Is everything as rosy as it seems in India’s electric three-wheeler ecosystem, or are there hidden challenges? Prateek Rao, Director and Founder of Zyngo EV Mobility, discusses this with EFY’s Mukul Yudhveer Singh.
Q. Recent data shows a significant drop in electric vehicle (EV) sales, particularly in the electric two-wheeler and three-wheeler segments. Does this suggest that EV adoption, especially in last-mile logistics for e-commerce, has reached its peak?
A. The drop in EV sales can be attributed to several factors. The most significant is the end of the FAME 2 subsidy on March 31st, which made EVs more affordable. With elections underway and no new subsidy like FAME 3 announced, there is a temporary gap affecting EV purchases. Typically, April is a period of increased demand projections as companies prepare their yearly logistics needs. Despite the sales dip, factors like workforce availability due to election voting also play a role. However, we believe we have not yet reached an inflexion point in the EV market. The ecosystem remains positive, and we may see improvements once new policies are introduced post-election.
Q. Given your optimistic outlook, do you have a specific timeline in mind for when EVs might reach that inflexion point in mass adoption?
A. The progression towards an inflexion point in EV adoption is closely tied to the development of charging infrastructure, which is indeed a classic chicken-and-egg scenario. The government is actively working to enhance this infrastructure, which should catalyse further growth. Based on current trends and projects, we anticipate that we could see a significant surge in EV adoption within the next two to three years.
Q. Fleet owners are embracing EVs, but individual buyers, such as auto rickshaw drivers, seem reluctant. What is causing this hesitation?
A. Several factors contribute to the hesitation among individual buyers, such as auto rickshaw drivers, to adopt EVs. One primary concern is the significant cost of battery replacement, which may be necessary after just three years. This expense makes EVs less economically viable compared to traditional CNG or diesel vehicles when considering the total cost of ownership over a three-year period. Manufacturers are now offering extended warranties of up to five years to address this issue, providing some reassurance to fleet operators and logistics companies.
Another major barrier is the repair and maintenance of EVs. The durability and robustness of EVs are crucial for their acceptance in commercial operations. High dependency on authorised service centres and the potentially high costs of repairs deter many from adopting EVs. Additionally, the limited availability of spare parts in the open market and the risk of voiding warranties through unauthorised repairs further complicate maintenance. These factors collectively create a significant barrier for individual buyers despite the growing interest and adoption among fleet owners.
Q. Would you say leasing is becoming a preferred approach for companies like yours?
A. Leasing is indeed becoming a strategic choice for us and other players in the EV market. Traditionally, companies have been hesitant to move away from proven ICE technologies due to their stability and predictability. EVs, on the other hand, introduce a degree of uncertainty—technologies rapidly evolve, and new features like improved battery packs or fast charging capabilities can appear shortly after an initial purchase, potentially making earlier models obsolete.
Leasing addresses these issues by reducing the long-term risks associated with purchasing EVs. It allows companies to engage with the technology on a trial basis without the commitment of full ownership. This flexibility is particularly valuable given the fast pace of innovation in the EV space. As the market matures and products become more standardised, confidence in purchasing might increase.
Q. Should the EV OEMs improve their warranty offers?
A. While companies like BYD and Tata have made strides in battery technology and offer robust warranties for their electric cars, the warranty terms often do not align with the demands of the Indian market, especially for commercial vehicles like three-wheelers. These vehicles typically need to surpass significant mileage thresholds to ensure that their owners can recoup their investments and start profiting, which often exceeds the current warranty limits. Ideally, OEMs should offer extended warranties that cover more kilometres, potentially as an additional option that customers can purchase.
Moreover, there is a notable gap between current warranty offerings and market needs, particularly for high-usage commercial vehicles. OEMs need to adapt their warranty structures to better support the operational realities of fleet owners and promote broader EV adoption. This change would benefit the industry by enhancing vehicle longevity and reducing the total cost of ownership, which is crucial for the financial sustainability of fleet operators.
Q. Many fleet owners believe that the cost of maintaining teams to service ICE vehicles is higher than the cost of the drivers themselves. Is this accurate, or is it an exaggeration?
A. Maintenance teams often represent a significant cost, sometimes exceeding that of the drivers. This is why we consider leasing options, which can relieve us of direct maintenance responsibilities but also thin our profit margins. Ensuring our vehicles remain in prime condition extends their usefulness beyond the payoff of their initial costs.
Having been in the logistics sector for over 35 years, our family’s experience spans a wide range of vehicles. Maintenance predictability varies by vehicle type. Traditional ICE vehicles have predictable maintenance schedules based on mileage, while EV maintenance can be less predictable, especially after warranties expire, leading to unexpected costs.
Additionally, significant investments are needed in building and maintaining infrastructure like charging stations and parking hubs. These costs, coupled with the need for on-the-ground teams to handle maintenance and downtime, significantly impact profitability. So, while it might sound like an exaggeration, the cost of maintaining ICE vehicle service teams can indeed be substantial and sometimes greater than the cost of the drivers.
Q. If a motor and its controller are under warranty and need replacing after a year, how might it affect your profits, even if the batteries perform well?
A. In fleet management, all costs, including those for regular replacements like tyres and brake pads, are closely monitored to maintain efficiency. For example, if a tyre expected to last 25,000 kilometres only lasts 20,000, the cost impact across a large fleet can be significant.
When it comes to motor replacements under warranty, the direct costs may not affect us immediately due to warranty coverage. However, the unexpected need for replacements can disrupt operations and erode profit margins. We structure our pricing models to absorb these costs over a one- or two-year period, but margins are tight. Even small deviations in expected maintenance schedules can significantly impact profitability.
Despite advancements in technology that facilitate longer use and quicker charging times in other countries, we are still navigating these challenges in India. The surprise costs of spare parts, which we often don’t anticipate, need careful management to ensure they don’t undermine our financial stability.
Q. Considering the significant role of data in logistics now, are traditional fleet owners in India equipped to handle and utilise this data? Are they even aware of its existence and potential benefits?
A. Many fleet owners in India might not be fully aware of the vast amounts of data available to them. Unfortunately, this lack of data sharing from manufacturers hinders our ability to fully optimise our processes. Adding GPS or other hardware for data collection often seems unnecessary given the advanced BMS technology already present in vehicles, which makes data sharing relatively simple and cost-effective. Therefore, there is a significant opportunity for manufacturers to support fleet operators by making more data accessible. This would enable fleet owners to leverage data for better route planning, maintenance scheduling, and overall operational efficiency, ultimately enhancing their profitability and service quality.
Q. How do you address the penalties imposed by partner companies?
A. We plan for a 5-10% buffer by keeping backup vehicles, though this adds to our costs. If downtime exceeds our buffer, our profit margins suffer since our customers and the competitive market don’t compensate for these losses. Effective inventory management at both the dealership and manufacturer levels is crucial. We maintain our own inventory to manage risks, such as immediate part replacements during operations, and handle warranty claims later. Manufacturers support us by improving stock capacity and inventory management, which is essential for reducing downtime and maintaining profitability in our industry.
Q. Given the challenges you have described as a fleet owner, do you believe solving these would significantly accelerate EV adoption in logistics?
A. Absolutely, it is inevitable. With the current market buzz and government mandates, there is no escaping EV adoption. The key is for manufacturers, the government, and standardisation bodies to introduce norms that ensure longer warranties, perhaps up to eight years, and better durability. This would also positively affect the financing ecosystem, allowing for longer-term financing options. Additionally, controlling repair and maintenance costs is crucial. With more data and improved predictions on component lifespan, manufacturers can enhance product durability. If these improvements are made, we will see those on the fence about EVs make the switch, driving adoption to new heights.
