Economics of running an electric L5 3W for last-mile deliveries vs ICE 3W • EVreporter

The logistics industry, particularly in last-mile deliveries, is rapidly shifting towards electric vehicles, with electric 3-wheelers (L5) emerging as serious contenders against internal combustion engine (ICE) 3-wheelers. Rising fuel costs, increasing environmental regulations, and a stronger focus on sustainability have prompted businesses to consider electric vehicles’ economic and operational benefits. When comparing electric 3-wheelers to their ICE counterparts, it’s essential to examine operational costs, maintenance, initial investment, and long-term profitability to understand which option offers a better value for fleet operators.

Kumar Ramamurthi, CEO of BAXY Mobility, discusses the economic incentive of running an electric 3W fleet over ICE vehicles.

Purchase price and running cost comparison

Electric 3Ws tend to come with a higher initial price tag due to the cost of batteries and advanced electronics. While ICE 3-wheelers are priced between INR 2.0 – 2.5 lakhs, electric models generally range from INR 3.5 – 4.0 lakhs. However, government incentives – such as those offered under India’s PM E-DRIVE (PM Electric Drive in Innovative Vehicle Enhancement) Scheme can help reduce this gap. The scheme, for instance, provides buyers with subsidies of up to INR 50,000, making electric 3-wheelers more affordable and closer in price to ICE vehicles. This reduction in upfront cost through government support has made it more feasible for businesses to invest in electric vehicles.

Running costs present one of the most significant economic advantages for electric 3-wheelers. In daily operations, an electric 3-wheeler can travel 100 KM for approximately INR 50-60 in electricity, compared to the INR 250-300 needed for the same distance using an ICE 3-wheeler fueled by petrol or diesel.

Over a year, assuming a vehicle covers 50-80 KM per day, this reduction in fuel expenditure can lead to savings of INR 60,000-90,000 annually per vehicle. For businesses managing large fleets, this could translate into substantial cost reductions, making electric vehicles an attractive proposition. In the long run, lower running costs offer electric vehicles a significant economic edge, especially as fuel prices remain volatile.

Comparing maintenance expense

Another crucial factor is maintenance. Electric 3-wheelers, with their simpler powertrains, have fewer moving parts, leading to lower maintenance requirements and costs. Unlike ICE vehicles, which require frequent oil changes, engine repairs, and maintenance of complex systems like the transmission and exhaust, electric 3-wheelers operate on a much simpler mechanism. On average, maintenance for ICE 3-wheelers ranges from INR 3,000-5,000 per month, while electric models typically require just INR 1,000-2,000. Regenerative braking systems in electric vehicles further reduce wear and tear on brake components, enhancing their overall longevity. For fleet operators, lower maintenance translates to fewer service disruptions and reduced operational downtime, ultimately boosting efficiency.

Battery cost consideration

Battery costs, however, remain a significant consideration for electric 3-wheelers. While the cost of batteries has been declining globally, they are still one of the most expensive components of an electric vehicle. Lithium-ion batteries, commonly used in electric 3-wheelers, typically last 5-7 years or around 100,000 KM before they need to be replaced. The replacement cost can range from INR 1.0-1.5 lakhs, which is a considerable expense. However, with technological advancements and economies of scale, battery prices are expected to continue dropping, which will further improve the overall economics of electric vehicles in the coming years. Moreover, emerging battery recycling and repurposing programs can help alleviate some concerns about battery disposal’s environmental and financial implications.

Other benefits

Government policies and incentives are key drivers of electric vehicle adoption. In addition to the subsidies provided under PM D-DRIVE, the Indian government offers other incentives to promote EV adoption. For example, electric vehicles are subject to a lower Goods and Services Tax (GST) of 5%, compared to 28% for ICE vehicles. Some state governments also offer additional tax benefits, reduced registration fees, and incentives for fleet operators to invest in electric vehicles. These measures help reduce the initial financial burden of transitioning to electric vehicles and make them more competitive in the long term.

From an environmental perspective, electric 3-wheelers provide substantial benefits. They produce zero tailpipe emissions, making them a critical tool in the fight against air pollution, which is a significant issue in India’s urban centers. Replacing an ICE 3-wheeler with an electric one can reduce carbon emissions by 1-2 tons annually. The environmental benefits extend beyond emissions; electric vehicles also contribute to a quieter urban environment, as their motors operate almost silently, reducing noise pollution. For cities grappling with air and noise pollution, the widespread adoption of electric vehicles could significantly improve residents’ quality of life.

Current challenges and roadmap

However, some challenges still need to be addressed, particularly concerning the range and charging infrastructure of electric 3Ws. Currently, most electric 3-wheelers offer a range of 100-120 KM on a single charge, which is generally adequate for urban last-mile deliveries. However, for operations in rural or semi-urban areas, where distances between delivery points may be greater, this range may be insufficient, creating “range anxiety” for fleet operators. Charging infrastructure is another concern. While urban areas are seeing an increase in the number of charging stations, rural areas still lag behind. Without widespread and easily accessible charging points, the practicality of using electric 3-wheelers in less developed areas remains a challenge.

Battery swapping is emerging as a potential solution to overcome these limitations. This technology allows for rapidly exchanging depleted batteries with fully charged ones, significantly reducing the downtime associated with charging. Battery swapping stations are already being deployed in some regions, particularly urban centers, and offer an efficient solution for fleet operators who need to keep their vehicles in constant operation. As this technology becomes more widespread, it could help address some of the concerns around range and charging time, making electric 3-wheelers an even more attractive option.

Looking ahead, it is clear that electric 3-wheelers are poised to play an increasingly dominant role in last-mile deliveries. Their lower running and maintenance costs, government incentives, and environmental benefits make them a compelling choice for businesses. However, ICE 3-wheelers may continue to hold an edge in regions where charging infrastructure is underdeveloped or the electricity supply is unreliable. In the short term, a hybrid approach—using both electric and ICE vehicles—may be the most practical solution for logistics companies, particularly those operating across diverse geographic areas.

In conclusion, while electric 3-wheelers are already economically viable in many cases, especially in urban settings, continued improvements in battery technology, declining costs, and the expansion of charging infrastructure will further strengthen their position. Businesses looking to future-proof their operations would be wise to begin integrating electric vehicles into their fleets, not only for cost savings but also to align with the global shift towards more sustainable practices.

References:

• International Energy Agency (IEA) – For trends in electric vehicle adoption:
  IEA – Global EV Outlook

• Price Trends and Battery Technology:
  BloombergNEF – Electric Vehicle Outlook

Author credit: Mr. Kumar Ramamurthi, CEO – BAXY Mobility, A key subsidiary of the BAXY Group.

Also read: India L5 E-3W Sales Trend | Jan 2024 – Aug 2024