therefore, it is possible
that with adequate access to residential charging points, consumers may be able to
transition to lower-range models as well.

Additionally, given that the two-wheeler market in India is highly price-sensitive, long-
range models may not appeal to all consumer segments until substantial reductions in
battery costs take place. For perspective, in China, Indonesia, Thailand, and Vietnam,
the average range of leading electric two-wheeler models is between 80 and 120
km, which is similar to the range available in the Indian market. 37 Manufacturers are
best placed to recognize and respond to the range preferences of various consumer
segments as the market matures.

The Indian Government’s Faster Adoption and Manufacturing of Hybrid Vehicles

(FAME) II scheme specifies a minimum range of 80 km, minimum top speed of 40
km/h, minimum acceleration of 0.65 m/s2, and a maximum energy consumption
of 7 kWh/100 km for electric two-wheelers to be eligible for consumer incentives.
Policymakers might consider adopting the same technical specifications for eligibility
in a crediting scheme for electric two-wheelers. Beyond the minimum eligible range, all
ZEVs could be allowed to earn the same base credit value. This approach would have
the advantage of spurring the initial market to replace combustion engine kilometers
with ZEV kilometers.

36 Sunitha Anup, Market Analysis of the New Two-Wheeler Fleet in India for Fiscal Year 2020-21 (Washington,
DC: ICCT, 2021), https://theicct.org/publication/market-analysis-of-the-new-two-wheeler-fleet-in-india-for-
fiscal-year-2020-21/.
37 Houng Le, Francisco Posada, and Zifei Yang, Electric Two-Wheeler Market Growth in Vietnam: An Overview
(Washington, DC: ICCT, 2022), https://theicct.org/publication/asia-pacific-lvs-ndc-tia-e2w-mkt-growth-
vietnam-nov22/.

11 ICCT WORKING PAPER | DESIGNING A ZERO-EMISSION VEHICLE SALES REGULATION FOR TWO-WHEELERS IN INDIA
 As in other jurisdictions, other technical and consumer cost parameters beyond base
credits may be considered for the purpose of awarding a reasonable amount of extra
credits to eligible ZEVs. Criteria related to electrical energy consumption, battery
energy density, and vehicle price may be evaluated for such purposes.

Figure 1 illustrates the variability in range versus electrical energy consumption of

electric two-wheeler models on the market in 2022. Figure 2 illustrates the variability in
range versus battery energy density, and Figure 3 illustrates variability in range versus
price. The sizes of the bubbles in all three figures represent total annual sales for the
depicted models.

Figure 1
Comparison of range and energy consumption of electric two-wheeler models in 2022

155

145
Ola S1
135
Ampere Zeal EX
Ola S1 Pro
125
Range (km)

Ampere Magnus EX JMT 1000 3k

115

105

Bajaj Chetak 2403 Premium

95
JMT1000HS
85

75
2.5 2.6 2.7 2.8 2.9 3 3.1 3.2 3.3 3.4 3.5
Electric energy consumption (kWh per 100 km)

Source: “FAME India Scheme Phase II Dashboard,” Government of India, Ministry of Heavy Industries,
http://fame2.heavyindustries.gov.in/dashboard.aspx.

THE INTERNATIONAL COUNCIL ON CLEAN TRANSPORTATION THEICCT.ORG

Figure 1 shows a scattered distribution and indicates the potential to incentivize more
efficient models through credit multipliers for reducing electrical energy consumption.
There seems to be no direct correlation between range and energy consumption, such
that encouraging more efficient ZEVs would not discourage the manufacturing of
models with longer ranges. Notably, all models have an electrical energy consumption
well under the threshold of 7 kWh/100 km specified under the FAME II scheme to
qualify for incentives.

12 ICCT WORKING PAPER | DESIGNING A ZERO-EMISSION VEHICLE SALES REGULATION FOR TWO-WHEELERS IN INDIA
 Figure 2
Comparison of range and battery energy density of electric two-wheeler models in 2022

155
Ola S1
145
Ola S1 Pro
135
Ampere Zeal EX
125
Range (km)

JMT 1000 3k
115
Ampere Magnus EX Bajaj Chetak 2403 Premium
105

95
JMT1000HS
85

75
150 170 190 210 230 250 270 290
Battery energy density (Wh per kg)
Source: “FAME India Scheme Phase II Dashboard,” Government of India, Ministry of Heavy Industries,
http://fame2.heavyindustries.gov.in/dashboard.aspx.

THE INTERNATIONAL COUNCIL ON CLEAN TRANSPORTATION THEICCT.ORG

As seen in Figure 2, there is wide variation in battery energy density of models on the
market. Battery energy density is also a function of battery chemistry; while FAME II
only incentivizes models with advanced battery chemistries, 38 certain technologies
may offer tradeoffs between energy density and safety and performance under
Indian weather conditions. It is important to have adequate market consultations to
understand optimal battery energy density for the Indian two-wheeler segment for the
purpose of awarding any premiums on credits under a ZEV sales regulation.

As seen in Figure 3, there is also wide variability in the upfront pricing of electric two-
wheeler models on the market. While price is observed to increase with range, even the
lowest-cost model on the market has an upfront price 21% higher than the top-selling
conventional two-wheelers. As the Indian two-wheeler market is very price-sensitive, to
enable better reach of electric models among the average consumer, the production of
low-cost models that meet all requisite technical and performance quality criteria could
be incentivized through appropriate amounts of extra credits.

38 According to FAME, “Vehicle fitted with only advanced chemistry meeting with minimum technical criteria
and registered as ‘Motor Vehicle’ as per Central Motor Vehicle Rules shall be eligible for incentives under
the FAME-II scheme. Advanced battery represents the new generation batteries such as lithium polymer,
lithium iron phosphate, lithium cobalt oxide, lithium titanate, lithium nickel manganese cobalt, lithium
manganese oxide, metal hydride, zinc air, sodium air, nickel zinc, lithium air and other similar chemistry
under development or under use. In addition, to this battery should have specific density of at least 70
Wh/kg and cycle life of at least 1000 cycles.” Ministry of Heavy Industries and Public Enterprises, Fame
2 Notifications and Guidelines (2019), https://www.acma.in/uploads/doc/FAME%202%20Notifications_
DHI_10th%20May%202019.pdf.

13 ICCT WORKING PAPER | DESIGNING A ZERO-EMISSION VEHICLE SALES REGULATION FOR TWO-WHEELERS IN INDIA
 Figure 3
Comparison of range and upfront prices of electric two-wheeler models in 2022

170

160
Ola S1 Pro
150
Ola S1
140

130
Range (km)

Ampere Zeal EX
120
JMT 1000 3k
110
Ampere Magnus EX Bajaj Chetak 2403 Premium
100

90 JMT1000HS

80

70
70 80 90 100 110 120 130 140 150 160 170
On-road price in thousands (INR 2023)
Sources: “FAME India Scheme Phase II Dashboard,” Government of India, Ministry of Heavy Industries,
http://fame2.heavyindustries.gov.in/dashboard.aspx and manufacturer websites.

THE INTERNATIONAL COUNCIL ON CLEAN TRANSPORTATION THEICCT.ORG

POLICY GOALS FOR TWO-WHEELER ZEV REGULATIONS IN INDIA

Figure 4 illustrates the electrification levels that can potentially be achieved through
stringent fuel consumption standards, 39 in comparison to an indicative sales regulation
that increases year-on-year sales obligations by 5%. For reference, the chart also
depicts the electrification trajectory for new sales of two-wheelers under the ambitious
policy scenario of ICCT’s India Roadmap Model. 40 The ambitious scenario depicts
electrification levels that are required to align India’s road transport emissions with
objectives of the Paris Agreement and India’s net-zero by 2070 goal.

As shown in Figure 4, by increasing annual ZEV sales by 5% starting from 2024, only
14% electrification is reached by 2025. From a climate standpoint, targeting a 30%
share for new electric two-wheelers by 2025 is better aligned to achieving 100%
electrification of new sales by 2035.

Among vehicle segments, two-wheelers offer the easiest pathway for EV penetration
due to their small battery pack, which is typically less than 5 kWh. Studies indicate
that with central and state government subsidy support, cost parity has already been
achieved for several models on the market. 41 It is therefore reasonable to assume that a
ZEV regulation could target 10% annual growth in new sales of electric two-wheelers.
In practice, annual sales obligations need not follow a linear path, and near-term and
long-term electrification targets could be set to balance both cost feasibility and policy
objectives.

39 Sunitha Anup and Ashok Deo, Fuel Consumption Standards for the New Two-Wheeler Fleet in India
(Washington, DC: ICCT, 2021), https://theicct.org/publication/fuel-consumption-standards-for-the-new-
two-wheeler-fleet-in-india/.
40 Arijit Sen and Josh Miller, Vision 2050: Update on the Global Zero Emission Vehicle Transition in 2023
(Washington, DC: ICCT, 2023), https://theicct.org/publication/vision-2050-global-zev-update-sept23/.
41 Shikha Rokadiya, “FAME-II Revisions Spark Hopes for a Jump in Electric Two-Wheeler Sales in India,” ICCT
Staff Blog, July 28, 2021, https://theicct.org/fame-ii-revisions-spark-hopes-for-a-jump-in-electric-two-
wheeler-sales-in-india/.

14 ICCT WORKING PAPER | DESIGNING A ZERO-EMISSION VEHICLE SALES REGULATION FOR TWO-WHEELERS IN INDIA
 Figure 4
Illustrative policy trajectory for new two-wheeler sales

100%
Annual percentage sales achieved for electric two-wheelers

90%

Ambitious scenario of electric

80% two-wheeler sales aligned with
India’s Net Zero by 2070 goals ICCT analysis for electric
two-wheeler penetration by
70% setting fuel consumption
standard 20.5 gCO2/km
at 2030
60%

ICCT analysis for electric

50% two-wheeler penetration
by setting fuel consumption
standard 25.3 gCO2/km at 2025
40%

30%
Increasing electric two-wheeler
sales share 5% per year
20%

10%
Dots represent sales targets for each scenario.

0%
2020 2022 2024 2026 2028 2030 2032 2034 2036

THE INTERNATIONAL COUNCIL ON CLEAN TRANSPORTATION THEICCT.ORG

In this context, a ZEV credit program for two-wheelers in India could target 30%
market penetration in the very near term (2025), up from a rate of 4.1% in 2022.

COMPLIANCE FLEXIBILITY AND ENFORCEMENT PATHWAYS

In this section, we briefly discuss the various compliance and enforcement pathways
established under ZEV sales regulations in other countries and regions as focus areas
of regulatory design. Such mechanisms can provide flexible options to manufacturers
for meeting their credit targets to promote market growth in a progressive and feasible
manner, while at the same time setting a strong deterrent to non-compliance.

The most direct pathway available to manufacturers for compliance with their annual
credit targets is through sales of the required number of ZEVs. However, ZEV credit
programs also offer options to bank and/or trade surplus credits as a compliance
flexibility to manufacturers.

Banking and trading of surplus credits

Surplus credits occur when a manufacturer holds more credits at the end of a
compliance year than required. The manufacturer can bank the excess credits and
use them to comply with next year’s ZEV requirement or can trade the excess credits
with other manufacturers who are not meeting their targets. Banking of credits is an
important flexibility element for manufacturers. It not only encourages manufacturers
to transition to ZEVs earlier than required but also provides flexibility and security in
case market uptake does not occur exactly as anticipated. Credit banking provisions
also discourage manufacturers from holding back ZEV sales if they have already met
their requirement for that year. Banking also reduces the number of credits available

15 ICCT WORKING PAPER | DESIGNING A ZERO-EMISSION VEHICLE SALES REGULATION FOR TWO-WHEELERS IN INDIA
for trading and thereby might force manufacturers to transition to ZEVs faster than if
relying on purchased credits.

Credit borrowing
In addition to banking, ZEV regulations also may include mechanisms that allow
manufacturers to borrow credits from future compliance years. For example, the
United Kingdom’s ZEV regulation allows the borrowing of allowances in the first three
years of the policy (2024–2026), with an interest rate of 3.5% annually.

Some compliance pathways also allow for limited interlinkage between manufacturer
compliance towards ZEV regulations and fuel consumption or greenhouse gas
standards. In China, manufacturers can offset corporate average fuel consumption
deficits by using banked or traded NEV credits, in addition to the option of using their
own or transferred fuel consumption credits. 42 Meanwhile, manufacturers can offset
NEV deficits only by using their own NEV credits or purchasing NEV credits from other
companies. 43 Phase II of China’s NEV mandate policy, however, allows for a relaxation
in a manufacturer’s total vehicle volume on which the NEV credit requirements are
calculated. This relaxation is allowed only for vehicles that either meet or exceed
China’s fuel consumption standards. 44

Under California’s ZEV credit provisions for model years 2018–2021, manufacturers
were permitted to offset 30%–50% of their ZEV credit requirements through credits
earned by over-complying with applicable greenhouse gas standards by at least 2 g
CO2/km. 45 Under the United Kingdom’s ZEV mandate, manufacturers will be allowed to
use excess credits (allowances) from CO2 regulation compliance towards compliance
with the ZEV mandate in the initial years. This feature was introduced primarily with
the objective of providing flexibility to manufacturers to optimize costs in making CO2
reductions across the fleet while moving towards an all-ZEV fleet in the long term. The
transfer of such allowances towards ZEV compliance is capped at 65% in 2024, 45% in
2025, and 25% in 2026.

While two-wheelers in India are not subject to fuel-consumption standards, if such

standards are introduced in the near future, appropriate transitional interlinkages
could be considered that benefit manufacturers who may choose to make short-term
investments in fuel-efficient technologies while transitioning towards electrification at
scale in the long term.

Deterrents for non-compliance

If manufacturers are unable to demonstrate compliance with ZEV targets through
the various compliance pathways and flexibility mechanisms available to them, credit
programs specify enforcement measures to deter non-compliance. For example, under
California’s ACC II regulations, if a manufacturer demonstrates non-compliance, it
has an additional two years to make up its ZEV deficit, beyond which it is liable for a
financial penalty of $5,000 per credit deficit. Paying this penalty does not write off the
credit deficit, which is accrued to future years. The United Kingdom’s ZEV mandate
also specifies a financial compliance payment of £15,000 per excess non-ZEV car

42 Zhinan Chen and Hui He, The Second Phase of China’s New Energy Vehicle Mandate Policy for Passenger
Cars (Washington, DC: ICCT, 2021), https://theicct.org/publication/the-second-phase-of-chinas-new-
energy-vehicle-mandate-policy-for-passenger-cars/.
43 Zhinan Chen and Hui He, “How Will the Dual-Credit Policy Help China Boost New Energy Vehicle Growth?”
ICCT Staff Blog, February 10, 2022, https://theicct.org/china-dual-credit-policy-feb22/.
44 Chen and He, The Second Phase of China’s New Energy Vehicle Mandate Policy.
45 Shikha Rokadiya and Zifei Yang, Overview of Global Zero-Emission Vehicle Mandate Programs
(Washington, DC: ICCT, 2019), https://theicct.org/publication/overview-of-global-zero-emission-vehicle-
mandate-programs/; Zero-Emission Vehicle Standards for 2018 through 2025 Model Year Passenger Cars,
Light-Duty Trucks, and Medium-Duty Vehicles, California Code of Regulations Section 1962.2, https://ww2.
arb.ca.gov/sites/default/files/barcu/regact/2022/accii/acciifro1962.2.pdf.

16 ICCT WORKING PAPER | DESIGNING A ZERO-EMISSION VEHICLE SALES REGULATION FOR TWO-WHEELERS IN INDIA
registration as a last resort for manufacturers to comply with their ZEV targets. Unlike
California’s penalty system, the UK’s mechanism absolves manufacturers of any deficits
in exchange for the payment.

CONCLUSIONS
ZEV regulations send a clear market signal towards the ZEV transition and can spur
manufacturers to produce and supply ZEVs in greater numbers. ZEV regulations can
also help to stimulate market competition and benefit consumers by encouraging wider
model availability at competitive prices. Credit mechanisms offer added compliance
flexibility for manufacturers to optimize costs in transitioning towards electric
powertrains.

A mandate in the form of a ZEV regulation can provide the necessary push for
manufacturers to enter the market and build capacity at scale. The two-wheeler market
in India is arguably well-positioned for the issuance of such a regulation, and attractive
demand-side incentives are already in place from the central government and several
state governments. As noted above, the CNG transition in Delhi, which was brought
about through a mandate, indicates that regulatory certainty can have powerful
impacts in achieving market transformation at scale in a cost-effective manner.

Our review suggests that there are multiple enabling statutory frameworks that could
provide the necessary authority for issuance of a ZEV regulation at the national or
sub-national level. Such authority is derived from laws in place related to energy
(fuel) consumption, air quality, environment, and vehicular transport. Key authorities
include the Ministry of Power, the Bureau of Energy Efficiency, the Ministry of Road
Transport and Highways, the Ministry of Environment, Forest, and Climate Change,
and the Central Pollution Control Board. At the state level, they also encompass State
Pollution Control Boards and Committees and State Transport Departments. Further,
the National Council on Electric Mobility and National Board on Electric Mobility also
have broad powers to recommend and approve policy frameworks in the interest of
promoting electric vehicles and their manufacturing in India.

Under a credit-based ZEV regulation, two-wheeler manufacturers in India could be

subjected to increasingly stringent credit targets over a policy period. Under ZEV
regulations for light-duty vehicles in other countries and regions, a range-based sliding
credit system has been used to determine the number of credits awarded to a given
ZEV. However, relying heavily only on range to distinguish credit allocation can lead
to excess credits and introduce uncertainty in meeting target market shares. Several
jurisdictions, including California and the United Kingdom, have hence moved toward
awarding credits uniformly to all eligible ZEVs, as opposed to range-based sliding
credit approaches.

In the initial phases of a ZEV regulation in India, policymakers could consider

allocating credits uniformly to all two-wheelers that meet a minimum range criterion
for models with factory-fitted batteries with advanced chemistries. Such range
criteria could be modified and or waived for swappable battery packs, which may
have a lower range by design. In future years of the regulation, based on market
performance and feedback, distinctions could be made to favor uptake of energy-
efficient vehicles and batteries, as well as low-cost models, through multipliers on the
base credit value for such parameters.

Banking provisions could be defined to allow manufacturers to hold any additional

credits for future use as a compliance flexibility, alongside options to trade or
sell excess credits to competitors. Further, if fuel consumption standards are also
implemented for two-wheelers, appropriate near-term interlinkages could be specified

17 ICCT WORKING PAPER | DESIGNING A ZERO-EMISSION VEHICLE SALES REGULATION FOR TWO-WHEELERS IN INDIA
between the two regulations to enable manufacturers to make short-term investments
in improving the fuel-efficiency of their ICE fleet while transitioning towards
electrification over the longer term. Finally, appropriate penalties could be defined to
deter non-compliance after manufacturers have exhausted all available pathways to
meet their credit obligations.

18 ICCT WORKING PAPER | DESIGNING A ZERO-EMISSION VEHICLE SALES REGULATION FOR TWO-WHEELERS IN INDIA
 www.theicct.org

communications@theicct.org

@theicct.org

BEIJING | BERLIN | NEW DELHI | SAN FRANCISCO | S ÃO PA U LO | WA S H I N G T O N D C