The share of electric buses (e-buses) in India’s new bus sales is anticipated to witness a significant surge, doubling to approximately 8% in the upcoming fiscal year from around 4% in the previous fiscal year as per CRISIL. Two primary factors are steering this acceleration.
Firstly, the central government’s commitment to decarbonize the public transport sector has propelled the deployment of e-buses through tenders awarded under initiatives like the Faster Adoption and Manufacturing of (Hybrid and) Electric Vehicles (FAME) scheme and the National Electric Bus Programme (NEBP).
Secondly, the favorable total cost of ownership (TCO) of e-buses compared to internal combustion engine (ICE) and compressed natural gas (CNG) buses is driving their adoption. Lower operating costs and a diminishing initial acquisition cost contribute to this advantage.
Under the FAME and NEBP programs, state transportation units (STUs) have initiated e-bus procurement through gross cost contracts (GCC) and outright purchase models. With 5,760 e-buses already delivered, an additional 10,000 are set to be deployed in the current and next fiscal years.
The growth in e-buses is also supported by favorable ownership economics, with the TCO estimated to be 15-20% lower than the ICE and CNG buses over a lifespan of 15 years, achieving breakeven in 6-7 years. Although the initial acquisition cost of e-buses is higher, it is expected to decrease due to improving operational efficiency and decreasing battery costs.
However, challenges such as high counterparty risk and inadequate battery charging infrastructure pose hurdles to widespread adoption. To address these issues, the PM-eBus Sewa Scheme has been introduced, focusing on payment security mechanisms and creating battery charging infrastructure.
The government’s proposed scheme aims to establish a payment security mechanism to secure receivables for original equipment manufacturers (OEMs) in case STUs experience delays in payments. Encouraging the adoption of this scheme by state counterparts will be crucial for driving up e-bus penetration.
While government initiatives have driven e-bus sales, the private sector’s participation remains limited. Developing a policy framework to encourage private sector involvement, which constitutes about 90% of the country’s bus fleet, is essential for accelerating e-bus penetration.
The future trajectory of India’s electric bus market will be shaped by policy changes, advancements in battery technology, and the effective implementation of payment security mechanisms.
