Spurring India’s E-mobility Aspirations: Encouraging Commercial Uptake Of Electric 2-wheelers

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red motor scooter near wall
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Opinion piece by:

Dr. Parveen Kumar – Senior Manager, WRI India 

Leona Nunes – Research Analyst, Sustainable cities, WRI India 

Madhav Pai – Executive Director, Sustainable Cities, WRI India

India’s dependence on crude oil has been on the rise with increased imports of 82.9% and 83.8%  in FY18 and FY19 respectively. In India, two-wheelers (2Ws) account for 70% of the 200 million-plus registered vehicles and 2Ws alone are responsible for 61.42% of total petrol consumption. Along with this rise in oil consumption, fuel price volatility leads to fluctuations in the operational costs of petrol-2Ws. 

Incidentally, 2Ws contribute to about 20% of the total CO2 emissions and 30% of the particulate emissions in urban India. An outcome of the pandemic induced human mobility restrictions was the significant reductions in PM 2.5 levels, which led to a drastic improvement in air quality and a reduction in the number of premature deaths. Needless to say, the negative environmental and health impacts of tailpipe emissions, from fossil fuel, are necessitating a rapid shift towards the development and adoption of Electric Vehicles (EVs). 

In India, e2W sales account for the highest share in overall EV sales of which 90% were low-speed electric scooters (~25kmph). Users can now choose from a range of low-cost to high-end models across varying speed ranges. However, there are still significant barriers to uptake which include long charging times, lack of charging infrastructure, and adequate financing mechanisms. 

Economic Viability of e2Ws in Commercial Applications

EVs are gradually gaining traction not just because of benefits such as low maintenance and zero emissions; but also in terms of economic opportunity as realized and highlighted in the WRI India`s TCO analysis. This can be attributed to the increase in the use of e-2Ws for hyperlocal delivery and last-mile connectivity in urban areas.

As seen in Figure 1(a), the Total Cost of Ownership (TCO) per km of a high-cost e-2W becomes less than the petrol-2W for an average daily travel distance of more than 50 km where the TCO/km of a low-cost e-2W is cheaper than a petrol-2W even at 25 km per day. With FAME-II subsidy, the break-even distance for the high-cost e-2W transitions to less than 50 km per day usage (see Figure 1(b)).

Figure 1: Comparison of TCO per km of petrol-2Ws with lithium-battery powered e-2Ws ((a) without and (b) with FAME-II subsidy) at different average daily travel distances. 

With the increase in the vehicle holding period, the economic viability of the e-2W variants increases compared to petrol-2W. As we see in figure 2(a); for an average distance of 75km, the TCO/km of the high-cost e-2W becomes less than that of a petrol-2W at the 4th year of the holding period, whereas the TCO/km of a low-cost e-2W is cheaper than its petrol-2W counterpart from year 1 itself. With FAME-II subsidy, the break-even year of the high-cost e-2W shifts to the 2nd  year as shown in Figure 2(b).

Figure 2: Year-wise TCO per km of petrol-2W and e-2W (without (a) and (b) with FAME-II subsidy) for the daily average travel distance of 75 km. 

The WRI India TCO analysis suggests that e-2Ws are more favored in the commercial space given their economic benefits. With shared mobility on the rise and options like a rental or subscription-based model, urban centers are exploring the ‘market economy and willing to experiment — opening up doors for the adoption of e-2W in the goods delivery space.

Key Enablers for Commercial Applications


Supportive Policies: There has been a range of government initiatives to boost EV sales, ranging from the announcement of the ‘National Electric Mobility Mission Plan’ (NEMMP) to FAME schemes for financial incentives. Despite these initiatives, the adoption of EV in the commercial freight segment is very low due to operational issues such as range anxiety, high upfront cost, apprehension regarding new technology, lack of charging infrastructure, and lengthy charging time. To accelerate the adoption of e-2Ws, the issue of high upfront cost has been addressed by reducing GST rates to 5% and the sale of e-2W without batteries is being introduced, which can reduce the purchase cost by 40%.

New Business and Financing Models: EV financing is projected to be worth Rs. 3.7 lakh crore in 2030 which is about 80% of India’s retail vehicle finance industry as of today. Strategic partnerships can help in addressing the issues of high-cost, development of sustainable business models, and flexible financing options, especially in the use cases of last-mile connectivity and delivery of goods. While some partnerships explore financing sustainability, such as a tie-up between cKers Finance and OTO Capital promoting e-2W leasing; other e-mobility players like Zypp, eBikeGo, or Yulu tie-up with food and groceries giants through subscription-based rental models at a fixed per km rate. 

Battery Swapping for Efficiency: Hyperlocal delivery is associated with faster and frequent delivery mechanisms. For businesses to be cost-effective, high operational efficiency is required. This calls for a fast, efficient, and reliable charging infrastructure set-up. The majority of e-2Ws are fitted with detachable batteries that provide flexibility in plugged-in charging. Battery swapping options can ensure high operational efficiency and can help in addressing the issue of long charging time and range anxiety. 

Way Forward

Currently, the share of EVs in the Indian automobile sector is less than 1%. Scaling this up will require enabling policy interventions, innovative business models, and huge capital investments. To reduce operational barriers and improve uptake, reduction of GST on batteries from 18% to 5% (as in the case of EV sales) would open up the possibility of battery leasing and battery swapping. Battery swapping being quick and hassle-free enhances operational efficiency. Acknowledging these fixes while also exploring financing solutions, with flexible loan repayment, carves a way to better access and uptake of e-2Ws. 

By

Dr. Parveen Kumar – Senior Manager, WRI India 

Leona Nunes – Research Analyst, Sustainable cities, WRI India 

Madhav Pai – Executive Director, Sustainable Cities, WRI India

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