ICRA Predicts 8-10% Share For E Buses by 2025

Highlights :

  • India is massively underserved when it comes to buses, and e buses or not, the market and approach to buses need to change.
  • E buses face an opportunity like never before, provided supplies can keep up.
ICRA Predicts 8-10% Share For E Buses by 2025

Buses, the bulwark of public transport in any well planned transport system, are set to be a key part of the transition to electric mobility in India too. Thanks to focused subsidies and pressure to improve a decrepit bus network in most markets, e-buses are set to make a large impact in this category.

For obvious reasons, the intracity bus segment is expected to be at the forefront of this change, aided by the Government’s subsidy support in the green energy shift, says rating agency ICRA.

According to ICRA, the e-bus segment is expected to witness increased traction going forward with 8-10% of new bus sales in the India by FY2025. In our view, that number could and should be vastly improved upon if one goes by the ground realities of India’s bus networks, but high cost of replacement, and apathetic local governance means this is the best estimate possible for now.

A developing challenge might be the dominance of China in the global e-bus market, accounting for approximately 98% of the global e-bus fleet, driven by an organized, collaborative approach with the involvement of all stakeholders and significant government subsidies. Electrification in other geographies like Europe is also picking up gradually. For India, a high level of dependence on China is unacceptable in the new political realities. New domestic players like GreenCell Mobility have announced ambitious plans, but face tough challenges including the present worldwide semiconductor challenge  that is already pushing back delivery schedules by upto six months for vehicles.

In India, significant incentives are offered through various schemes like Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME), Smart Cities, etc. To reduce acquisition costs and spur adoption. Subsidies offered under the FAME II scheme (~30-40% of bus cost) help reduce upfront capital costs of e-buses significantly and accordingly, ICRA expects 8-10% of new bus sales by FY2025 to be electric.

As bus costs drop with evolving technology and a better (and faster) charging network develops one can expect intercity segments to be electrified too. Additionally, operational savings, especially on fuel costs (3-5x lower) vis-à-vis diesel buses, support the Total Cost of Ownership (TCO) of e-buses and support their penetration. Thus, a large part of new E bus demand is likely to be for replacement of existing fleets. Estimates for actual sales of e buses by other sources have been pegged at over 7,000 units per annum by 2025.

The Gross-Cost Contract (GCC) model, or OPEX model, has emerged as the preferred route for e-buses adoption in India. The model helps to alleviate the upfront capital burden on cash-strapped SRTUs while increasing private participation to spur electrification.

While execution-related risks remain relatively low in these projects, operational risks are higher, given the lack of an adequate track record in the country. The model is currently evolving, and operators are looking at various measures to mitigate the risks prevalent in the model.

Overall, the e-buses market in India is likely to witness healthy traction over the near-to-medium term, despite the ongoing stress in the bus segment due to the pandemic, according to ICRA. Accordingly, the various stakeholders such as OEMs, transport undertakings, lenders, etc. Are adapting themselves for the transition.

A strange risk comes from the push to use green Hydrogen, which, while guaranteed not to deliver anything by 2025 by way of real results, could yet slow down e-bus adoption on the basis of promises. Keep in mind that unlike the EV bandwagon, the green hydrogen group has large, well established firms from the oil and gas sector that have a far greater away over government thinking at times.

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