India's Electric Bus Market Set To Grow 10 Times In Five Years

The Indian electric bus market is set to grow at a rapid pace to become 10 times its current size in the next five years, as demand from state and central governments rise exponentially along with the increase in adoption in the private space.

“We expect this exponential growth to continue, and expect the market to double by the next year,” Mahesh Babu, chief operating officer at Switch Mobility Ltd., said in an emailed response. “The growth outlook going forward is positive, and we expect it to continue with a 10x growth in the next five years.” He expects the electric bus market penetration to rise to at least 9% share by 2025.

Tata Motors Ltd. is even more optimistic about the future.

With government incentives and policy support, expansion of charging infrastructure, and advancement in battery technology, India can have a sizable penetration of electric buses to meet the demands of growing urban centres, Rohit Srivastava, vice president, product line – buses, Tata Motors Ltd., said.

“In the next seven to eight years, we expect that about 50% of buses could be electric,” he said.

The company has all the reason to be extremely bullish on the sector. It was recently declared the lowest bidder for the largest global tender of 5,450 e-buses floated by Convergence Energy Services Ltd., the government’s unit responsible for aggregating states’ demand for such buses.

The estimated $1 billion tender is just the beginning for the industry.

Currently, there are over 300 e-buses tenders live from several state transport units, while CESL also plans to float tenders for 50,000 buses over the next five years, Babu from Switch Mobility said.

The growth in the companies’ orderbooks is testament to the rapid growth which has already kicked in.

Switch Mobility started FY22 with 65 orders for e-buses but ended the year with orders growing 10 times. It has also signed a contract with travel app Chalo to deploy 5,000 electric buses. The company is looking to deliver a major part of these vehicles by the next financial year.

"Even going by already floated government orders, E buses could touch $2 billion value (10,000 buses versus 1,200 in CY21) within two years,” BofA Securities said in a report published in July. EV shift in intra city transportation is feasible given predictable routes, ease of creating charging at depots and running cost of sub Rs 10 per km compared with Rs 25-35 a km for CNG or diesel bus variants, the report said.

Due to the subsidies offered by the government, the state transport units have been quick to grab the benefits offered by a shift to electric. But, currently, the buses owned by the state units make up only 15-20% of the market.

Once the private bus operators start to find e-buses feasible, it will open floodgates for the industry.

Switch Mobility’s Babu expects the market share for the private e-bus orders to be about 70% by 2025, with State Road Transport Undertakings orders making up the rest.

As many corporates have also committed to net-zero emission goals, Tata Motors has started partnering with them to transport their employees through e-buses.

While the operators may not find e-buses attractive from the financial perspective as of now due to the upfront costs, the operational challenges are not that hard to scale.

Intra city transportation make a better use-case for electric buses as routes are predictable, thus making it easier to set up charging stations too, the BofA Securities said in the report. Range for buses from most companies is around 160-200 km per charge, with charging time varying between 45 minutes to 2 hours, it added.  

However, the sector is not completely devoid of barriers.

Tata Motors’ Srivastava noted that the project financing, which is in its nascent stage and needs to evolve to aid scalability. There is also a necessity to create a mature ecosystem to ensure payment security for sustained operations as per the contracts, he added.

The tenders floated by CESL will be executed as per gross contract model, under which the company that gets the contract will own, operate, and maintain the buses along with providing charging infrastructure, while the STU will pay the company on per km basis.

Investments required are enormous and mobilising the investments to finance bus makers, battery manufacturers, charging stations, and end consumers will require shifts in financial structuring to counter the high cost of funding, Switch Mobility’s Babu said.