OEMs eye government bus bonanza

India’s bus manufacturers are trying to make the most of a push to green mobility as State Transport Undertakings (STUs) adopt the asset-light GCC (gross cost contract) model in order to cut their losses – which trebled from 13,956.77 crores in 2016-17 to Rs 42,143 crores in 2021 – as well as go green.

An indication of that are recent orders for 3600 electric buses bagged by Tata Motors and Ashok Leyland’s EV bus arm’s Switch Mobility’s which is in the process of fulfilling an order book of 600.

The GCC is a public-private partnership (PPP) model under which the operator signs a contract with the transport corporation and is paid on a fixed cost per km basis. The supplier is responsible for the procurement of e-buses and their maintenance infrastructure. For the transport undertakings, the GCC that is based on the pay-per-use model is a huge relief. From the prohibitive Rs 96.75 cost per km, they have to fork out owing to rising fuel and administration input costs, with the lowest price, discovered for a 12-meter e-bus at Rs 43.49/km, 9-meter-metre e-bus of Rs 39.21/km, is a big reprieve.

Bus upgradation

A policy push by the government and lucrative incentives is set to fuel the growth in a segment that has traditionally been characterised by old and rickety buses, says Mahesh Babu, CEO of UK-based Switch Mobility.

What has given the move to clean buses is the $ 10 billion bus order tender by Convergence Energy Services’ National Electric Bus Program (NEBP),’ Grand Challenge 2’ that invited STUs to participate in one of the world’s largest bus orders to the tune of 50,000 electric buses as part of the 'FAME II' scheme. Over 4,000 of the targeted 5,585 electric bus contracts have already been awarded as part of CESL Grand Challenge1.

 Over 25 STUs that own 32,062 buses that are over 12-14 years old are making them turn to government-sponsored e- bus orders to make good for the deficit in light of MoRTH’s latest decision not to renew the 15-year scrapping deadline for BS-II or BS-III diesel buses that are highly polluting and uneconomical to maintain.

Rohit Srivastava, VP, buses product line at Tata Motors, says India’s bus market is following a global trend. “Globally, electric buses constitute the leading segment within the commercial applications, with almost 20 per cent penetration.” The government’s focus is on electrification of public transport, in which e-buses have a significant role to play, he said. So far, Tata Motors has supplied over  700 electric buses to various STUs.

 “The on-road cost for a 12-meter electric bus is around 1.3 crore. As part of FAME II incentives, we are getting a subsidy of close to 66 lakh per electric bus which means 50 percent of the bus cost can be recovered at the start of the contract,” said Babu. The rest is on a per km model that will take 5-6 years and as contracts range from 8 to 12 years, profitability will come during the final years of operation,” he added explaining the math.

Over their lifetime, these buses will run nearly 3 billion km without tailpipe emissions, produce oil import savings of 55 lakh barrels equivalent to Rs3,600 crore (about $500 million), and avoid Rs12 lakh (1.2 million) tons of carbon dioxide (CO2) emissions.

New players

Pure electric bus makers are also queuing up to tap the STU opportunity. This includes the likes of Olectra, and Foton PMI ElectroMobility that are also making fresh investments to speed up their get-to-market plans. Much Like Ashok Leyland and Olectra Greentech who have floated dedicated EV subsidiaries to get external investors and stay asset-light, VECV recently floated its electric arm, VE Electro Mobility.

PMI ElectroMobility recently set up Rajkot’s first electric bus depot and plans to invest Rs 300 crore to operationalise an electric CV manufacturing facility in Pune, Manvi Jain, Director of PMIElectroMobiity told Autocar Professional.  “Our second unit will be more than double the size of our existing facility at Dharuhera, in Haryana,” Jain said.

Vinod Aggarwal, MD & CEO of VECV says the bus market which fell to around 18,000 units in 2021-22 is likely to grow to pre-Covid Levels of 60,000 units as life comes back to normal and the opening of schools has contributed to demand. While VECV has an order book of 210 buses including supplies to Chandigarh and Surat, Switch Mobility has already sold 115 electric buses to various STUs.

VECV which took over Ashok Leyland’s contract in Chandigarh plans to add 40 new buses to the Chandigarh Union Territory Administration’s existing fleet of 40 electric buses at a GCC price of 44.95 km as against Rs 60 quoted by Switch Mobility. VECV has also won a contract to supply 150 buses to Surat.

PMI’s Jain further added that e-buses offer many value propositions to Indian cities: they are more efficient, cleaner, quieter, and increasingly cost-competitive. By 2030, if four out of 10 buses sold in India are electric, the country could emerge as the second largest e-bus market in the world after China, she stated.

Ashish Kundra, Delhi’s Transport principal secretary says: “The idea is that if we can provide two-wheelers and personal vehicle users some kind of premium service, in which they book like an Uber, which picks them up from where they are and drop at their workplace, people are willing to pay a premium for fixed, comfortable seats rather than trying to drive in the traffic,” says Kundra.

The Chandigarh Union territory administration has taken a big decision to replace the entire fleet of 358 diesel buses running on local or suburban routes, with electric ones by 2027-28. Here are a few more examples. Delhi Government has given an order for 1500 electric buses, and 250 electric buses have been ordered by Kerala State Road Transport Corporation. The West Bengal Transport Corporation has awarded a work order to Tata Motors. The Telangana State Road Transport Corporation (TSRTC) has awarded a supply of 300 electric buses worth Rs 500 crore to Olectra Greentech.

The Maharashtra State Road Transport Corporation (MSRTC) which has a 16,000 buses in its fleet is also planning to phase out the old fleet and add 700 non-AC electric buses and 150 air-conditioned electric buses that will start arriving this September with final induction to get completed by December 2022. Out of 150 electric AC buses, 100 buses will be introduced on the Mumbai Pune route. The rest will be introduced on other inter-city routes of the states, a senior official of MSRTC said. Causis- E-Mobility, a UK-based electric vehicle startup is setting up an electric bus manufacturing plant which is expected to be operational within 15 months.

“If India has to become the global manufacturing hub for electric vehicles and buses must be closely looked at as they can create disruption to move people from cars and two-wheelers, to public transport,” says Niti Aayog Adviser (Infrastructure Connectivity & Electric Mobility) Sudhendu J. Sinha.

The big opportunity lies in the intercity bus market where the penetration of electric buses is almost insignificant, says Mansi. Bangalore to Mumbai's driving range of 1000 km is much unattainable for an electric bus or even hybrid buses as there’s limited scope for regenerative braking, she said. Instead, the market is evolving in the 180-250 km inter and intra-city transport

As part of the inter-city electrification drive, Green Cell Mobility has won the bid to run intercity e-buses for MSRTC. These electric buses, dubbed ‘Shivai’ will be introduced across the state in stages.

The first bus on Pune- Ahmednagar has already been flagged off with Green Cell Mobility would be deploying 50 such electric buses for intercity travel across Maharashtra for MSRTC in the cities of Pune, Aurangabad, Kolhapur, Nasik, and Sholapur soon.

Ashok Agarwal, MD & CEO, Green Cell Mobility, adds that the firm plans to create ‘green routes’ with 12-meter buses in the state with 10 buses will to ply between Pune and Aurangabad while 12 buses will run on the Pune – Kolhapur route, 18 buses will ply between Pune and Nasik, and 10 buses on the Pune- Sholapur route.

Credit rating agency ICRA estimates that e-buses will comprise 8 per cent-10 percent of new bus sales by FY25 as the central government’s Faster Adoption of Manufacturing of Hybrid and Electric Vehicles (FAME) initiative has already been lengthened until 2024.

Switch Mobility’s Babu points out that there is a need for financial measures that could support the early electrification of city and intercity bus services in India. In his opinion, low-interest loans from institutions and timely subsidies, viability gap funding, and regular payments can support everyone’s financial success.

 For e-buses, depot and route selection are critical precursors to cost-effective and efficient operations.

"Proper depot selection has the potential to reduce upfront investment cost in electricity infrastructure and support higher utilization of charging infrastructure is th

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