Why Indian e-bus adoption is poised for ‘electrifying’ growth in 2024: Two primary reasons

Following the growth of the electric two-wheelers and passenger vehicles segments in India, the share of electric buses (e-buses) in new bus sales in India is poised to double to approximately 8 perecent in the upcoming fiscal year from around 4 percent in the last fiscal year, a Crisil report said.
The analytical company has attributed the rise in adoption to two primary factors.Firstly, the central government’s aim to decarbonize thepublic transport sector is steering the shift towards electric buses. Initiatives are already underway, with tenders awarded through the Faster Adoption and Manufacturing of (Hybrid and) Electric Vehicles (FAME) scheme and the National Electric Bus Programme (NEBP). These programs, launched in 2015 and 2022, respectively, aim to accelerate the integration of electric buses into the public transportation system.

The second driving force behind the accelerated adoption of e-buses is the favorable total cost of ownership (TCO) compared to internal combustion engine (ICE) and compressed natural gas (CNG) buses. Lower operating costs and a diminishing initial acquisition cost contribute to the appeal of e-buses in terms of ownership economics.
State transportation units (STUs) have been proactive in e-bus procurement under the FAME and NEBP programs, utilizing two models: the gross cost contract (GCC) and outright purchase. With 5,760 e-buses already delivered, the plan is to deploy an additional 10,000 in the current and next fiscal years. The GCC model, offering contracting terms such as assured rentals, fee revision linked to inflation, and the absence of traffic risk, has played a pivotal role in facilitating the adoption of e-buses.
Sushant Sarode, Director, CRISIL Ratings, said that the TCO for an e-bus is estimated to be approximately 15-20 percent lower than that of ICE and CNG buses over an estimated lifespan of 15 years, with breakeven in 6-7 years.
Despite the initial acquisition cost of e-buses being higher, the expectation is that this will reduce over time due to improving operational efficiency of original equipment manufacturers (OEMs) with increasing scale, localization, and decreasing battery costs. The electrification of buses is not only environmentally beneficial but also economically viable in the long run.