India’s electric vehicle (EV) market is witnessing expansion on a massive scale across all segments and types of vehicles. While central and state government policies and incentives have kindled the initial adoption of e-mobility across the country, it is the rising prices of petrol, diesel and CNG as well as increasing climate change awareness amongst consumers that are driving the clean mobility transition. Led by these factors, the country targets 70 per cent of all commercial cars, 30 per cent of private cars, 40 per cent of buses, and 80 per cent of two-wheeler and three-wheeler sales to be electric by 2030.
As the public slowly warms up to the idea of owning EVs for their personal use, commercial fleets are emerging as the bulk adopters of electric mobility. The trend is visible across both passenger and freight fleets. Affordability is higher in the case of electric two-wheelers and three-wheelers compared to four-wheelers. Thus, the two-wheeler and three-wheeler fleets are the first ones to be electrified. Meanwhile, city and state transport authorities are slowly electrifying their bus fleets through the procurement of electric buses via tenders and partnerships.
Interestingly, corporates are not far behind in this fleet electrification race and recent months have witnessed many partnerships between EV manufacturers and corporates wanting to adopt cleaner fleets. This is primarily the case with e-commerce and delivery giants, which are taking major steps to reduce their consumption of carbon-intensive fuels as a part of their sustainability strategy and to reduce their operating costs. Some of these companies have also set targets for the electrification of their fleets. As EVs become a natural progression in the automotive space, various cab aggregators too are now offering electric car rides at affordable prices to consumers.
Renewable Watch assesses the electric fleet market, the policy and regulatory climate landscape, and the key issues in this space…
EV sales and growth
India’s EV market witnessed a sudden surge in 2021-22 with total EV sales rising to around 450,000 from the previous sales of less than 200,000 in 2020-21. The year 2022-23 has witnessed record new registrations of around 1 million EVs, a doubling of sales over the previous year, according to government statistics as of March 12, 2023. The electric passenger three-wheeler segment has witnessed the highest growth in terms of EV penetration as a share of total vehicle sales, which has increased from around 18 per cent in 2018-19 to more than 50 per cent in 2022-23. Meanwhile, electric two-wheelers, e-cabs and e-buses all remained below 10 per cent sales penetration in 2022-23.
In absolute numbers, electric two-wheelers recorded the highest number of new registrations in the non-transport space in 2022-23, with more than 660,000 new EVs registered. Meanwhile, barely 3,000 new electric two-wheelers were registered in the transport space. The trend was totally different in the three-wheeler space, which saw more than 350,000 new registrations in the transport space and just 4,000 in the non-transport space. In the electric four-wheeler segment, there were 35,000 new registrations in the light motor vehicle category (such as cars and jeeps), around 1,800 new registrations in buses and 554 in the freight space.
EV fleet adoption trends
It is a mix of various stakeholder groups that is responsible for these impressive growth numbers. First, the transport authorities are increasingly procuring electric buses as these are low-hanging fruit in the transition to clean mobility. For instance, Andhra Pradesh targets 11,000 e-buses by 2029, Chhattisgarh aims for 900 e-buses by 2027 and Ladakh plans to have 49 e-buses by 2027. Delhi, meanwhile, aims for a 70 per cent share of electric buses in its fleet by 2025 and its neighbour, Haryana, plans to convert 100 per cent of its bus fleet to electric by 2029.
Apart from electrifying public transport fleets, states are looking at procuring electric cars for official use. Governments, municipal agencies and public sector authorities can easily convert their official fleets to electric as they have the land and the facilities to charge these. Moreover, this helps create awareness amongst people, especially in smaller towns and cities, and gives them confidence to opt for EVs if possible. Although states such as Assam, Uttar Pradesh, Madhya Pradesh and Haryana have all notified plans to completely electrify the car fleets used for official purposes, the progress remains slow. Only a few states like Delhi and Himachal Pradesh have shown promising results in this area. However, the recent budget announcement re-emphasised the need to scrap all government vehicles that are more than 15 years old, which will lead to a boost in EV uptake by government bodies.
The e-commerce segment is growing rapidly with an increase in the number of people using home delivery apps and websites for essentials, and these delivery platforms are expanding their vehicle fleets to service their customer base. An interesting trend observed in recent months is that many of these e-commerce corporates are preferring EVs over petrol or even CNG-based vehicles. This is not only due to the increasing fuel prices but also a genuine commitment to adopt greener choices. While large companies such as Flipkart, Myntra, IKEA and Zomato have already announced plans for 100 per cent electrification of their fleets by 2030, global giant Amazon has announced the deployment of 10,000 EVs in its fleet in India by 2025.
Many of them have also announced tie-ups with auto manufacturers and charging infrastructure providers to ensure EV uptake. For instance, Amazon has partnered with Mahindra Electric to deploy Mahindra E-treo electric three-wheelers in its delivery network. It has also tied up with SUN Mobility for battery-swapping services. Similarly, Flipkart has partnered with EV logistics vendors such as Mahindra Logistics, MoEVing and ETO Motors that also provide charging infrastructure. Meanwhile, companies such as Tata Steel, JSW Steel and Dalmia Cement Bharat have initiated steps to incorporate electric trucks for freight transport.
As the EV surge continues, there is another category of adopters that has emerged as a large contributor to this transition – ride-hailing services and cab aggregators. While e-rickshaws have been on Indian roads in large cities as well as small towns for a few years now, the number of players in this space has increased by a significant margin. This is a scattered market with many players catering to a particular region or city only. For instance, both Smart E and Oye Rickshaw operate in the Delhi-NCR region and provide last-mile connectivity solutions. They do not themselves manufacture these EVs but instead procure them from manufacturers like Kinetic Green and Lohia Auto.
In the four-wheeler segment, cab-hailing provider Uber is slowly procuring EVs and has also recently started offering an EV cab option on its platform. Meanwhile, Lithium Urban, which provides EV fleets to corporations, has tied up with companies such as Wipro and Birlasoft for their employee transport. Dedicated electric cab service providers have emerged in the market, promising consumers cleaner and greener rides. BluSmart, probably the largest and most popular of these aggregators, procures EVs on lease, which users can book for rides through a dedicated mobile application. BluSmart has developed dedicated charging hubs for charging these cars. Other new e-cab providers such as Glyd and Evera are also expanding their fleet and reach as consumers also want to switch to clean transport choices, especially in metropolitan cities.
Outlook
The fleet electrification market in India will continue to expand rapidly driven by increasing fuel prices, government impetus, reducing battery and EV prices, attractive partnership options with manufacturers, and the emerging charging infrastructure landscape. This transition to electric mobility is being supported by enabling policy initiatives such as Faster Adoption and Manufacturing of Electric Vehicles (FAME II) at the national level, which provides upfront subsidies on EVs. On top of this, there are various state-level policy provisions such as more demand incentives, tax exemptions, free permits, and interest rate subvention to further encourage EV uptake. However, challenges remain. The primary issue relates to financing of EVs. There is an urgent need to have flexible and affordable financing options for EVs. Banks are wary of lending to the EV segment due to technology, battery safety and creditworthiness risks, especially in the case of two- and three-wheelers. For this reason, the industry has been requesting for priority sector lending for EVs to improve uptake. Lack of adequate charging infrastructure is another issue, necessitating fleet operators to set up and maintain charging stations to charge their EVs. Thus, many fleet operators are tying up with charging station and battery-swapping station providers rather than investing capital and resources for their charging hubs.
Another point of concern is that while a plethora of options are available in the electric two-wheeler and three-wheeler space, there are slim pickings in the four-wheeler space, with just two to three models in the market at present. More EV models need to be launched for other agencies to switch to electric mobility.
Net, net, there is ample opportunity in India’s fleet electrification space. What is required to tap this potential are the right business models and financing policies to drive real, large-scale uptake.
By Khushboo Goyal
