The Indian EV market is expanding at a rapid pace as more and more car owners embrace technology for convenience and cost-efficiency. The Indian government has ambitious plans to grow EVs significantly by the decade's end. In line with this, major automobile companies are launching several new electric vehicles almost every other month.
But India's real EV revolution is not happening in the consumer or commercial passenger transport sectors – it's in the logistics vertical. To be more precise, in the last-mile delivery segment. Door delivery businesses have been incredibly popular in India, given the size of the country, weak infrastructure, and hectic traffic. Startups delivering anything from groceries to electronics are increasingly turning towards electric fleets to boost efficiency.
Some of the leading EV startups have been quick to capitalize on this. Bangalore-based Fyn Mobility, for instance, has recently rolled out the world's first 15-minute full-charge EV fleet.
Why logistics is embracing EV
Logistics companies have traditionally relied on diesel vehicles. But as EVs became more mainstream, they began to consider electrifying their fleet for cost-effectiveness. The costs of last-mile delivery are a concern for many companies. Driver salaries would only continue to increase, as with vehicle maintenance. Lowering fuel costs would be the best bet to reduce the overall expense.
"All e-commerce and quick-service delivery companies are looking at reducing their last-mile costs, which is the biggest problem when they look at their profit margins," explained Visakh Sasikumar, Founder and CEO of Fyn Mobility. "In 2020, we saw a lot of players announcing their vision towards electrifying their fleet. Now in 2023, we are seeing these vision statements getting into an execution level."
A critical reason behind this growth is that the demand is already present. Sasikumar pointed out that if you are trying to generate new opportunities and then deploy EVs, the growth rate will be very slow. In logistics, it's about replacing diesel and petrol vehicles, which means the opportunity is already there.
"You are replacing those vehicles with EVs," Sasikumar said. "So, there are no concerns about the growth potential - it's there. But at the same time, this is prompting many companies who don't have comprehensive product know-how to get into the market. They just see the massive demand and want to grab a share of the pie."
Growth in the near future
Last-mile delivery is where EVs have caught on. But Sasikumar feels that the next step would be to transition from this segment to the middle mile and then further up the chain. However, this transition would necessitate a steady evolution of technology and its adoption.
"Along with this transition in the next three years or so, you'll also see technology evolving," Sasikumar said. "When we started, charging happened in six to seven hours. Before that, it could go up to 10 hours, but the arrival of lithium-ion batteries reduced it to five to six hours. Now we are bringing vehicles that can fully charge within 15 minutes."
Another interesting possibility is that EV interest in logistics will also influence consumer-level conversions. Sasikumar pointed out that a customer who sees their grocery deliverer arriving in an EV will become more aware of the potential of electric vehicles. When they see that the B2B sector can effectively use EVs, there will be more investment confidence at the consumer level.
Opportunities for foreign collaborators
Most Indian EV manufacturers try to rely on a local supply chain now. This helps them have more control over component sourcing and use several government subsidies. However, critical components like cells that are still not manufactured in India are brought in from overseas.
Sasikumar pointed out that companies from countries like Taiwan would benefit from setting themselves up in India, as the subcontinent presents a huge opportunity.
"Importing from them is going to reduce," Sasikumar said. "So, if they can come to India, the market is open for them. Earlier, foreign companies were reluctant to directly enter India because the market wasn't big enough. Now the market has grown, and potential is visible. Now it's a good time for them to come and set it up. And there are a lot of collaborations that can happen with companies like ours."
Wrapping up
India's logistics sector is estimated to account for about 14.4 percent of GDP, according to India Brand Equity Foundation, a government agency. According to Statista, the market would grow from $250 billion in 2021 to $380 billion by 2025 at a CAGR of 10 to 12 percent.
Such numbers further amplify the potential for EVs in logistics. As more e-commerce and delivery companies look to take advantage of the cost and efficiency, the sector could become the trailblazer of the EV revolution in India.
