India's E-Bus Market Sees 80% Growth Spike in 2024

Key Highlights:

• Electric bus sales in India are set to grow by 75-80% this year, reaching 6,000-6,500 units.
• Growth is driven by government schemes like FAME, NEBP, and PM-eBus Sewa, with 24,000 e-buses ordered at the year's start.
• The GCC model, preferred by State Transport Undertakings, offers no upfront costs and steady income for operators.
• The government introduced a payment security mechanism in August 2023 to ensure timely payments to bus operators.
• Lower battery costs and production economies are expected to reduce e-bus prices, supporting India's carbon reduction goals.

According to a recent CRISIL Ratings research, sales of electric buses (e-buses) are predicted to increase by 75-80% in the current fiscal year, reaching 6,000-6,500 units, which will significantly benefit India's electric vehicle sector. 

This significant gain, despite starting from a small base, is mostly due to the deployment of e-buses through various government programs and a favorable contracting arrangement.

Tenders issued under programs such as the Faster Adoption and Manufacturing of (Hybrid and) Electric Vehicles (FAME) schemes, the National Electric Bus Programme (NEBP) under Convergence Energy Service Ltd (CESL), and the PM-eBus Sewa Scheme all contribute to the expansion. These efforts resulted in orders for 24,000 e-buses at the start of the fiscal year.

Gautam Shahi, Director at CRISIL Ratings, notes that the adoption of e-buses is in a "sweet spot" thanks to the Gross Cost Contract (GCC) model, which has emerged as the preferred route for e-bus purchases by State Transport Undertakings. 

This strategy provides an asset-light method for STUs, with no upfront acquisition expenses because e-buses are financed by bus operators. Operators enjoy a stable income through guaranteed per-kilometer rentals, eliminating the risk associated with fluctuating passenger traffic.

The GCC model is predicted to deliver a respectable internal rate of return of 10-11% for bus operators during the concession period. However, counterparty risk remains a worry, especially for STUs with weak credit profiles.

To overcome this issue, the government announced a payment security mechanism (PSM) for the PM-eBus Sewa Scheme in August 2023. A special payment security fund (PSF) is being formed to protect bus operators' receivables in the event of delayed or unsuccessful payments by STUs.

The increase in e-bus orders is expected to generate economies of scale in production, while falling battery costs are predicted to lower e-bus purchasing prices. These advantages may be passed on to STUs by operators in the form of lower per-kilometer rentals, further encouraging adoption.

Pallavi Singh, Associate Director at CRISIL Ratings, emphasizes that the current robust e-bus order book, along with the remaining 7,800 buses to be awarded under the PM e-Bus Sewa Scheme, will provide a considerable boost to the sector. The government is anticipated to expand this program, boosting e-bus sales in the current and upcoming fiscal years.

The e-bus market in India has expanded dramatically in recent years. From 65 new e-buses added in fiscal year 2019, the number increased to 3,607 by fiscal year 2024. The estimated 6,000-6,500 new e-buses for fiscal year 2025 represent a continuation of this upward trend.

Policy changes, battery cost evolution, smooth implementation of the payment security mechanism, and bus operators' ability to scale up e-bus supplies will all have an impact on the sector's future.

This push for e-buses is consistent with the central government's attempts to cut carbon emissions from public transportation. As India continues to prioritize sustainable transportation solutions, the e-bus sector is poised for tremendous growth, with the potential to reshape the country's urban mobility scene.

Also Read: Electric Buses Sales Report June 2024: PMI Electro Mobility Emerges as Top Choice for E-Buses

CMV360 Says

The rapid growth in e-bus sales is a positive sign for India's commitment to sustainable transportation. With government support and innovative contracting models, the sector is set for a transformative phase. However, ensuring financial stability for operators and maintaining the momentum in policy support will be crucial for the long-term success of the e-bus initiative.