To cut emissions and cope with high fuel prices, e-commerce and logistics firms in India are increasingly lining up to electrify their fleets, boosting prospects of the emerging EV-as-a-Service (EVaaS) sector, says fleet operators, automakers, and industry experts. This new-found focus on electrification is attracting more investors to the segment.
As shown by data from Crunchbase, more than $160 million have been invested in electric vehicle (EV) startups in this segment starting from April 2020, as against $7 million in the period before that.
As per Ankur Mittal, co-founder of an early-stage investment platform Inflection Point Ventures (IPV), the transition to EVs is necessary. “Using EVs for deliveries makes economic sense, has a positive impact on delivery, and is also a sign of a good corporate statement,” Ankur said adding that the presence of a proof of concept and better infrastructure were making investors see the potential for great returns.
Despite this increased fund flow to the segment in the post-pandemic era, the segment still has to cover a long path. In order to electrify the nation’s two and three-wheelers fleet, which is the largest in the world will require about $285 billion, says a WEF-NITI Aayog report.
As per industry experts, the processes of electrification which are still at a nascent stage require financing since not many e-commerce and logistics players are willing to buy the vehicles.
Mr. Visakh Sasikumar, the founder of Fyn Mobility, a firm that provides EV-as-a-Service, says, that the e-commerce and logistics players want to lease out the vehicles to maintain an asset-light model.
In India, most drivers don’t own electric vehicles. Many companies are also hesitant to own EVs due to the lack of charging infrastructure as their core competency. Moreover, financing challenges also arise often due to the low predictability of the life of an EV and unestablished resale value.
Another challenge is the dearth of the right products for the segment. Original equipment manufacturers (OEMs) making the right product are scarce.
To make EV-as-a-Service work, one needs to find the right balance between the right product, finances, and services along with automated life prediction and optimizing vehicle usage.
Moreover, supply needs to be right and scaled up. With a key focus on electrifying the routes that see more logistic carrier traffic.
What also, needs to be taken into account is, what percentage of delivery routes can be electrified, say experts.
A worthy bet
Apart from being environment-friendly, there is a social and economic sense in logistics companies switching to EVs. Thus, more companies including logistics players, are jumping on this bandwagon.
As per a WEF-NITI Aayog report, the Last-mile and urban delivery fleets are leading the adoption of electric two and three-wheelers in India and are likely the first segments to transition completely to electric.
E-commerce giant Amazon expects its India delivery fleet to have 10,000 EVs by 2025, while rival Flipkart aims to deploy 25,000 EVs by 2030.
EVs can help reduce operational costs by 70%, and ease the financial pains on the drivers as EVs need far lower EMIs.
As per reports, better economics and more earnings for operators have led to about 10 lakh two and three-wheeler EV sales in the country so far. However, a lot more room for growth awaits since India has a two-and three-wheeler fleet stock of 25 crores.