In a forecast by credit rating agency ICRA, electric buses (e-buses) are expected to take a prominent role in India’s electrification push, constituting 11-13% of new bus sales by the fiscal year 2025. The trajectory indicates a consistent rise, with e-bus volumes reaching 7% in FY2023. This progress aligns with the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) scheme, with the momentum likely to intensify before the scheme concludes in March 2024.
ICRA Vice President & Co-Group Head – Corporate Ratings, Ms. Kinjal Shah, emphasized that bus cost constitutes a significant portion of e-bus projects, making up 75-80% of the overall project cost. The capital subsidy provided under the FAME II scheme, ranging from Rs. 35-55 lakh per bus, can alleviate a substantial portion of the project costs, up to 40%. Coupled with substantial fuel cost savings, Ms. Shah notes that e-buses could achieve a 10-25% lower total cost of ownership compared to conventional CNG or diesel buses.
The report highlights government schemes, state policies, and initiatives like the PM e-Bus Sewa scheme and bid aggregation by Convergence Energy Services Limited (CESL) as driving factors for increased e-bus adoption. Despite success in previous tenders, CESL’s third tender faced limited original equipment manufacturer (OEM) participation, emphasizing the need for addressing OEM concerns related to payment security mechanisms and operational models.
The Government’s recently announced PM e-Bus Sewa scheme, aiming to deploy 10,000 e-buses in 169 cities through a public-private partnership, is anticipated to sustain e-bus volumes as subsidies gradually phase out with the expiration of the FAME II scheme in March 2024.
While the gross cost contract (GCC) model, or opex model, is favored for e-bus adoption due to FAME II capital subsidies, ICRA notes that the model is evolving, with operational risks higher due to the limited track record of electric vehicles (EVs) in the country. The report suggests that direct backing from e-bus OEMs and financial strength provide an advantage in establishing a foothold in the segment.
Despite some time overruns and cost overruns in e-bus projects, the operational track record has been satisfactory, with buses meeting efficiency requirements. The report highlights the need for continued government support, addressing OEM concerns, and evolving battery technology to sustain the momentum in India’s e-bus adoption journey.
