In August 2023, new companies that hardly anybody had heard of swept the largest electric bus tender in Indian history, shutting out the giants who had dominated the industry for decades. It looked like the beginning of something. Two years later, most of these companies are running at less than half their manufacturing capacity, sitting on four months of trapped working capital, and watching incumbents quietly prepare to price them out of the next tender. This is not a story about bad technology. The technology worked. The orders came in. What nobody accounted for was the operational complexity of managing custom design and manufacturing across multiple simultaneous tenders, each with its own specifications, timelines, and dependencies. That gap, more than any procurement decision or pricing strategy, is what stands between these companies and the returns on everything they have already invested. When the Government of India announced the PM-eBus Sewa Scheme in August 2023, it did more than signal a policy direction: it restructured the competitive landscape of an entire industry overnight. The problem the government was trying to solve was real. Pollution levels in Indian metros are among the highest in the world. For decades, policymakers had been caught between two legitimate imperatives: keeping public transport affordable enough to support economic activity, and reducing the pollution generated by ageing internal combustion engine (ICE) technology. Electric mobility appeared to resolve this conflict, and the government moved decisively to convert public transport fleets to electric.  For decades, the bus industry had been controlled by a small number of large players who built their dominance on ICE platforms. The shift to electric was a technology reset that temporarily erased that advantage. Electric bus technology was new to everyone, including the incumbents. A new entrant with the right platform and aggressive pricing suddenly had a genuine fighting chance. Several new auto original equipment manufacturers (OEMs) took that chance. By collaborating with technology partners in China and Europe, they secured platforms without spending years on internal R&D. This allowed them to move fast and price aggressively. When the first major tender opened for nearly 11,000 buses, these new entrants swept it. It was a historic moment. A new competitor had broken into an oligopoly, bringing with it accelerated innovation and price pressure that a developing nation's public infrastructure badly needs.  The story was far from over. Yet should have been simple. Before examining what went wrong, it is worth understanding why it should not have gone wrong.  An electric bus has approximately 1,500 parts. An ICE bus drivetrain alone exceeds that number. The three critical sub-assemblies, the motor, battery pack, and high-voltage system, are imported from China. Everything else is largely localised. The supplier base is less than a fifth of what an ICE bus requires, parts sharing across models is 50% or higher, and most manufacturers follow a modular design approach, varying only sheet metal, frames, and trim across specifications.  By every structural measure, an electric bus should be significantly easier to manufacture than an ICE bus. Yet most electric bus makers are currently operating at less than half their installed capacity, even as their order books represent more than a year of production at full capacity. With a simpler product and a full order book, the outlook should look very different. So, what gives? <h2>Some basics to understand better: The economics of the electric bus market</h2>To understand the operational problem, the current conditions of the electric bus market need to be understood first:<ul><li>Nearly 95% of the electric bus business comes from government tenders. (Private sector operators are concentrated in long-distance routes, typically exceeding 200 km, and current battery energy density and charging infrastructure are not yet suited for highway operations. This will change as battery technology and charging networks mature, but it is not the reality today.)</li><li>From the release of a tender specification, a bus takes approximately six months to reach deployment readiness. Of this, four months are consumed by design, prototyping, and homologation. The remaining two months cover parts procurement and assembly. The following flow diagram explains various steps:</li></ul><figure class="image"><img style="aspect-ratio:4000/3365;" src="https://web-assets.vectorconsulting.in/storage/editor_uploads//image_1775546289.png" width="4000" height="3365"></figure><ul><li>Most critically, the end of the manufacturing process is not the sale of the bus; it is deployment. The OEM earns revenue only when the bus is deployed and running. The OEM also carries full responsibility for maintenance and operations. (The government has moved to a Gross Cost Contract (GCC) model for electric buses, a shift from the capital expenditure (CAPEX) model used for ICE fleets. An electric bus costs between ₹1 crore and ₹2 crore, compared to approximately ₹50 lakh for an ICE bus. Most state-run transport corporations do not have the cash reserves to purchase fleets outright at the scale and pace the central government is targeting. Under the GCC model, the bus is owned and operated by the OEM, and the government pays approximately ₹54 per km.)</li><li>The one thing that OEM does not control is the depot. Charging infrastructure and depot readiness are the responsibility of the local government. Without a functional depot, a completed bus is dead weight on the company's balance sheet.</li></ul> When an OEM wins a tender, a six-month design and manufacturing cycle begins. Despite this, they realise revenue only after the bus is deployed at a depot, which someone else is responsible for, is not a very positive prospect for any company. When the schedule moves, everything moves. To understand what happens when a depot is not ready, it helps to first understand what a pristine schedule looks like.  An OEM wins a tender. The specification is released. Design begins immediately and runs for roughly four months, culminating in a validated prototype and a fully approved manufacturing bill of materials (MBOM). Only then does procurement begin in earnest, parts arrive as a full kit, and the bus moves through the assembly line. Six months after the release of the specification, the bus is–ready for deployment. Then the revenue begins.  This is the plan. It rarely survives contact with reality. The depot is a government-controlled asset. The OEM has no control over it. Charging infrastructure installation, civil works, permissions, and local government coordination all sit entirely outside the OEM's value chain. In practice, this means that an OEM begins design for a deployment date that may shift by weeks or months, and that shift is typically not known until the OEM is already deep into the design cycle.  Now consider what happens when the depot for order A is delayed by three months. The instinctive reaction is that this is good news for the OEM: more time. But that reading is wrong and understanding why is key to understanding the entire operational crisis. The OEM is not working on one order. It is working on five, eight, and 10 simultaneously, each at a different stage of design and manufacturing, each tied to a different tender, with its own depot and deployment date. When order A is delayed, the manufacturing slot reserved for it opens up. An idle assembly line is expensive. Labour is on a per-piece basis and will leave if there is no work. So, under pressure to keep the line moving, planning pulls order B forward to fill the slot. Order B was scheduled to enter manufacturing two months later. Its design is only 60% complete. Its BOM (Bill of Materials) has not been fully validated. Supplier lead times have not been fully accounted for. But the assembly line cannot wait. So, the BOM for order B is released to the shop floor with deviations, known gaps or unresolved design questions flagged as acceptable for now, only to be resolved later.  This is where the damage begins.  A BOM released with deviations is a BOM that has not been tested against the physical reality of assembly. Electric buses, despite their lower part count, involve significant sheet metal fabrication, complex wiring harnesses, and high-voltage system integration, all of which require precise dimensional alignment. When the assembly team encounters a part that does not fit because design validation was skipped, the work stops and the issue goes to R&D. R&D is already working on orders C, D, and E. They now have to context-switch, diagnose the fitment problem, issue a corrected drawing, and send it back to the assembly line. Each such interruption costs hours. When multiple such issues arise on a single order, it costs days. Across an entire plant running multiple orders with incomplete BOMs, it creates a permanent state of R&D being pulled in every direction except forward. Now consider the order A parts. Procurement was already underway when the delay was announced. Materials had been ordered based on the original schedule, and they continue to arrive. The plant cannot return them. They accumulate as inventory, waiting for order A's depot to become ready. This is the cash that has already left the company, and the inventory is now sitting on a shelf, generating no return.  Meanwhile, order B is partially assembled on the assembly line with fitment issues. It cannot move forward until R&D resolves the design problems. It sits as work-in-progress (WIP), occupying line space, tying up labour, and blocking the next order from entering. The line cannot absorb indefinitely large WIP buffers. When WIP exceeds the plant's physical capacity, the line stops entirely. Piece-rate labour, earning nothing, leaves. When the line restarts, new workers must be inducted and trained. Fabrication work has a real learning curve; new workers make more errors. More errors lead to more fitment issues, which in turn, lead to more R&D interruptions.  Planning responds to the threat of an assembly line stoppage by pulling yet another order forward, releasing yet another incomplete BOM, and repeating the cycle. Each repetition adds another layer of R&D interruption, another layer of inventory accumulation, and another layer of labour churn.  The field adds a final and particularly costly dimension. Some fitment errors introduced by incomplete BOMs are subtle enough to pass assembly inspection and only surface after the bus is deployed and operational. Since the OEM owns operations under the GCC model and earns nothing from a non-operational bus, a field failure is not just a quality problem; it is a direct revenue stoppage. It also triggers another emergency demand on R&D for field support, adding yet another layer of interruption to an already overloaded team. The result is a system where R&D is simultaneously expected to complete new designs, correct manufacturing errors, and resolve field failures, none of them well. Output falls below 50% of rated capacity. Working capital equivalent to four months of raw material, WIP, and finished goods is trapped in the system. Meanwhile, penalties from government bodies for delayed or inoperable buses begin to accumulate. <h2>The competitive consequence</h2>While the new entrants have been firefighting, the established ICE commercial vehicle giants have moved differently. They took the slower path: developing technologies internally, reducing dependence on imports, and thoroughly testing platforms  before committing. They have not yet won tenders, but all that remains for them is to quote a price, and their financial muscle allows them to price aggressively enough to push new entrants out. With the next tranche of approximately 6,000 buses expected from the central government, this is no longer a hypothetical threat. New entrants are approaching this tender operationally weakened, financially stretched, and burdened by a growing reputation for delivery and quality issues. By contrast, incumbents are approaching it well-rested, well-capitalised, and with platforms already validated, free from the pressure of live orders. This is the tender trap, the very speed that allowed the new entrants to win the first round has created the conditions for losing the second. <h2>The resolution</h2>The way out requires two rules applied without exception.  The first rule is that R&D must build and maintain a bank of fully validated designs. The bank is what absorbs schedule chaos. When a depot delay shifts order A, a validated design for order B can be picked up immediately, without compromising quality or creating a rush. The bank only works if it is replenished faster than schedule changes can deplete it. That rate of replenishment is only possible when R&D works without interruption. Uninterrupted work is possible only when what is released is fully validated. Every deviation released to the shop floor returns as a manufacturing or field problem, pulling R&D backwards. The discipline of releasing only when validation is complete is therefore not a quality initiative; it is a precondition for R&D to have sufficient capacity to build the bank in the first place.  The second rule is that manufacturing starts only when depot and site readiness are confirmed. This is the intervention that protects the first rule. False starts are what create the assembly-line pressure that forces incomplete BOM releases. Remove the false start, and the entire cascade, including WIP build-up, labour churn, R&D interruptions, field failures, loses its trigger.  Once these two rules hold, the manufacturing environment transforms. Validated designs entering the shop floor mean fitment issues no longer occur daily. The assembly line moves without interruption. Labour productivity rises, not because of any new incentive or workforce programmes, but simply because workers are no longer waiting for R&D to resolve problems that should never have reached the floor. The chronic start-stop rhythm that drives labour churn disappears.  At that point, the remaining operational challenge is parts availability: ensuring a full kit of the right parts is always ready when a validated design enters manufacturing. This is a well-understood problem. Operations science offers robust, proven methods for managing supplier lead times, buffer stock, and procurement sequencing in exactly this kind of environment. It is not a novel challenge. What makes it tractable is precisely the stability created by validated designs and confirmed site readiness. Parts availability cannot be managed well in a system that keeps changing what it is building and when. Once the system stabilises, the necessary tools are already in place. These are not new ideas. They are established principles that the new entrants, in their rush to capture the market, never had the space to apply. That space is now available, but only if they choose to create it. <h2>Closing</h2>The new entrants have already done the hardest part. They broke into an oligopoly, secured technology, won historic tenders, and proved the incumbents were not untouchable. None of that is trivial.  But winning a tender is a one-time event. Building an operation that can fulfil tenders on time, at the required quality, and without straining working capital is a compounding advantage. That is what incumbents are quietly building while new entrants are firefighting.  The path forward is not about working harder or hiring more engineers. It is about recognising that a long, interdependent value chain cannot be managed by reacting to its loudest problem at any given moment. It has to be decoupled, sequenced, and protected from the chaos that depot delays and schedule changes will continue to generate. That chaos is structural; it won’t go away.  Companies that understand this will not just survive the next tender; they will become difficult to displace when the market reaches full scale, large enough to matter for a very long time.

Key Takeaways

New Indian e-bus OEMs are stuck in a 'tender trap'. Despite huge wins, depot delays and R&D rework have stalled growth. The fix? Decoupling R&D from shop floor chaos with validated design banks to stop the cycle of trapped capital.

The tender trap: How India's new electric bus OEMs are losing the plot

In August 2023, new companies that hardly anybody had heard of swept the largest electric bus tender in Indian history, shutting out the giants who had dominated the industry for decades. It looked like the beginning of something. Two years later, most of these companies are running at less than half their manufacturing capacity, sitting on four months of trapped working capital, and watching incumbents quietly prepare to price them out of the next tender. This is not a story about bad technology. The technology worked. The orders came in. What nobody accounted for was the operational complexity of managing custom design and manufacturing across multiple simultaneous tenders, each with its own specifications, timelines, and dependencies. That gap, more than any procurement decision or pricing strategy, is what stands between these companies and the returns on everything they have already invested. When the Government of India announced the PM-eBus Sewa Scheme in August 2023, it did more than signal a policy direction: it restructured the competitive landscape of an entire industry overnight. The problem the government was trying to solve was real. Pollution levels in Indian metros are among the highest in the world. For decades, policymakers had been caught between two legitimate imperatives: keeping public transport affordable enough to support economic activity, and reducing the pollution generated by ageing internal combustion engine (ICE) technology. Electric mobility appeared to resolve this conflict, and the government moved decisively to convert public transport fleets to electric.  For decades, the bus industry had been controlled by a small number of large players who built their dominance on ICE platforms. The shift to electric was a technology reset that temporarily erased that advantage. Electric bus technology was new to everyone, including the incumbents. A new entrant with the right platform and aggressive pricing suddenly had a genuine fighting chance. Several new auto original <a target="_blank" rel="noopener noreferrer" href="https://www.vectorconsulting.in/en/industries/auto-and-auto-components/">equipment manufacturers</a> (OEMs) took that chance. By collaborating with technology partners in China and Europe, they secured platforms without spending years on internal R&D. This allowed them to move fast and price aggressively. When the first major tender opened for nearly 11,000 buses, these new entrants swept it. It was a historic moment. A new competitor had broken into an oligopoly, bringing with it accelerated innovation and price pressure that a developing nation's public infrastructure badly needs.  The story was far from over. Yet should have been simple. Before examining what went wrong, it is worth understanding why it should not have gone wrong.  An electric bus has approximately 1,500 parts. An ICE bus drivetrain alone exceeds that number. The three critical sub-assemblies, the motor, battery pack, and high-voltage system, are imported from China. Everything else is largely localised. The supplier base is less than a fifth of what an ICE bus requires, parts sharing across models is 50% or higher, and most manufacturers follow a modular design approach, varying only sheet metal, frames, and trim across specifications.  By every structural measure, an electric bus should be significantly easier to manufacture than an ICE bus. Yet most electric bus makers are currently operating at less than half their installed capacity, even as their order books represent more than a year of production at full capacity. With a simpler product and a full order book, the outlook should look very different. So, what gives? <h2>Some basics to understand better: The economics of the electric bus market</h2>To understand the operational problem, the current conditions of the electric bus market need to be understood first:<ul><li>Nearly 95% of the electric bus business comes from government tenders. (Private sector operators are concentrated in long-distance routes, typically exceeding 200 km, and current battery energy density and charging infrastructure are not yet suited for highway operations. This will change as battery technology and charging networks mature, but it is not the reality today.)</li><li>From the release of a tender specification, a bus takes approximately six months to reach deployment readiness. Of this, four months are consumed by design, prototyping, and homologation. The remaining two months cover parts procurement and assembly. The following flow diagram explains various steps:</li></ul><figure class="image"><img style="aspect-ratio:4000/3365;" src="https://web-assets.vectorconsulting.in/storage/editor_uploads//image_1775546267.png" width="4000" height="3365"></figure><ul><li>Most critically, the end of the manufacturing process is not the sale of the bus; it is deployment. The OEM earns revenue only when the bus is deployed and running. The OEM also carries full responsibility for maintenance and operations. (The government has moved to a Gross Cost Contract (GCC) model for electric buses, a shift from the capital expenditure (CAPEX) model used for ICE fleets. An electric bus costs between ₹1 crore and ₹2 crore, compared to approximately ₹50 lakh for an ICE bus. Most state-run transport corporations do not have the cash reserves to purchase fleets outright at the scale and pace the central government is targeting. Under the GCC model, the bus is owned and operated by the OEM, and the government pays approximately ₹54 per km.)</li><li>The one thing that OEM does not control is the depot. Charging infrastructure and depot readiness are the responsibility of the local government. Without a functional depot, a completed bus is dead weight on the company's balance sheet.</li></ul> When an OEM wins a tender, a six-month design and manufacturing cycle begins. Despite this, they realise revenue only after the bus is deployed at a depot, which someone else is responsible for, is not a very positive prospect for any company. When the schedule moves, everything moves. To understand what happens when a depot is not ready, it helps to first understand what a pristine schedule looks like.  An OEM wins a tender. The specification is released. Design begins immediately and runs for roughly four months, culminating in a validated prototype and a fully approved manufacturing bill of materials (MBOM). Only then does procurement begin in earnest, parts arrive as a full kit, and the bus moves through the assembly line. Six months after the release of the specification, the bus is–ready for deployment. Then the revenue begins.  This is the plan. It rarely survives contact with reality. The depot is a government-controlled asset. The OEM has no control over it. Charging infrastructure installation, civil works, permissions, and local government coordination all sit entirely outside the OEM's value chain. In practice, this means that an OEM begins design for a deployment date that may shift by weeks or months, and that shift is typically not known until the OEM is already deep into the design cycle.  Now consider what happens when the depot for order A is delayed by three months. The instinctive reaction is that this is good news for the OEM: more time. But that reading is wrong and understanding why is key to understanding the entire operational crisis. The OEM is not working on one order. It is working on five, eight, and 10 simultaneously, each at a different stage of design and manufacturing, each tied to a different tender, with its own depot and deployment date. When order A is delayed, the manufacturing slot reserved for it opens up. An idle assembly line is expensive. Labour is on a per-piece basis and will leave if there is no work. So, under pressure to keep the line moving, planning pulls order B forward to fill the slot. Order B was scheduled to enter manufacturing two months later. Its design is only 60% complete. Its BOM (Bill of Materials) has not been fully validated. Supplier lead times have not been fully accounted for. But the assembly line cannot wait. So, the BOM for order B is released to the shop floor with deviations, known gaps or unresolved design questions flagged as acceptable for now, only to be resolved later.  This is where the damage begins.  A BOM released with deviations is a BOM that has not been tested against the physical reality of assembly. Electric buses, despite their lower part count, involve significant sheet metal fabrication, complex wiring harnesses, and high-voltage system integration, all of which require precise dimensional alignment. When the assembly team encounters a part that does not fit because design validation was skipped, the work stops and the issue goes to R&D. R&D is already working on orders C, D, and E. They now have to context-switch, diagnose the fitment problem, issue a corrected drawing, and send it back to the assembly line. Each such interruption costs hours. When multiple such issues arise on a single order, it costs days. Across an entire plant running multiple orders with incomplete BOMs, it creates a permanent state of R&D being pulled in every direction except forward. Now consider the order A parts. Procurement was already underway when the delay was announced. Materials had been ordered based on the original schedule, and they continue to arrive. The plant cannot return them. They accumulate as inventory, waiting for order A's depot to become ready. This is the cash that has already left the company, and the inventory is now sitting on a shelf, generating no return.  Meanwhile, order B is partially assembled on the assembly line with fitment issues. It cannot move forward until R&D resolves the design problems. It sits as work-in-progress (WIP), occupying line space, tying up labour, and blocking the next order from entering. The line cannot absorb indefinitely large WIP buffers. When WIP exceeds the plant's physical capacity, the line stops entirely. Piece-rate labour, earning nothing, leaves. When the line restarts, new workers must be inducted and trained. Fabrication work has a real learning curve; new workers make more errors. More errors lead to more fitment issues, which in turn, lead to more R&D interruptions.  Planning responds to the threat of an assembly line stoppage by pulling yet another order forward, releasing yet another incomplete BOM, and repeating the cycle. Each repetition adds another layer of R&D interruption, another layer of inventory accumulation, and another layer of labour churn.  The field adds a final and particularly costly dimension. Some fitment errors introduced by incomplete BOMs are subtle enough to pass assembly inspection and only surface after the bus is deployed and operational. Since the OEM owns operations under the GCC model and earns nothing from a non-operational bus, a field failure is not just a quality problem; it is a direct revenue stoppage. It also triggers another emergency demand on R&D for field support, adding yet another layer of interruption to an already overloaded team. The result is a system where R&D is simultaneously expected to complete new designs, correct manufacturing errors, and resolve field failures, none of them well. Output falls below 50% of rated capacity. Working capital equivalent to four months of raw material, WIP, and finished goods is trapped in the system. Meanwhile, penalties from government bodies for delayed or inoperable buses begin to accumulate. <h2>The competitive consequence</h2>While the new entrants have been firefighting, the established ICE commercial vehicle giants have moved differently. They took the slower path: developing technologies internally, reducing dependence on imports, and thoroughly testing platforms  before committing. They have not yet won tenders, but all that remains for them is to quote a price, and their financial muscle allows them to price aggressively enough to push new entrants out. With the next tranche of approximately 6,000 buses expected from the central government, this is no longer a hypothetical threat. New entrants are approaching this tender operationally weakened, financially stretched, and burdened by a growing reputation for delivery and quality issues. By contrast, incumbents are approaching it well-rested, well-capitalised, and with platforms already validated, free from the pressure of live orders. This is the tender trap, the very speed that allowed the new entrants to win the first round has created the conditions for losing the second. <h2>The resolution</h2>The way out requires two rules applied without exception.  The first rule is that R&D must build and maintain a bank of fully validated designs. The bank is what absorbs schedule chaos. When a depot delay shifts order A, a validated design for order B can be picked up immediately, without compromising quality or creating a rush. The bank only works if it is replenished faster than schedule changes can deplete it. That rate of replenishment is only possible when R&D works without interruption. Uninterrupted work is possible only when what is released is fully validated. Every deviation released to the shop floor returns as a manufacturing or field problem, pulling R&D backwards. The discipline of releasing only when validation is complete is therefore not a quality initiative; it is a precondition for R&D to have sufficient capacity to build the bank in the first place.  The second rule is that manufacturing starts only when depot and site readiness are confirmed. This is the intervention that protects the first rule. False starts are what create the assembly-line pressure that forces incomplete BOM releases. Remove the false start, and the entire cascade, including WIP build-up, labour churn, R&D interruptions, field failures, loses its trigger.  Once these two rules hold, the manufacturing environment transforms. Validated designs entering the shop floor mean fitment issues no longer occur daily. The assembly line moves without interruption. Labour productivity rises, not because of any new incentive or workforce programmes, but simply because workers are no longer waiting for R&D to resolve problems that should never have reached the floor. The chronic start-stop rhythm that drives labour churn disappears.  At that point, the remaining operational challenge is parts availability: ensuring a full kit of the right parts is always ready when a validated design enters manufacturing. This is a well-understood problem. Operations science offers robust, proven methods for managing supplier lead times, buffer stock, and procurement sequencing in exactly this kind of environment. It is not a novel challenge. What makes it tractable is precisely the stability created by validated designs and confirmed site readiness. Parts availability cannot be managed well in a system that keeps changing what it is building and when. Once the system stabilises, the necessary tools are already in place. These are not new ideas. They are established principles that the new entrants, in their rush to capture the market, never had the space to apply. That space is now available, but only if they choose to create it. <h2>Closing</h2>The new entrants have already done the hardest part. They broke into an oligopoly, secured technology, won historic tenders, and proved the incumbents were not untouchable. None of that is trivial.  But winning a tender is a one-time event. Building an operation that can fulfil tenders on time, at the required quality, and without straining working capital is a compounding advantage. That is what incumbents are quietly building while new entrants are firefighting.  The path forward is not about working harder or hiring more engineers. It is about recognising that a long, interdependent value chain cannot be managed by reacting to its loudest problem at any given moment. It has to be decoupled, sequenced, and protected from the chaos that depot delays and schedule changes will continue to generate. That chaos is structural; it won’t go away.  Companies that understand this will not just survive the next tender; they will become difficult to displace when the market reaches full scale, large enough to matter for a very long time.

The tender trap: How India's new electric bus OEMs are losing the plot

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New Indian e-bus OEMs' working capital is trapped due to infrastructure delays. Discover the operational fix to decouple R&D from shop floor chaos and boost efficiency.