Total Cost of Ownership of battery electric trucks is now lower than diesel counterparts
India’s transport sector is the fastest growing source of carbon emissions in the country today, accounting for 13.5% of India’s energy related CO2 emissions. Road transport is responsible for 90% of these emissions. Therefore, decarbonising transport is central to achieving India’s target of net zero emissions by 2070. While India is making rapid progress towards electrifying light duty vehicles, little has been done to electrify heavy duty vehicles like trucks and buses.
Diesel trucks account for more than 70% of all road freight movement in India, a share that has been steadily rising over the last two decades. They consume nearly 57% of petroleum used by the transport sector, and despite comprising a mere 5% of total vehicle fleet, they are responsible for 71% of the CO2 emissions, 74% of the PM emissions, and 55% of the NOx emissions from road vehicles. This makes a clear case for transitioning them to zero emission technologies.
A recent report by the Lawrence Berkeley National Laboratory and the Institute of Environment and Sustainability, University of California Los Angeles analyzes the potential for truck electrification to reduce India’s emissions and fuel imports. It finds that, as a result of reduction in international battery prices, battery electric trucks (BETs), once mature, will have lower total cost of ownership than diesel trucks across multiple weight classes. They can also be expected to emit 9 - 35% less GHG emissions per km compared to diesel, which could become entirely carbon free once charging is powered through renewable sources.
The study considers trucks in four weight classes - 7.5 metric ton (MT), 12 MT, 25 MT and 40 MT - and shows that the recent cost and performance improvements in battery technology have made electrifying heavy and medium sized trucks substantially more feasible from a techno-economic perspective. For example, at a battery pack price of $135 per kilowatt-hour (kWh), a 12-ton electric truck with a 222-kWh battery pack and 300 km range could deliver a 18% lower total cost of ownership (TCO) per kilometer relative to a diesel truck. The payback period for recouping the electric truck’s higher upfront costs would be 3.1 years. Larger trucks like a 25-ton operating 400 kms per day can have a payback period of about 2.2 years while 40-ton trucks operating 400 kms per day can have a payback period of about 3 years. This is well below the expected 15-year life of all electric truck categories, showing they are more cost effective in the long run.
While BETs show economic viability, they will require sustained policy support to see them through a long maturation phase and become commercially viable. To this end, complementing the existing Production Linked Incentive (PLI) scheme with additional policies such as subsidies for early adopters, as well as binding obligations on truck manufacturers and large fleet owners to induct a certain quantity or share of BETs annually – will be critical for creating certainty for investors and economies of scale. Additional policies will also be needed to catalyze investments in battery manufacturing, vehicle manufacturing, and charging infrastructure which are the most capital intensive in the BET value chain.
As one of the world’s largest automotive producers and exporters, India already has the necessary institutional infrastructure to begin transitioning to electric trucks. The existing national policies like the FAME I and II, tax rebates and state level policies are showing results in accelerating EV adoptions in light duty vehicles. By leveraging these successful prior policies and with additional targeted interventions, India can create a thriving domestic electric vehicle industry over the next decade or so and become a global leader in producing clean, efficient, high-quality vehicles.