E-Bus Market Share Likely To Double Next Fiscal: CRISIL

In the upcoming fiscal year, the share of electric buses (e-buses) in new bus sales in India is anticipated to double to approximately 8 per cent, a notable increase from the current 4 per cent, as projected by CRISIL. This surge is attributed to two key factors: the Central Government's efforts to decarbonize the public transport sector and the total cost of ownership (TCO) associated with e-buses compared to internal combustion engine (ICE) and compressed natural gas (CNG) buses.

Under initiatives such as the Faster Adoption and Manufacturing of (Hybrid and) Electric Vehicles (FAME scheme) and the National Electric Bus Programme (NEBP), the government has been actively promoting the deployment of e-buses through awarded tenders. The FAME and NEBP programs, initiated in 2015 and 2022 respectively, have seen state transportation units (STUs) procure e-buses through gross cost contract (GCC) and outright purchase. To date, 5,760 e-buses have been delivered, with plans to deploy an additional 10,000 in the current and upcoming fiscal years.

Positive Trends And Challenges

CRISIL emphasizes the positive impact of the GCC model, citing factors such as assured rentals, fee revisions linked to inflation, and the absence of traffic risk as contributors to the successful adoption of e-buses. Sushant Sarode, Director, CRISIL Ratings said, “Growth in e-buses is also supported by favourable ownership economics. TCO for e-bus is estimated to be around 15-20 per cent lower than ICE and CNG bus, over an estimated life span of 15 years with breakeven in 6-7 years. Though the initial acquisition cost of e-bus is twice that of an ICE or CNG bus, it is expected to reduce on account of improving operational efficiency of original equipment manufacturers (OEMs) with increasing scale and localisation and decreasing battery costs.”

Despite these positive trends, there are challenges to e-bus adoption. High counterparty risk stemming from the financial constraints of STUs and an extended debtor cycle have made lenders cautious about financing e-bus projects. Additionally, inadequate battery charging infrastructure, particularly crucial for intercity bus operations, poses a hurdle.

Policy To Rope In Private Sector

Pallavi Singh, Team Leader, CRISIL Ratings said, “The recently announced PM-eBus Sewa Scheme rightly aims to address issues related to payment security mechanism (PSM), including setting up of a payment security fund that will facilitate timely payments to the operators in case of delays by STUs and creating battery charging infrastructure, and should give a fillip to e-bus adoption.”

While government initiatives have driven e-bus sales, private sector adoption remains low. CRISIL underscores the importance of developing a policy framework aimed at increasing private sector participation, which constitutes about 90 per cent of the country's bus fleet, to accelerate e-bus penetration. Looking ahead, the evolution of battery technology, policy changes, and the implementation of payment security mechanisms will be closely monitored.