As the automotive industry undergoes a significant transformation towards electrification, commercial vehicle manufacturers in India are developing innovative strategies to ensure their sustainability without relying on government assistance.
21 Nov 2024 | 4174 Views | By Shahkar Abidi
In the rapidly evolving landscape of India's commercial vehicle market, manufacturers are increasingly seeking to establish a foothold independent of government subsidies. This shift is driven by a combination of market dynamics, technological advancements, and strategic business models aimed at ensuring sustainable growth.
As the electric vehicle market matures, ...
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In the rapidly evolving landscape of India's commercial vehicle market, manufacturers are increasingly seeking to establish a foothold independent of government subsidies. This shift is driven by a combination of market dynamics, technological advancements, and strategic business models aimed at ensuring sustainable growth.
As the electric vehicle market matures, commercial vehicle manufacturers—traditionally cautious and reliant on policy-driven nudges—are innovating to stand independently. While some electric CVs, such as three-wheelers and trucks, do qualify for subsidies presently, the government has made it clear that these would be phased out over the next 1.5 years. Hence, for OEMs like Tata Motors, Ashok Leyland, and Mahindra, the challenge is clear: sustain momentum, drive mass adoption, and forge a sustainable EV ecosystem.
Lowering Cost of Ownership
For instance, Tata Motors, India's largest commercial vehicle manufacturer, is shifting its electric vehicle (EV) strategy to focus on generating demand without relying on government incentives, according to comments by Girish Wagh, Executive Director. Wagh said the company is fully geared for a “post-FAME environment” and has launched an exciting range of products.
Tata Motors has launched a new 1-tonne variant of its ACE electric small commercial vehicle (SCV). Although 17% more expensive than the previous 600 kg FAME-subsidised variant, the company claims a 30% improvement in Total Cost of Ownership (TCO) for customers despite the new model receiving no point-of-purchase subsidy.
Tata Motors boasts more than 6,500 ACE EVs on Indian roads, accumulating 50 million cumulative kilometres and recording high repeat-purchase orders. Additionally, Tata Motors is a leader in electric buses, deploying more than 3,300 e-buses with over 210 million kms covered.
Furthermore, at the holistic level, Tata Motors' strategy is to offset potential cost increases by focusing on affordable, reliable battery technologies and localising supply chains. Additionally, Tata Motors is ramping up production capacity, showing an early commitment to meeting demand from cities moving towards zero-emission mandates.
Meanwhile, Ashok Leyland, another major player, has been proactively working on bringing down the total cost of ownership (TCO) that can accelerate the shift. Shenu Agarwal, MD & CEO of the company, said, "We should look at one solution only – which is a cost solution, because otherwise we will not reach the end goal any time soon…TCO becomes positive at the fifth to sixth year because the operating cost is quite low." He pointed to the developments in China, where the fast development of the ecosystem for electric commercial vehicles has helped the country become a global leader in e-trucks.
A study by JMK Research & Analytics noted that in 2022, China accounted for 80-85% of the global electric truck market, with 52,000 units sold, a majority of which work on battery-swapping models. These electric trucks are primarily deployed in ports, mining sites, and urban logistics. A report from IMARC Group forecasts continued exponential growth, projecting the market to reach $15.6 billion by 2032, with a compound annual growth rate (CAGR) of more than 23%. This expansion, driven initially by heavy government subsidies in the mid-2010s, has since gained momentum, even as state financial support has tapered off, signalling a maturing market.
Pragmatism at Play
While the course towards electrification continues and OEMs make efforts in that regard, the pace of rollout is tempered by pragmatism, given the difference in the usage characteristics of PVs and CVs. Most of the focus is on the low-capacity segment.
For example, Mahindra & Mahindra is strengthening its position in the Indian small pickup market with the launch of its new Urban Prosper Platform (UPP). The automotive giant, which already holds a commanding 40% share in this segment, has invested more than Rs 900 crore in the first phase of developing this multi-energy platform. While the company recently rolled out its diesel, petrol-CNG version, it has held back on its electric version for the time being due to cost dynamics. Commenting on the decision, Veejay Nakra, President of Mahindra's Automotive division, said, "The economics are not yet established (for the EV version)."
He pointed out that the kind of overloading that happens in India means that one will need a rather large battery for the 1.5-tonne pickup, which will ultimately turn out to be very expensive. "What matters in this category is economics," he pointed out.