India's 2, 3Ws fleet transition to electric calls for $285 bn financing: Report

Achieving 100 percent electrification of India’s two- and three-wheeler stock requires a capital allocation of approximately $285 billion, said the World Economic Forum (WEF) in a recently released white paper.

This WEF's white paper, published in collaboration with NITI Aayog said cumulative sales of electric vehicles have reached one million units. However, this is still just one million out of India’s total two- and three-wheeler fleet stock of 250 million – leaving immense room for sustained growth, it indicated.

At present, there are about 45 certified vehicle manufacturers of electric two- and three-wheelers in India. “Capital cost for its transition to electric is calculated based on an average two-wheeler vehicle cost of $1,000 for 264 million two-wheelers and average three-wheeler cost of $3,500 per for six million three-wheelers (across vehicle categories, excluding e-rickshaws) – bringing overall capital cost to approximately $285 billion. Electric vehicle turnover rate and cost of infrastructure have not been taken into consideration – and will require additional financing," the report added.

The report also said that last-mile and urban delivery fleets are leading the adoption of electric two-and three-wheelers in India. It added that they are likely the first segments to transition completely to electric.

"However, higher upfront cost of acquisition, lack of confidence in new technology, unassured reliability, and unestablished resale value are few reasons for which driver-cum-owners are hesitant to make the transition to electric," the paper highlighted.

In India, two -wheelers and three-wheelers account for over 80 percent of vehicle sales and the adoption of electric vehicles has been steadily rising in the past few years.

Moreover, the report stated that electric vehicles (EVs) their running cost is much lower, albeit having a higher upfront cost. So, the more an EV is used, the cheaper it gets, it mentioned. "When gauged by total cost of ownership (TCO), they are already ideal for ride-hailing and last-mile delivery fleets, which have high daily utilization. These segments are leading the adoption of electric two and three-wheelers in India and are likely to be among the first segments to transition completely to electric," the report said.

For a rapid transition of fleets, the report also said, capital flow to the ecosystem needs to grow multi-fold. Opening large capital pools will require de-risking of the market through deeper collaboration between stakeholders and business model innovation.