Till the end of 2019, shared mobility was all the rage in India. So much so that it was being touted as one of the reasons for the slowdown in the domestic passenger vehicle market–sales fell 12.75% in the calendar year 2019. The prevalent theory that was even endorsed by the finance minister Ms. Nirmala Sitharaman was that the urban youth relied on Olas and Ubers and no longer wanted to buy a car. The pandemic in 2020 has taken the wind out of that trend. High cost of fuel has damaged prospects further, undermining the economic viability for drivers who saw their costs go up even as demand was down.
It has proved to be a boon however for one segment–cabs that run on electricity. As the tariff for conventional fleet owners went up, electric cab operators suddenly became more viable. FAME 2 subsidy which is given only for cabs used for commercial purposes came in as an added incentive. India’s largest electric cab hailing company BluSmart, which started with just 70 cars in the Delhi NCR region in 2019, has over 680 of them on the roads today. Recently, it placed an order for 3500 Tigor EVs with Tata Motors and is targeting a fleet of over 100,000 cabs by 2025.
“While it is clear that the future is electric for automobiles in general, for shared mobility it will happen sooner. On a unit economics perspective, an electric car still costs about Rs 2 lakh more compared to a comparable diesel car which translates to an additional Rs 5,000 in EMI but the savings is Rs 15,000 per month for diesel and Rs 10,000 per month for CNG. So the dice is loaded heavily in favor of electric,” says Anmol Jaggi, founder and CEO, BluSmart. “A few years ago, the difference in price used to be Rs 4-5 lakh while petrol and diesel as fuels were very competitively priced so the unit economics was starkly different.”
Nearly a third of the enquiries that Jaggi receives today are from those who are currently driving a diesel or CNG taxi and wanted to go electric. A majority though, are first timers that reflects a renewed interest of drivers in shared mobility.
“We are getting about 100 enquiries everyday from people who wish to join us as drivers and almost 60-70% are fresh into this business. The unit economics is such that it is a very nice time to join the ecosystem. When we had started out (2019), the price of an EV was substantially more (Rs 4-5 lakh) compared to a diesel vehicle while cost of petrol or diesel was also relatively lower. Today, the price differential has gone down to Rs 2 lakh while prices of fuel has gone up–40-50%. So it is a tail wind from both sides.”
It’s not just the drivers alone. Even companies like Carzonrent, which runs the radio taxi service Easycabs is keen to make the shift. The company recently launched its EV fleet brand ‘Plug’ and wants to at first transform its existing fleet of 2000 cars to electric before expanding it to around 19,000 cars in the next 5 years.
We have decided that in the next 12-15 months we will transition our entire existing business which is around 2000 cars into electrical..Rajiv Vij, MD, Carzonrent
“We have been continuously evaluating but the good thing is that over the last year a number of cars have come up where the battery range is at least 200 km+ which changes the whole game significantly,” says Rajiv Vij, managing director, Carzonrent. “We have decided that in the next 12-15 months we will transition our entire existing business which is around 2000 cars into electrical. Then over the next 5 years, we will expand our fleet to 19,000 cars.”
“The future of the commercial car industry in India and I’m sure in the other parts of the world is electric vehicles and not ICE vehicles. Some like us will be early as a part of strategy, some others may get forced by their customers and some will be forced by regulation over a period of time but the transition will happen,” Vij adds. “A lot of companies want to protect their legacy business and that’s the challenge. As a mobility service company that’s not our challenge. The pandemic has of course impacted the industry badly. High fuel prices have completely taken away the margin of the ICE vehicle industry. At 95-100 rs a liter of diesel how can anybody make money? Smaller operators have suffered very badly.”
Like Jaggi, Vij reiterates the favorable economics. As somebody with nearly two decades of experience with B2B clients, he says his customers would be forced to dip into their CSR funds to pay the premium for EV fleet vehicles in the past. Now, the tables have turned. While profitability for a fleet owner in a diesel car has evaporated, an electric cab operator doesnt need to charge more.
Total cost of ownership at one time was negative for EV. Now the situation is such that earnings for an ICE fleet operator has evaporatedRajiv Vij, MD, Carzonrent
“Total cost of ownership at one time was negative for EV. Now the situation is such that earnings for an ICE fleet operator has evaporated,” he says. “On top of that, I’m also giving a monthly invoice to my customers that says how much CO2 emissions has been saved due to this shift to EVs. The customer can then use that certificate to meet ESG targets.”
The tailwind for EVs in the fleet segment runs contrary to the personal mobility segment where penetration remains miniscule even as sales are growing on a small base. Industry veteran Pawan Goenka who at Mahindra pioneered one of the first forays of a mass market player into EVs, says the trend is on expected lines.
“For electric vehicles the more you run, the more you save. So therefore it will be an ideal solution for aggregators,” he says.”And certainly because there, you’re putting in 100-150 kilometres a day versus in personal mobility segment where you put in 30-50 kilometres. Therefore, their fixed costs are higher and variable cost is lower. The more you run, the more you save.”
Also Read:
Led by high speed scooters that recorded an over 5 fold jump, nearly 2.34 lakh electric two wheelers were sold in the country in 2021. But that is just a precursor to 2022 when sales are expected to grow upto 6 times as a clutch of new entrants like Ola Electric, Simple Energy, Bounce Infinity, Tork Motors and Ultraviolette make their presence felt. All this while the traditional two wheeler segment is struggling for growth like never before.
The global electric vehicle (EV) industry has evolved over the last decade led by China and followed by other major automobile markets. In 2020. India lags in EV penetration, compared to other larger markets. The Central and state governments have taken several policy initiatives in recent years to encourage and accelerate transition to EVs. The scope for growth is encouraging in the electric two and three-wheeler segment, followed by the electric buses owing to favourable total cost of ownership (TCO) and huge volumes, which offer benefits of economies of scale.
