The Delhi government’s new EV Policy 2.0, effective July 1, 2026, will phase out new internal combustion engine (ICE) two- and three-wheeler registrations by 2028. Traditional automakers faced selling pressure due to this regulatory shift, while EV-focused companies saw gains. Investors are evaluating the long-term impact on manufacturers heavily reliant on fossil-fuel sales in the capital.
What Happened
The Delhi government has announced its Electric Vehicle (EV) Policy 2.0, setting a strict timeline to phase out traditional internal combustion engine (ICE) vehicles in the capital. Effective from July 1, 2026, the policy mandates that all new two- and three-wheeler registrations must be electric. The transition begins with auto-rickshaws by January 1, 2027, followed by two-wheelers by April 1, 2028. The policy includes a significant financial allocation of nearly ₹15,000 crore to promote EV adoption, subsidies for buyers, and scrapping incentives for older BS-IV vehicles.
How The Market Reacted
The stock market reacted swiftly to the announcement, with the Nifty Auto index falling 1.2% in intraday trading on Tuesday. Traditional manufacturers bore the brunt of the sentiment. Eicher Motors, the manufacturer of Royal Enfield, saw its stock price decline by approximately 6.5%. Other legacy players, including Bharat Forge, Hero MotoCorp, Bajaj Auto, and Uno Minda, also experienced losses ranging between 1% and 5%.
In contrast, the EV-focused segment saw a positive trend. Ather Energy’s share price rose 4%, reaching ₹1,125, extending its year-to-date gains. The divergence in stock performance reflects investor concerns regarding the speed of adoption for legacy manufacturers compared to those already established in the electric space.
The Shift For Auto Manufacturers
The policy forces a strategic pivot for companies that have high revenue exposure in Delhi. While major two-wheeler manufacturers like Bajaj Auto and TVS Motor Company are expanding their EV portfolios, they still derive a significant portion of their revenue from petrol-powered bikes. The risk lies in the potential for revenue loss or the cost of aggressive marketing and discounting required to push EV sales in the capital to maintain market share.
Conversely, Royal Enfield (Eicher Motors) faces a specific challenge. Analysts have noted that the brand has a limited presence in the current EV market, making its reliance on petrol-powered motorcycles a point of vulnerability if this policy leads to a drop in sales volume within Delhi. The exclusion of hybrid vehicles from these new incentives adds another layer of pressure, as it prevents manufacturers from using hybrids as a transition technology to meet these new regulatory standards.
What Investors Should Track
Beyond the immediate stock reaction, investors should monitor how this policy impacts the financial health of the auto sector over the coming quarters. Key areas to watch include the pace at which legacy manufacturers can convert their Delhi-based sales to electric, and whether other major Indian states choose to adopt similar restrictive policies, which would widen the impact beyond the capital.
Furthermore, margin pressure remains a critical monitorable. As companies compete for market share in the mandatory EV segments, price wars or increased capital spending to upgrade production lines could affect profitability. Finally, the effective utilization of the ₹15,000 crore government subsidy will be a crucial factor in determining how quickly consumers make the switch from traditional to electric vehicles.