Decoding EV adoption Economics for the Wider Electric Revolution in the Corporate Sector

The government is continuing to impose restrictions on running petrol and diesel vehicles older than 15 years on the road. With the potential to reduce air pollution, electric vehicles (EVs) are gaining significant momentum, especially in the corporate fleet segment. However, electrification is moving beyond the environmental pursuit and gradually aligning with the corporate’s sustainability and financial prudence. 

Corporates potentially hold the power of setting trends in the market, especially when it comes to adopting sustainable practices. Additionally, compared to internal combustion engines, EVs offer tangible benefits for society as well as the bottom line. EVs produce significantly fewer greenhouse gas emissions throughout their life cycles. It significantly overshadows the Total Cost of Ownership (TCO) by reducing maintenance costs and fuel expenses. On the long-term front, switching to EVs can increase employee satisfaction, add to brand credibility and ensure compliance with Environmental, Social and Governance (ESG) standards.

Debunking the TCO concern

Understanding the Total Cost of Ownership (TCO) before switching to EV is essential for understanding the financial viability in comparison to traditional combustion engines. According to several studies, the lifetime cost of EVs, especially on Indian metro roads, is generally lower than ICE vehicles. For instance, the per-kilometer operating cost of an EV is approximately ₹1.20, whereas for an ICE vehicle, it's about ₹12. Over a 10-year period, the cost per kilometer for an ICE 4-wheeler is nearly ₹3.78 higher than that of an EV, with operational costs almost doubling for ICE vehicles in comparison. 

While EVs have traditionally been associated with higher upfront costs, government initiatives and advancements in battery technology are reducing these expenses. The recently launched PM Electric Drive Revolution in Innovative Vehicle Enhancement (PM E-DRIVE) Scheme, with an outlay of ₹10,900 crore, aims to support various categories of electric vehicles, including two-wheelers, three-wheelers, trucks, buses, and ambulances, as well as the development of charging infrastructure and testing agencies.

Long-term Business Benefits and Viability 

Moving beyond initial cost and saving prospects, EV adoption in corporate fleets can enhance employee satisfaction to a major extent. Every individual has their own sustainability commitment and contributes to the environment. They often appreciate the corporate’s effort and commitment while traveling in EVs or getting deliveries, which improves their morale and helps in talent retention. ​

Furthermore, EV adoption directly bolsters corporate reputation by demonstrating environmental responsibility to eco-conscious consumers and investors, potentially opening new market opportunities. Apart from this, ESG standards have become an imperative today; hence, transitioning to EVs aligns with global sustainability and positions corporates favourably in the eyes of industry leaders, government bodies and investors. 

Considering the associated costs, fuel savings are another compelling factor for EV adoption at a wider scale. Electrification is generally more affordable than petrol or diesel, which results in substantial cost reductions over the vehicle's lifecycle. 

Bottomline

The adoption of EVs in the corporate fleet segment represents both a challenge and an opportunity. While the upfront investment in EVs may be higher but the long-term financial and strategic benefits are substantial. This calls out for careful planning and implementation to reap the key benefits collectively and make it a compelling case for corporate fleets.

Though the journey of EV transition can be complex, it rewards the environment as well as businesses. As the Indian market continues to evolve, businesses that proactively embrace this transition are likely to gain a competitive edge in the sustainable economy of the future.

Abhinav Kaliai is CEO and Co-founder at ARC Electric, India. Views expressed are the author's personal.