Delhi pollution curbs open new market for ICE-to-EV retrofitters

Delhi's tighter pollution norms are boosting demand for EV retrofits, but industry players are urging the government to cut GST and ease regulatory hurdles to scale up conversions

Delhi’s worsening air quality — and the government’s renewed crackdown on vehicular pollution — is shining a spotlight on a fast-emerging fringe industry: Retrofitting internal combustion engine (ICE) and compressed natural gas (CNG) vehicles into electric ones. Industry experts say the New Delhi retrofitment norms could unlock significant business opportunities. At the same time, policy pushes in other states are also beginning to create nationwide demand.

 

Over the last month, Delhi’s anti-pollution measures have ranged from banning non-BS-VI private vehicles registered outside the national capital to denying fuel to vehicles without a valid pollution under control certificate. Alongside these curbs, proposed plans to mandate the replacement of CNG vehicles have unexpectedly boosted the retrofitting of ICE and CNG vehicles into electric vehicles (EVs). 

“The Delhi EV policy brings a cap on the number of years a CNG vehicle can run. This used to be 15 years. They are considering bringing it down to eight to 10 years. That opens up the retrofit EV market in Delhi for a new fuel type. Vehicle life extension through retrofit will be a huge positive,” Ayush Bhargava, head of business at Bengaluru-based Exponent Energy, said.

 

While comprehensive industry-wide figures are unavailable, a rough estimate drawing on Transparency Market Research’s 2021 assessment puts the EV powertrain retrofitting market at about 1 million vehicles, valued at roughly $2.14 billion. The market was projected to reach around $4 billion by 2026, with two-wheelers, three-wheelers and commercial vehicles accounting for a large share. 

A retrofitting kit typically costs about ₹50,000 for two-wheelers, ₹1 lakh to ₹2 lakh for three-wheelers, and around ₹5 lakh for four-wheelers, according to a JMK Research report published last year. 

The government is also taking steps to support the industry. For instance, Tsuyo Manufacturing was selected as an industry partner by the Ministry of Electronics and Information Technology (Meity) to commercialise standardised conversion kits that turn older diesel and petrol commercial vehicles into EVs. Tsuyo Manufacturing estimates annual Indian market demand of 5 million to 6 million commercial vehicles — such as the Tata Ace and the Bajaj RE three-wheeler — for such conversions. It puts the conversion cost at ₹1.25 lakh to ₹1.3 lakh for three-wheelers and ₹3 lakh to ₹3.25 lakh for light commercial vehicles, including the battery. 

The company is collaborating with the Visvesvaraya National Institute of Technology (VNIT), Nagpur — the government’s nodal agency — on the project. Estimated to cost ₹4.5 crore to ₹5 crore, the project requires Tsuyo to contribute 20 per cent of the total funding, underscoring the industry’s commitment to its outcome. The first tranche of government funding is expected to be released to VNIT Nagpur next month. 

“Normally, original equipment manufacturers (OEMs) cannot do this (ICE-to-EV conversion). The reason is very clear: If they do, they will be cannibalising their own future prospects,” said Vijay Kumar, chief executive officer and founder of Tsuyo Manufacturing.

 

The mandate is focused on vehicles nearing the end of their operational life — eight to 10 years for diesel and 13 to 14 years for petrol — as well as relatively younger vehicles where fleet owners are seeking better operational efficiency. The conversion process typically extends a vehicle’s life by an initial five years, allowing fleet owners to strip off old parts and achieve significant operational cost savings.

 

Challenges for the Industry

 

New electric vehicles receive subsidies under schemes like Faster Adoption & Manufacturing of Electric Vehicles in India (FAME), but retrofitting does not have any pan-Indian support — something the industry flags as a major challenge, alongside goods and services tax (GST) bottlenecks.

 

“The GST on new vehicles is 5 per cent, but for retrofit it is 18 per cent. We have requested multiple times for GST reduction through our industry association. New vehicles have subsidies also, and we do not have them. Though state subsidies are announced by states, in several places it is not becoming practical due to procedural bottlenecks,” said Srikant Shinde, chief executive officer and founder of GoGoA1, a Thane-based EV retrofit kit provider.

 

Shinde added that the need for multiple clearances could stretch the conversion process, making it time-consuming — often taking close to a month. In a typical retrofit, the fuel tank, engine, fuel pipes, exhaust system and engine accessories are replaced with a battery, controller and motor.

 

“In India, EV retrofitting is most practical for two-wheelers and three-wheelers due to their simpler retrofitting process, smaller battery requirements, and the growing availability of battery-swapping options. Currently, retrofitting four-wheelers faces more obstacles, including higher costs, technical complexity, and limited service providers. Retrofitting a two-wheeler with the battery-as-a-service (BaaS) model can cost as little as 25 per cent of a new electric two-wheeler, making it a budget-friendly alternative,” according to the JMK Research report. 

Gaining traction

• EV powertrain retrofitment market pegged at 1 mn vehicles in 2021, valued at $2.14 bn
• Expected to reach about $4 billion by 2026, led by two-wheelers, three-wheelers and commercial vehicles
• Average retrofitment kit costs around ₹50,000 for two-wheelers; ₹1-2 lakh for three-wheelers, and ₹5 lakh for four-wheelers