Understanding Shared EV Transportation for India: Electric Cabs vs Electric Buses (& RBT) and Metro Rail

Conventional wisdom is that electric vehicles are VERY VERY costly for India... Or are they really? How quickly can we see meaningful penetration in India? To first approximation solar was expensive in 2009, but has achieved grid parity now, similarly energy storage and EVs are expensive now, but will be where solar is today by 2020 (i.e. 4-5 year lag w.r.t solar).

The government has an aggressive target of 2030 All-Electric Vehicle sales target. This article argues that while the current market is miniscule, the aggressive battery price decline trends, and the adoption by early "shared EV" markets will be the beachheads leading to aggressive personal EV penetration in the 2-wheeler and 4-wheeler markets. The Mahindra e2o is priced under Rs. 6 lakh (w/ a monthly energy fee) and the Ather scooter is expected around Rs. 1L about 50%+ premium to comparable sized products.

Let us look at three major areas: Electric cabs, Electric Buses and (Electric) Metro Rail. The arguments for electric cabs hold also for the 3-wheeler market and e-rickshaws as covered in an earlier article.

EVs as Electric Cabs

In an article "Solar + Ola! = Sola! ..." I made the case that (Battery) Electric Vehicles (EVs) can become affordable sooner than consensus thinking. I also made the case that electric vehicles will also spur the growth of residential solar PV and vice versa. From a global perspective, the Tesla Model 3 will also be a catalyst for further energy-transportation synergies, not to mention significant investment in batteries and EVs in the China market.

The key contributor to the EV affordability case is the dropping price of LiIon batteries, the major cost component of EVs. The recent BNEF forecast indicates a EV learning rate of 20-25% to continue through 2030.

The second key driver is to leverage the fact that EV OPEX (maintenance and energy) costs are low. Consider this: A litre of diesel costs Rs. 55-60/litre for cars, and delivers 10 km/litre, or Rs. 5.5-6/km. A kWh of electricity costs Rs. 5-6/kWh and delivers 4-5 km/kWh for mid sized cars, or Rs. 1 / km (Mahindra e2o claims Rs. 0.7/km). This indicates a 5-6X gain with EVs on (variable) energy costs vs ICE vehicles. Also with simpler design and fewer moving parts, EV maintenance costs are lower than ICE vehicles.

As EV CAPEX comes down, the gain with OPEX will lead to progressively faster payback on capex. So while we wait for EV CAPEX to come down, one way to raise the (monetized) productivity of the high capex asset (the EV) via driving more monetized miles with the asset.

This is where and why the "shared" use of EVs makes a lot of sense. A home EV owner may drive 10,000 km a year, but a EV cab operator will likely drive it 30K-40K miles / year. As long as the battery life holds up (say 5-7 years), the price-per-km remains same as ICE vehicles (eg: Rs. 6-15 / km), and the capex differential is moderate (say <50% capex gap), a shared EV can be profitable over an ICE vehicle even today. Every km monetized will yield Rs. 5 - 15 / km, or Rs. 1.5- 6 lakhs/year. A Rs. 7 lakh CAPEX can be paid off in 5 years (even at the low end of expectations). This is the economic threshold at which it makes sense to build a business, especially with any incentives from the government (eg: accelerated depreciation, lower GST rate or direct EV CAPEX subsidies). No wonder Mahindra and Ola! announced a trial in Nagpur with Electric cars as Ola fleet taxis. Earlier Ola! had announced a pilot of e-rickshaws in Tier 2/3 towns.

Electric Buses and Rapid Bus Transit (RBT):

Electric buses are at the earlier stage of evolution than EVs. In markets like China and United States, they are achieving early traction even with price points of $700,000 a bus. However, the economics are marginal or negative at this point in India, as indicated by the following table (with Rs. 1.5-3 crore capex vs Rs. 60-85L capex for diesel). The economics for western markets (eg: for Proterra buses) are shown in the following picture.

Compared to an electric car, an electric bus is 10-20 times heavier, but can carry 20-30 times the number of people.

The electric bus is of course designed principally for shared transportation. Especially so when it can get through more monetizable kilometers faster, like in Rapid Bus Transit (RBT) systems where the buses have a dedicated lane on existing roads. The incremental capex is only that of cordoning off the road lanes, and building bus stations. Estimates of the Ahmedabad RBT system incremental capex are about Rs. 8-9 crores/km which is a steal (1/20th or better) compared to metro systems (eg: Kochi Phase 1 cost Rs. 220 crores/km which is at the low end of metro capex).

One interesting tradeoff (pointed by George Sebastian in the comments section below) is the amount and cost of "stored electricity" vs overhead electricity. If you see a metro or a tram line, it has overhead electricity throughout its line. Whereas a charging station for a bus is at a point (eg: a depot or intermediate bus stop). Perhaps an intermediate tradeoff, especially with RBT model is to electrify certain sections (rather than a point charging station). There are some technical problems to overcome. Usually fast charging standards use DC-to-DC charging from an external battery source or transformer to an internal battery. You cannot easily have exposed overhead DC lines since that will be a safety hazard. Medium voltage (eg: 11 kV) AC lines are ok but it means that the AC to DC conversion kit has to be in the bus (a bulky piece of kit). May be worth R&D looking into this, especially if the cost of external sections of AC lines are cheaper than the saved battery costs on the short run. Even if battery costs drop, the reduction in weight will be helpful to increase range and reduce charging downtimes.

While China appears to be investing aggressively in electric buses (see below), India appears to be playing the slower growth game which is fiscally prudent. Ashok Leyland recently launched a Made in India electric bus, the Circuit.

The good news is that by the next 2-5 years, capex for electric buses will come down making it a more viable proposition, especially in combination with the RBT model.

There are also other form factors for campuses or city centres, such as the autonomous EV shuttle concept Olli launched by Local Motors in collaboration with IBM Watson.

(Electric) Metro Systems:

Compared to other modes, Electric Metro has scale going for it. The Delhi metro carried over 1 billion passengers (with a B) or 100 crore passenger trips. At an estimated average price of Rs. 16-20 per passenger trip, this translates to Rs. 1600-2000 crores / year of fare revenue.

Interestingly the metro's non-fare revenues (eg: via advertisements monetizing its huge ridership) are higher than the fare revenue, for a total over Rs. 4400 crores/year. The capex is equally high at about Rs. 300-400 crores / km, and 218 km, the metro probably costed Rs. 65000+ crores to build (before operating expenses, and incurring high annual depreciation and finance costs). Fares are also being revised upwards to combat rising depreciation in recent years. In terms of operating costs, power costs and labor are key categories.

However, Delhi Metro has been innovative in power procurement by recently purchasing low-cost solar power via the open access method from a large solar park in Madhya Pradesh. It is also aggressively installing solar panels on its station roofs of tens of megawatt-peak. This is clearly a combination of electric transportation, powered increasingly by solar power (which is largely co-incident with metro demand). Recently the Delhi metro also raised the price for commuter fares to better balance its books.

Summary

Electric Vehicles (whether shared or personal) are at an early stage of feasibility and market adoption in India. The business case appears to be positive for the shared EV market (eg: Mahindra and Ola! partnership). Metro Rail will penetrate steadily in India, powered by open access solar and rooftop solar contracts. Electric buses seem to be 2-5 years away from serious adoption.

The government has a EV support program. The FAME (faster adoption and manufacturing of hybrid and electric vehicles) scheme is a part of the National Electric Mobility Mission Plan. Under the FAME scheme, the government offers incentives on electric and hybrid vehicles of up to Rs 29,000 for bikes and Rs 1.38 lakh for cars. The scheme envisages Rs 795 crore support in the first two fiscals starting with the current year. This is a modest, albeit calibrated investment to stimulate the market.

The key drivers for shared EV adoption will be a combination of economics, calibrated subsidies/policies, traffic jams with increasing vehicle stock, and public health concerns as shown in the following figure. A good summary of technical and public policy issues is in a CSTEP report.

UPDATE (June 2019): In shared EVs - I should have included the humble e-rickshaws and e-Autos (e-Tuktuks). Similar shared e-scooters will also likely take off since the companies promoting them can build a customer franchise. Ather Energy is quietly suggesting this. The economics are also compelling for e-Auto: petrol prices $5-6/gallon (Rs. 70+ / litre) or Rs. 2-3/km vs Rs. 6-7/kwh and 10-15 km/kWh or Rs. 0.4-0.5/km. Capex will be comparable post FAME II subsidies due to small battery pack (5-10kWh). Piaggio is one of the e-auto makers promising to deliver soon in Mumbai.

Twitter: @shivkuma_k

If you like this article, please check out the past articles: "Understanding the Rs. 3/kWh bids in India in 2017", "Distributed / Rooftop Solar in India: A Gentle Introduction: Part 1","Rooftop Solar in India: Part 2 {Shadowing, Soiling, Diesel Offset}", "Rooftop Solar in India: Part 3: Policy Tools... Net Metering etc..." "Solar Economics 101: Introduction to LCOE and Grid Parity" , "Solar will get cheaper than coal power much faster than you think..", "Understanding Recent Solar Tariffs in India", "How Electric Scooters,... can spur adoption of Distributed Solar in India," "Solar + Ola! = Sola! ... The Coming Energy-Transportation Nexus in India", "UDAY: Quietly Disentangling India's Power Distribution Sector", "Understanding Solar Finance in India: Part 1", "Back to the Future: The Coming Internet of Energy Networks...", "Tesla Model 3: More than Yet-Another-Car: Ushering in the Energy-Transportation Nexus", "Understanding Solar Finance in India: Part 2 (Project Finance)", "Ola! e-Rickshaws: the dawn of electric mobility in India", "Understanding Solar Finance in India: Part 3 (Solar Business Models)" , "Meet Olli: Fusion of Autonomous Electric Transport, Watson IoT and 3D Printing".

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