Economics Of Going Electric: Cost Saving & ROI In Commercial EV Adoption

The superior economics of EVs are compelling fleet operators towards electric vehicles over traditional internal combustion engine (ICE) vehicles.

By Kalyan C Korimerla

The transportation industry has witnessed a global shift towards electric vehicles, prompting a focus on sustainability and cost savings. As such, various verticals such as Logistics, E-commerce, Agri-logistics, Waste Management, and others are transitioning towards electrifying their fleets to enhance their economic gains. Commercial EV deployments have yielded substantial data-based evidence, demonstrating the significant cost savings and return on investments in EVs.

Businesses have recognised the superior Total Cost of Ownership (TCO) as a significant advantage for EV adoption. With rising fuel costs, electric three-wheelers have become more appealing, offering potential savings of up to 70 per cent on operational costs. Early adopters initially favoured Electric Vehicles for their environmental benefits, but most fleet operators now prefer them for their superior economics.

The superior economics of EVs are compelling fleet operators towards electric vehicles over traditional internal combustion engine (ICE) vehicles. The three-wheeler electric vehicles have overcome the cost barriers, and the emerging total cost of ownership (TCO) advantage of four-wheeler LCVs and electric trucks is rapidly driving the electrification of cargo fleets in India.

EV operators are realising substantial TCO benefits, which have become particularly prominent due to the skyrocketing fuel costs. By leveraging EVs, they can save significantly on fuel expenses and vehicle maintenance costs, while also enjoying enhanced residual value. Furthermore, the intelligent features of EV technology enable operators to optimise their load and route planning, further enhancing their bottom line.

Moreover, the Indian Government has outlined a transparent federal plan to reduce the logistics costs in the country and improve competitiveness as a globally recognised manufacturing hub. The transportation cost constitutes a large portion of these logistics costs, which have led to a growing disparity in TCO between ICE vehicles and EVs. Customers are now transitioning towards electric LCVs and trucks for last-mile logistics, and are demanding EV fleet deployments for first-mile and mid-mile transportation requirements.

The adoption of commercial EVs also reduces maintenance costs, as these vehicles have fewer moving parts than traditional vehicles, a longer lifespan, and features such as regenerative braking systems that help cut down brake repair costs. Additionally, commercial EV adoption also offers an opportunity to leverage renewable energy sources to power on-site EV charging infrastructure, which can help businesses gain a sustainable cost advantage. The EVs also depreciate less and have a higher resale value than conventional vehicles, allowing business owners to recuperate a substantial amount of their initial investment.

It's important to note that not all EV players offer the same cost advantage. There is a variability of TCO between different electric vehicles and providers based on three over-arching factors - advanced technology capabilities, superior customer service resulting in lower downtimes, and superior vehicle designs.

The latest technological advancements, such as artificial intelligence (AI)-based intelligent electric vehicle (EV) systems, advanced telematics technology, sensors, and augmented reality (AR), have revolutionised the transportation industry. With these cutting-edge tools, cargo load optimisation and route optimisation have become more efficient, while end-point recognition has become more accurate, and driver safety has been significantly improved. The integration of these technologies has brought about a new era of innovation and efficiency in the transportation sector, making it easier than ever before to transport goods safely and seamlessly.

Production efficiencies stemming from smart manufacturing practices lead to economies of scale that effectively decrease the per-unit production cost. Streamlining manufacturing processes and placing emphasis on diminished component requirements involved in building electric vehicles contribute to enhanced reliability and diminished maintenance expenses.

Superior vehicle designs incorporate battery systems that are both efficient and lighter in weight, which make up a substantial portion of an electric vehicle's overall cost. To further improve upon this, manufacturers of electric vehicles are implementing the use of lightweight, streamlined aerodynamic designs that positively impact fuel efficiency, prolong battery life, and ultimately result in cost savings through reduced charging times.

As EV technology matures, the upfront cost differential between an electric vehicle and a traditional gas-powered vehicle continues to reduce, making the economics of deploying electric vehicles inevitable when it comes to commercial fleet adoption.

(The author is the Managing Director & Co-promoter at Etrio)

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