Accelerating The Green Transition Through EV Adoption In Logistics Space

Manish Gupta. Sep 14, 2022

The EV revolution is taking the world by storm with India striving to emerge as a leader in the EV space. The country is witnessing momentum around building a sustainable EV ecosystem driven by the ambitious goal to have net-zero carbon emissions by 2070. This shift demands innovation, government support, and infrastructure for generating high levels of EV adoption across sectors specifically, the transportation and logistics sectors.

The transportation sector contributes to nearly 14 percent of India’s total greenhouse gas emissions of which 90 percent is contributed by trucks. This is a fast-growing sector and contributes to 40 percent of fuel consumption in the country.

Certainly, the road to India’s energy sustainability and a carbon-free world goes through trucks. While India’s transportation sector is putting its best foot forward towards electrification, it's a long journey and we are still in the nascent stages of it.

Electrification of trucks will play a pivotal role in accelerating India’s green transition journey. The electrification of the Indian logistics sector foresees several challenges such as a lack of vehicles, a broken supply chain of EV parts, standard policies focused on encouraging the adoption of EVs, lack of robust charging infrastructure. Thus, it is imperative to address these problems for ensuring increased EV adoption in the logistics sector of the country.

Increased Electrification of Trucks

Electrification of trucks is one of the most feasible and vital solutions to drive the electrification of the logistics sector globally. According to a report by ICCT, a few leading countries such as the US and Austria have already set targets to phase out internal combustion engine medium and heavy trucks. While the US has committed to 100 percent zero-emission trucks by 2045, Austria requires 100 percent of new registrations of heavy-duty vehicles less than 18 tonnes to be zero-emission starting from 2030, and for those greater than 18 tonnes, it is applicable from 2035. Not only are the developed nations bolstering their EV adoptions, but other neighbouring developing countries are also striving to increase the adoption of EVs in multiple ways.

The growth of faster same-day deliveries, e-commerce, and scrappage policy is augmenting the growth of this segment in the country. Being the third-largest truck market after China and the United States, India’s early adoption of zero-emission trucks can be instrumental in not only accelerating its domestic climate imperatives but also supporting global climate action.

With 95 percent of Indian road transportation being dominated by trucks, the electrification of especially intra-city smaller trucks will play a major role in creating a sustainable logistics sector.

India is inching towards the deployment of EVs in the country through the formulation of various policies such as the FAME, NEMMP, and battery-swapping policies focused on encouraging the installation of charging stations, enhancing battery performance, developing R&D technology for the development of EVs and creating demand & supply incentives amongst others.

Such policies help reduce the cost of operations of EVs and reduce operational hours of drivers as well on a large scale.

Need for Strengthening the Policy Framework

The government of India has introduced policies such as the National Electric Mobility Mission Plan (NEMMP) and the Faster Adoption and Manufacture of Hybrid and Electric Vehicle (FAME) for promoting the growth of EV adoption in the country. Till date, 16 states of the country including states such as Maharashtra, New Delhi, West Bengal, Goa, and Odisha amongst others have endorsed and finalised policies.

Although the government has come up with various policies for accelerating the adoption of EVs, there is still scope for the formulation of more policies targeting the growth of EV adoption in the logistics sector. The policies should focus on encouraging the electrification of trucks exponentially along with the development of innovative business models that will help the small truck operators to afford electric trucks. The policy framework must also incorporate robust electrification of OEMs and 4Ws, improvement of the supply chain, and enhanced manufacturing of sustainable components to build a climate-neutral logistics sector.

Building of Robust Charging Infrastructure

The FAME-II policy has been deployed for improving the EV charging infrastructure of the country by allocating Rs. 1000 crore with a target installation of 4400 charging stations in cities. Recently, the government permitted the installation of 2,877 EVs under phase-II of FAME India.

However, there is an increased need to focus on the effective utilisation of these funds and the strong implementation of such policies. There is also a need for a blueprint that goes beyond the allocation of funds and increasing target for the number of charging stations to be installed.

A strategic and collaborative approach between the government and organisations will help reap the benefits of such policies. Adoption of a clear strategy focusing on the formulation and implementation of the policies encouraging the adoption of EVs will help ensure an effective sustainable transition.

Electrification of 2Ws & 3Ws

Electrification of 2Ws is gaining momentum in India. According to a report by McKinsey, the Indian electric 2W market would hit 4.5 million-5 million by 2025, accounting for 25-30 percent of the total market, and nine million by 2030. However, challenges such as a broken supply chain, limited vehicle offerings, lack of semi-conductor supplies, and reduced production of electric 2Ws by legacy players hinder the smooth electrification of 2Ws in India.

The new electric three-wheelers sold in the country in May commanded a lion's share - 56 percent - out of the total three-wheelers sold during the month, as against a 50 percent share in each of the three months till April 2022. Factors such as the growth of e-commerce, FAME policy, and fewer formalities and permits have accelerated the electrification of 3Ws in the country. However, a few challenges such as high TCO, a smaller number of electric 3Ws, lack of financing solutions, and limited activity by large legacy OEM players act as barriers to increased electrification of 3Ws in India.

The logistics players, OEMs, financing solutions, and manufacturers form the pillars of driving the electrification of 3Ws in the country. Measures such as electrification of last-mile delivery as a cost-effective solution and robust charging infrastructure for facilitating easy charging will help foster acceleration of EV adoption. Further, financing for 3Ws must also be made easier to reduce the high capital expenditure associated with them. Deployment of such measures will help in steering the electrification journey of 3Ws in the future.

The Future is Promising

It is critical to focus on the introduction of more policies catering to the adoption of EVs in the logistics sector, development of charging infrastructure, and promotion of scrapping and retrofitting of 2Ws, and 3Ws to make landmark progress in India’s decarbonisation journey. Policies encouraging incentives for manufacturing small trucks, improved charging infrastructure, reduction of permits and road taxes, ease in the registration process, and subsidised financing, can be deployed to foster the growth of a sustainable logistics ecosystem. While India is progressing significantly towards its ambitious green transition goals, there is a huge potential for accelerating the electrification of the logistics sector further through smart strategies and technology.