Food and e-commerce delivery companies are making ambitious transition plans

Electric vehicles are fast emerging as the preferred choice among commercial fleets, particularly for last mile delivery in the food and e-commerce sectors. A key reason for this is the recognition of declining total cost of ownership of EVs against ICE vehicles in delivery fleets, thereby leading to lower operational costs in the long run.

Some of the biggest names in the Business to Consumer (B2C) concerns, such as Zomato, BigBasket, Amazon, Flipkart, Swiggy, and many others, are actively switching to EVs. This will present significant opportunities for growth and expansion to the EV ecosystem.

Fig 1 - Flipkart’s electric three wheelers for last mile delivery © Flipkart stories

An all electric future for LMD fleets is closer than expected

A report by BCG consulting predicts that by FY 2025, 25% of EV sales in India will come from electrification of last mile delivery fleets across all forms of vehicles. The figure below shows that electric two, three and four wheelers (delivery vans, not cars) will experience growth in absolute numbers by up to 140%, 25% and 20% respectively, from 2022 to 2025. Also, their market shares are predicted to expand. On average, EVs could constitute roughly 25 - 30% of all last mile delivery fleets in India by 2025.

Fig. 2: Expanding market share of delivery EVs | Boston Consulting Group, 2023

Over the next 5 years, last mile deliveries are expected to grow at a CAGR of 15 - 20%, with food delivery services alone projected to grow at a CAGR of 30%. This will lead to expanded delivery fleets, which are already causing significant air pollution and carbon emissions. Despite being the smallest part of the journey in delivering a product from factory to home, last mile delivery actually accounts for nearly half of the total delivery emissions! This means it’s equal to what is emitted to get the product from the factory to the warehouse, typically by ship or plane. Their electrification is critical for India to ensure zero emission transport.

What’s catalyzing the transition to electric

  • Reducing Total Cost of Ownership of EVs for fleets: Along with the environmental benefits of switching to EVs, companies are recognising the TCO benefits of an electric fleet. The BCG consulting study shows that the total cost of ownership of a high speed electric two wheeler is 30 - 35% less than an ICE two wheeler, and a mid speed electric two wheeler is 35 - 40% less than an ICE motorcycle. Similarly, an electric three wheeler is 20 - 25% cheaper to own and operate than a diesel version, and 10 - 15% cheaper than a CNG version. The TCO of an electric four wheeler SCV is 15 - 20% lower than diesel variant and 5 - 10% less than CNG. This is a primary driver for expansion of EVs in last mile deliveries.
  • Consumer demand: 78% of urban India’s residents (across six major cities) feel that last-mile delivery vehicles are a significant contributor to air pollution, and that switching to EVs would be a much needed step in the right direction. Companies are recognizing the importance of transitioning as a corporate social responsibility and its brand value among its customers.
  • Proactive government policies: India has established a supportive policy landscape with 26 state EV policies, a national level FAME II scheme and NITI Aayog’s Shoonya initiative that aims to drive EVs in ride hailing and delivery fleets. Hundreds of companies have joined the initiative across last mile delivery, e-commerce companies, automakers, and even corporates like Coke owning large vehicle fleets.

Fig 3 - Zypp Electric is India’s leading tech enabled EV-as-a-service platform that provides carbon free last mile delivery services to local merchants and e-commerce giants, with a fleet size of 7,000 electric two wheelers and growing.

How OEMs can accelerate a transition to EVs in commercial fleets

The vehicle choices of e-commercial and delivery platforms influence the EV product market, making it crucial for OEMs to engage with delivery companies and understand their requirements, thereby creating products that suit their needs. There is a growing demand for fit to purpose electric two wheeler that account for delivery needs such as good storage, pick-up and heavy loading.

And lastly, OEMs must also invest in the EV ecosystem itself by expanding access to charging stations — India only had 5254 public charging stations in February 2023 — and invest in installing more fast chargers for quick recharges. The latter is critical as delivery vehicles only generate revenue when in service. And as an additional, foresighted step, forging partnerships with financial bodies to offer low-interest loans and lower down payments, as well as compensating EV owners for returning used/damaged battery packs, will help bridge the gaps much sooner.