Paving the Way For Electric Mobility In Logistics

The math is not as simple as it seems, there are a few barriers in adoption of electric vehicles in logistics

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As is true with any other industry, transportation and logistics industry has gone through a series of disruptions and transformations. With a lot of new entrants and startups rejigging the industry with innovative business models backed by technology, data and automation has repeatedly challenged the status quo and old-school methodologies of the logistics industry.

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In addition to the new business models, shopping trends and customer requirements have also significantly evolved and contributed in disrupting logistics. From them travelling to the market, to now just click, tap and swipe to get items home delivered in lesser than 10 minutes have also majorly contributed to the paradigm shifts in the industry.

Logistics businesses have always heavily relied on internal combustion-based vehicles due to legacy. With most of the countries aiming for carbon neutrality in the near future, majority of supply chain organizations and businesses have pledged to decarbonize the miles covered in delivering their goods.

Internationally and to some extent in India, while there has been progress in autonomous vehicle-based or drone-based deliveries, embracing electric vehicles is the easiest, proven and the swiftest way to achieve the decarbonization goals in logistics industry. Furthermore, from economics' perspective, expenses per mile, lower maintenance and operational spends are far more cost-effective in electric vehicles than in operating internal combustion engine vehicles.

The math is not as simple as it seems, there are a few barriers in adoption of electric vehicles in logistics.

First, the charging infrastructure for fleets. Installing adequate, suitable and reliable charging stations for electrifying the fleet is a key component. While charge point operators install such charging stations, high costs of electricity topped up with CPO margins negates any fuel saving and low vehicle maintenance costs.

This challenge is followed by vehicle downtime and utilization. Each vehicle needs charging twice a day: overnight charging followed by mid-day charging. This cumulates to around 6-7 hours of vehicle downtime and the real cost of re-fueling (electricity cost + parking fees + 30 per cent vehicle downtime + driver under-utilization during the charging hours) is actually more than what actually meets the eye.

Another major barrier in EV adoption is the right product-market-fit. Depending on the transportation models (first mile/mid mile/last mile/hyperlocal), vehicle categories (2/3/4 wheeler), type of loads (cartons, totes, frozen food items), range of distribution diameter, at present, supply chain businesses lack options in delivery vehicles. Vehicles meeting all the parameters with respect to fast charging, bigger battery size and higher travelling range, equivalent and existing (ICE) vehicle's loading capacity, expensive and higher cost of ownership are few product related constraints hampering scale at speed in logistics industry.

Irrespective of all the challenges and hurdles in operating electric vehicle fleets, in addition to our initial diffidence to embrace and adopt any new technology, the future of logistics is alternate fuels: largely driven by electric vehicles. Technology continues to improve, shopping patterns continue to evolve, new entrants continue to disrupt, decarbonization continues to be pledged, logistics companies, largely the incumbents, will quickly have to shed the legacy of internal combustion vehicles and pivot to electric vehicle fleets if they want to meet the challenging, digital expectations of the customers, remain profitable and generate growth.

Awareness has also played a significant part in a sense that whenever news about hike in fossil fuel makes the round, adoption of electric vehicles gets discussed in every household. This goes on to indicate that we can expect a very strong demand in electric 3-wheeler, since India as a country requires faster and cheaper option of public and goods transport medium. One in every 115 vehicles on the roads are electric vehicles, with most of them being 2 wheelers and 3 wheelers. Around 79 per cent of the electric vehicles sold are electric 3 wheelers and manufacturers are betting big on this segment encouraged by the rapid growth. Recognized as the fastest growing segment, there is a huge opportunity for mass adoption of electric vehicles in transportation and logistics industry. Many companies in e-commerce, pharma, FMCG, textiles, retail and other utility segments such as dairy, poultry and gas are preferring 3-wheelers as a last mile connectivity solution as they offer excellent maneuverability at affordable price. Moreover, they are very keen to convert their last-mile delivery fleet to electric due to their added benefits.

While the EVs are not mainstream yet and fleet EV adoption is still in the early stages, but the change is imminent. With the right product-market-fit, supported by government policies and regulatory announcements, electric vehicles are geared up for more widespread adoption over the next 5 to 10 years in the industry.