Driving the Future: India's Electrifying E-bus Revolution

The Indian electric vehicle (EV) opportunity is experiencing a remarkable surge, reaching approximately US$ 34B in FY24 with 30% year-on-year growth. It is projected to reach around US$ 238B by FY30, growing annually at about 38% from FY24 to FY30, reflecting a paradigm shift towards sustainable mobility. This growth underscores the increasing importance of EVs in addressing environmental concerns and reducing carbon emissions. In line with this transformative trend, this newsletter will focus on electric buses, which are anticipated to command a substantial ~30% share of the total bus sales by FY30. This momentum is primarily fueled by the government which is targeting to transform its public fleets and the cost-effectiveness of e-buses, which boast a 5-10% lower Total Cost of Ownership (TCO) compared to traditional internal combustion engine (ICE) counterparts. Additionally, there is a diverse range of new models of e-buses hitting the market, bridging the price gap between their ICE counterparts. Moreover, we will also discuss the challenges that lie ahead on this road to growth and how they can be addressed.

In FY24, the e-bus opportunity stood at approximately US$ 0.6B, growing at approximately 75% year-on-year from FY23. It is expected to reach ~US$ 6B by FY30, growing annually at 47% from FY24 to FY30, as shown in Exhibit 1.

The penetration of e-buses currently stands at 4% and is forecasted to reach ~30% by FY30. The increased penetration will be primarily driven by large state and central government orders, which are targeting to overhaul their fleet from ICE to EV and will likely result in ~50K unit sales by FY30, growing at a CAGR of ~55% from FY24 to FY30. Adoption will be facilitated by improving technology as well, which will drive down the price differential between e-buses and ICE buses, but the differential will still be high and impact the adoption by private bus operators due to the high cost of batteries.

The adoption of e-buses has been varying according to their seating capacity. Based on seating capacity e-buses are classified as 10-30-seater, 30-50-seater, and more than 50-seater. Tata Motors is the key incumbent present in e-bus with the presence of several pure-play EV companies like Switch, Olectra, Lancer, BYD, and JBM. E-buses with more than 50 seating capacity remain underserved with fewer OEM players and a smaller number of models present in the market.

Total Cost of Ownership (TCO) analysis

While e-buses require high initial investments, the overall ownership costs throughout the vehicle's lifecycle are more economical than those of traditional vehicles. The higher upfront capital costs associated with electric buses are effectively offset by substantial fuel savings compared to their ICE counterparts. For electric buses, total ownership costs decline by 9% with subsidies resulting in absolute cost savings of ~US$ 36K, and even without subsidies, there is a 7% reduction in ownership costs over the vehicle's life, as shown in Exhibit 3.