5% cut in cost of ownership can make electric trucks competitive: MHI

The Ministry of Heavy Industries (MHI) has estimated that a 5 per cent reduction in total cost of ownership (TCO) can bring electric trucks (etrucks) on a par with diesel trucks, while a 6 per cent cut can make certain electric buses (ebuses) cost-competitive, Business Standard has learnt. TCO refers to the cost of buying and operating a vehicle over its lifetime. 

The MHI arrived at the assessment after consulting various stakeholders, including automobile companies, as it has been working on a financing support scheme for ebuses and medium- and heavy-duty etrucks. Consultations were held between April and July between the MHI and stakeholders. These meetings identified high upfront costs, limited access to affordable financing, evolving battery-performance data and the absence of a mature secondary market as major barriers to wider adoption of etrucks and ebuses, according to MHI officials. 

Financial institutions are also concerned about borrower creditworthiness, technology risk, asset recoverability and the limited operating history of ebuses and etrucks, they added. 

The proposed financing scheme is expected to include a credit guarantee, under which the government would absorb part of the lender’s loss if a borrower defaults, and interest subvention, or government support to lower the interest cost of a loan for fleet operators. 

The MHI was considering bringing financing for ebuses and etrucks under priority sector lending (PSL), which requires banks to direct a portion of their lending to specified sectors, and extending infrastructure-status benefits to improve access to formal credit, the officials mentioned. 

The broader support package for the etruck and ebus segment could also include faster deployment of charging infrastructure along major freight and intercity corridors, rationalisation of electricity tariffs for commercial EV charging and consideration of toll exemptions for ebuses and etrucks. 

MHI officials stated that ebus and etruck makers need to also do more by providing longer battery warranties, stronger service networks, asset refurbishment programmes. These makers also need to share vehicle-performance data with lenders so as to build more trust, they added. 

The MHI and the stakeholders did an analysis on the difference in TCO for electric commercial vehicles and their diesel counterparts. It showed that a 28-tonne electric tipper has a TCO of ₹72.9 per km against ₹68.5 per km for a diesel truck. With the assumed 5 per cent support, the electric truck’s TCO falls to ₹68.3 per km. 

The economics improve with higher utilisation. A 35-tonne electric tipper needs to run about 290 km a day to achieve TCO parity with diesel under the assumptions used in the assessment, while a 55-tonne prime mover needs to cover 280 km. The threshold is 240 km a day for a 19-tonne truck, 175 km for a 12-tonne truck, 160 km for a 9-tonne truck and 175 km for a 7-tonne truck. 

The analysis showed that the upfront price gap remains substantial. A 35-tonne etipper is estimated to cost ₹130 lakh-150 lakh, compared with ₹58 lakh-62 lakh for a diesel vehicle. A 28-tonne etipper costs ₹95 lakh-120 lakh against ₹48 lakh-50 lakh for its diesel equivalent, while a 7-12 tonne etruck costs ₹48 lakh-55 lakh against ₹19 lakh-20 lakh for a diesel truck. 

The assessment estimated a cumulative potential market of around 50,000-57,000 etrucks during FY28-FY32 across seven priority sectors. These included ecommerce, mining, ports, cement, ready-mix concrete and road infrastructure, steel, and other industrial, auto-logistics and agricultural operations. 

Ports are expected to lead etruck adoption, with penetration projected to rise from 15 per cent in FY28 to 30 per cent by FY32, according to the analysis. Mining and cement are each projected to reach 16 per cent, while steel could reach 15 per cent by FY32. The assessment identified predictable routes, high vehicle utilisation and captive or depot-based operations as particularly suitable for electrification because vehicles can return to a fixed base for planned charging. 

The bus market was assessed for electrification across school, paratransit, intercity, non-corporate employee/staff transport and mofussil operations. These segments together accounted for about 106,258 buses, or 82 per cent of total bus sales, in FY26, according to the market assessment cited by the MHI. 

Paratransit is a flexible public transport service that provides personalised rides without fixed routes or set timetables. It mostly helps people with disabilities or older adults who cannot use regular buses or trains. 

Paratransit was expected to see the highest electric penetration among the identified bus segments, rising from 7.2 per cent in FY28 to 16.6 per cent by FY32. The proposed scheme envisaged support for 21,000-22,000 electric paratransit buses during FY28-FY32. 

The bus TCO calculations showed that the economics vary sharply by application. 

For intercity buses, electric TCO is estimated at ₹61.76 per km against ₹59.21 for an internal-combustion engine bus; with the assumed 6 per cent support, it falls to ₹58.42. For a 9-metre school bus, however, electric TCO is ₹138.87 per km against ₹107.72 for a conventional bus and remains at ₹131.39 even after the support. 

The MHI estimated that India’s medium and heavy-duty truck market, covering vehicles from 3.5 tonnes to 55 tonnes, recorded sales of 385,422 units in FY26 and could reach about 420,000 units by FY32. The cumulative conventional truck market was estimated at around 2.08 million vehicles during FY28-FY32. For buses, India recorded sales of 128,745 units in FY26.  

The proposals 

• A 5% cut could bring down the total cost of ownership (TCO) of a 28-tonne etipper from ₹72.9/km to ₹68.3/km, lower than the ₹68.5/km for a diesel truck 
• MHI is working on a support scheme for ebuses and etrucks 
• The scheme is expected toinclude a credit guarantee andinterest subvention