From Municipal Contracts to Yields: How Financial Engineering Securitized India’s Electric Bus Fleets

India’s commercial electric vehicle (e-CV) industry is entering a critical structural shift. As state-sponsored transit bus tenders reach maturity, the market’s center of gravity is moving toward private heavy freight and retail logistics. However, this expansion is exposing unseen operational friction, including unhedged 12-year concession risks, highway charging deficits, and policy frameworks that lock out key startup OEMs.

Speaking at a roundtable titled 'Commercial EVs: Getting the Economics Right' during the EV Conclave organized by Autocar Professional in New Delhi on Tuesday, top CV makers and infrastructure executives outlined how the sector is adapting to new financial realities.

While electric three-wheelers have achieved 60% to 65% market penetration and passenger 3Ws sit near 50%, electric bus adoption ranges between 5% and 7%, while heavy electric trucks remain under 1%. The earlier challenge was getting finance, which has improved significantly now. Then the issues moved to payment security mechanisms. Over a period of time, even that was addressed, the panelists noted.

Contract Securitisation and Secondary Financial Markets

A central topic of discussion was the transformation of public transit contracts into tradable financial assets. The introduction of Payment Security Mechanisms (PSM) and standardized Gross Cost Contracts (GCC) has de-risked municipal bus projects, attracting institutional capital and pension funds.

“In the bus world, a lot of the success of financing is to do with the contract itself,” said Mahua Acharya, Founder and CEO of Intent and former head of Convergence Energy Services Limited (CESL).

“We put [payment security] in, and I think that has really helped the market give enough money into that space. I know for sure, and I know this on record, there have been a number of secondary transactions, meaning somebody has been into a big bus contract, maybe run it for some time or even not run it, and then gone and raised money against it.”

Acharya added that financial conversations have matured from basic capital access to complex cash-flow valuations. However, she cautioned that corporate freight adoption faces a human behavior bottleneck.

“For as long as a private company does not have a target, whether it is Scope 3 or it is electrification, that business of transport always sits as a cost center,” Acharya noted. “Because risk in these private contracts is one-sided.”

The Concession Dilemma: Bidding Aggression vs 12-Year Inflation

While standardized contracts have unlocked institutional capital, veteran operators warned that long-term concessions carry operational exposure that newer bidders may be underestimating.

Mahesh Babu, Managing Director of Olectra Greentech, pointed to the influx of inexperienced participants in recent public tenders. “On the last CESL tender, I was really surprised. I saw a list of 22 people,” Babu said “These are all contracts for 12 years.

We need to be really making sure that the value chain, if it has to go, everybody earns money in the value chain. If you lose money in the value chain, that business is not going to grow”. Babu emphasized that State Transport Undertakings (STUs) account for only 20,000 to 25,000 buses annually, making private fleets and trucks the true scale opportunity.

For fleet operators running multi-thousand-bus portfolios, long contract horizons expose companies to unindexed operational costs.“Having this experience is also a curse, because these GCC contracts are for 12 years,” said Brijesh Gubbi, CEO of OHM Global Mobility, the EV mobility-as-a-service arm of Ashok Leyland.

“There is manpower cost... for example, recently in Karnataka, there was a huge increase in the minimum wages. Then you have energy costs, which are fluctuating. In 12 years, you don't know where that would be... you have to factor that in.”

Gubbi noted that while 90% of current e-bus deployments are concentrated in public transport, 90% of the broader Indian bus market is private. He identified intercity routes exceeding 300 kilometers and closed-loop 55-ton heavy freight corridors as immediate expansion areas.

Private Freight: AAA Balance Sheets Drive Unit Economics

Executives highlighted that heavy-duty commercial freight represents a total addressable market roughly three times larger than buses, with heavy trucks accounting for 275,000 to 300,000 annual unit sales and 40% to 45% of nationwide diesel consumption.

Sumit Mittal, CEO of JSW Greentech, argued that private corporate freight will scale faster than public transit because counterparties carry strong balance sheets and make purchasing decisions strictly on bottom-line savings.

“The truck opportunity is far bigger today in India,” Mittal said. “The counterparties are all... AAA-rated kind of companies,... If they become the counterparty, then financing should become a little easier. From a total cost of ownership, I think it's already 20 to 30 percent cheaper than the diesel counterpart.”

Mittal, whose company recently secured a 1,200-bus municipal order and operates a 90-acre dedicated EV manufacturing plant, added that corporate procurement norms, such as short one-year transport contracts, must adapt to longer EV amortization periods.

The Shift to Retail Financing and Startup PLI Barriers

In the light commercial vehicle (LCV / N1) segment, customer profiles have shifted rapidly as commercial banks and non-banking financial companies (NBFCs) establish vehicle residual values.

Saurav Kumar, Founder and CEO of Euler Motors, stated that his firm transformed its customer base from 90% corporate fleets in 2021 to 90% retail operators today, driving N1 electric penetration from 1% to nearly 6% in 18 months.

“Cash flow is what determines who is buying what,” Kumar said. “Financers over a period of time have seen some of these three-wheelers operating for five years, seven years. The vehicles have not come back. Some of the resale values are still good.”

However, Kumar pointed out a major policy distortion: despite new incumbents accounting for approximately 75% of the 20,000 electric buses on Indian roads and driving LCV adoption, startup OEMs remain excluded from government Production Linked Incentive (PLI) schemes due to net-worth criteria.

“I don't know why startups have been out of that,” Kumar noted “If you look at the N1 category, it has been at 1 percent, and we came with the right product... in a one and a half year gone to 5, 6 percent. It won't happen if some of these innovations are not coming.”

Infrastructure and Policy Demands

To sustain adoption, panelists called for structural policy changes and massive infrastructure investments.

Babu called on the government to introduce direct incentive policies for heavy trucks and private buses, noting they have been neglected compared to two-wheelers and public transit.

He also warned of severe supply chain and grid capacity constraints.

“We are talking about 22,000 charging infra today... we need 250,000 charging stations,” Babu said. Heavy commercial vehicles are talking about 400, 500 kilowatt-hour battery pack per vehicle. You can't be bringing containers from neighboring countries and keep building battery packs for a long time. Battery manufacturing in the country to a large scale is imperative.”

Babu added that Indian commercial vehicle OEMs must design brand-agnostic, left-hand and right-hand drive global platforms targeting European and UK compliance standards to capture export demand.

Gubbi urged highway authorities to integrate high-capacity charging plazas into road master plans from the outset.Electrifying a 1,000-kilometer freight corridor, such as Gujarat to Rajasthan, requires up to nine dedicated highway charging plazas with high-voltage connections.

“When the infrastructure is getting decided, like NHAI is deciding on the roads... they should be coming with charging infrastructure first in mind,” Gubbi concluded;m “It will be part of the master plan so that later on it will be easy for all the operators to set up.