Report
Total cost of ownership parity between battery-electric trucks and diesel trucks in India
Executive summary
Medium- and heavy-duty trucks play a critical role in India’s economy. They are also a major source of greenhouse gas emissions. While they constitute only 3% of the on-road vehicle fleet in India, they contribute 44% road transport sector of well-to-wheel CO2 emissions. Looking ahead, the adoption of zero-emission trucks—including battery electric trucks (BETs) and fuel-cell electric trucks—is critical to India’s pursuit of its Paris Agreement commitments and to achieving its goal of net-zero emissions by 2070. While the Government of India has provided growing support for the electrification of other vehicle segments, the truck segment could benefit from additional policy support in the form of fuel-economy regulations and incentives.
The zero-emission truck market in India remains at an early stage. A handful of manufacturers have introduced BET models and several plans to pilot BETs, but electric vehicle (EV) penetration among trucks continues to lag that of other segments. As India transitions to electric trucks, assessing total cost of ownership (TCO)—which considers both upfront and operational costs—will be critical to evaluate the cost-effectiveness of BETs and design policies to support their widespread adoption.
In this context, this study compares the TCO of internal combustion engine (ICE) diesel trucks and BETs in four segments—the 12-tonne, 16-tonne, 28-tonne and 42-tonne rigid truck—that have accounted for approximately 70% of the Indian truck market in recent years. Drawing on primary data and interviews with seven fleet operators on use cases, driving patterns, and operating costs, we use vehicle simulation tools to estimate the fuel consumption of diesel trucks and BETs operating on test cycles developed using real-world activity and we project vehicle fuel economy improvement over time, considering expected technology development. Additionally, we use primary cost data on EV components obtained from an EY Parthenon study commissioned by the International Council on Clean Transportation to determine the upfront costs of BETs in India and project them through 2040.
Figure A. TCO projections and cost parity of all four truck models
Key findings
- Based on bottom-up cost estimation, the upfront costs of BETs are 4–6 times those of diesel trucks in model year (MY) 2023 and are projected to fall by MY 2040 to 1.2–1.4 times the cost for the 12-tonne, 16-tonne, and 28-tonne trucks and 2 times the cost for 42-tonne trucks. This estimated cost gap in MY 2023 is higher than that for BETs currently deployed in India, which are 2–3 times more expensive than diesel counterparts upfront. Deployed BETs are primarily used in pilot applications with a more limited range than the diverse operations in which diesel trucks are currently employed. The BETs analyzed in this report, therefore, more accurately represent real-world operations and performance demands. Declining battery prices and fuel economy improvements that lead to smaller battery sizes, are the primary factors contributing to the projected gradual decline in the upfront cost of BETs; incremental costs associated with the deployment of fuel economy improvement technologies increase the upfront cost of diesel trucks over time.
- BETs will reach TCO parity with diesel trucks in this decade without direct incentives, but policy support can help drive down costs. The expected decline in battery costs (65% between 2023 and 2040), coupled with lower energy costs due to fuel economy improvements, will allow BETs to reach TCO parity with diesel trucks within the next 5 years. For high volume and low weight applications, where payload impact is irrelevant, TCO parity can be achieved by 2027. However, a robust policy ecosystem including fuel economy regulations and incentives are critical to driving down costs.
- Stringent fuel consumption regulations can encourage the adoption of BETs and improve their cost-effectiveness compared to diesel trucks. Such regulations would necessitate the deployment of fuel consumption improvement technologies that could increase the upfront cost of diesel trucks by 2030 (by 62%–89% for 12-tonne, 16-tonne, and 28-tonne trucks) compared to the business-as-usual scenario. As a result, the TCO savings offered by BETs in 2030 increase from a projected 7%–12% in a business-as-usual scenario to 20%–26% in a scenario with stringent fuel consumption regulations.
- Incentives such as purchase subsidies, interest rate subventions, road tax and toll waivers, and gross vehicle weight (GVW) relaxation for BETs result in TCO parity between MY 2023 BETs and diesel trucks in the 12-tonne, 16-tonne, and 28-tonne segments and nearly close the TCO gap for 42-tonne trucks. We consider a purchase subsidy of ₹20,000/kWh (capped at ₹50 lakhs), equal to that provided for the purchase of electric buses under the second phase of the Faster Adoption and Manufacturing of Electric Vehicles (FAME) scheme. Additionally, we consider a 5% interest rate subvention, in line with Delhi’s state-level EV policy; a 100% road tax waiver, as adopted by most Indian states for EVs; a 100% toll waiver, as implemented in Germany; and a GVW relaxation of 2 tonnes, in line with European Union regulations. These incentives substantially bridge the gap in TCO between diesel trucks and BETs.
- By MY 2030, BETs are estimated to have a lower TCO than their diesel counterparts for all daily driving distances from 200–700 km; however, a robust network of charging infrastructure would maximize the TCO savings of BETs. The battery electric powertrain is about 65% more fuel efficient than the diesel powertrain. Accordingly, BET energy costs are much lower than those of diesel trucks. While higher daily driving range requirements lead to higher battery design ranges and upfront costs, they are offset by lower energy expenses. Fuel cost is a major contributor to the TCO of diesel trucks; higher driving ranges increase those expenses, resulting in a higher TCO for diesel trucks relative to BETs. The TCO savings for BETs can be maximized by the optimal sizing of batteries such that battery range is smaller than daily travel demand and en-route charging meets additional distance demand.
Figure B. Impact of stringent fuel consumption regulation on TCO
Policy recommendations
- To promote BET uptake, the government could consider introducing stringent fuel consumption regulations, which could significantly increase the cost-effectiveness of BETs. Deploying fuel efficient technologies to meet an ambitious fuel consumption regulatory scenario is projected to substantially increase the upfront cost of diesel trucks, by 62%–89% for 12-tonne, 16-tonne, and 28-tonne diesel trucks and 27% for the 42-tonne truck in MY 2030. Thus, on a TCO basis, while the diesel trucks in MY 2030 benefit from lower fuel costs due to fuel economy improvement technologies, the cost of these incremental technologies offset any potential fuel cost savings. As a result, the TCO of the BETs is even more attractive, 20%–37% lower depending on the truck type compared to 19%–29% lower assuming business-as-usual fuel economy improvement.
- Existing national and sub-national incentives could be extended to BETs to lower the TCO of BETs compared to diesel trucks. Both national and state-level EV policies in India have focused on light-duty vehicles and buses. Targeting medium- and heavy-duty trucks with a ₹20,000/kWh purchase subsidy, interest rate subvention, road-tax waiver, and an additional toll fee waiver can reduce the TCO in MY 2023 by 25%–37%, bridging the gap in the TCO of BETs and diesel trucks substantially.
- Gross vehicle weight regulations could be relaxed for BETs (as they are in other markets) to help reduce the TCO gap between BETs and diesel trucks. BETs in model year 2023 face a payload penalty of 15%–20%. If India relaxes GVW regulations for BETs by 2 tonnes, in line with policies in the EU, we find this payload loss is eliminated in the 12-tonne and 16-tonne BETs and reduces to 11%–13% for the 28-tonne and 42-tonne BETs. This positively impacts TCO, shifting the TCO parity year forward from 2028–2030 to 2026–2028.
- Enhancing the EV charging infrastructure network would help promote BETs. We find that the TCO of BETs that rely on en-route charging is lower than the TCO of BETs with batteries designed to meet full daily travel demand. The impact is significant, such that the TCO parity year can be shifted up by 2–4 years across the different truck segments analyzed. The Ministry of Power has identified 25 national highways and expressways to be prioritized for setting up charging infrastructure (MoP, 2022). Additionally, it has also provided guidelines on power levels, standards, and distance between two charging stations for HDVs. The Ministry of Heavy Industries, meanwhile, has further provided ₹1,000 crore of funds to set up about 10,000 EV chargers in the country (Narde, 2023). Continuing to pursue these efforts, with the aim of ensuring adequate availability of high-power DC fast chargers suited for electric HDVs along freight corridors, could help lower the TCO of BETs for a broader range of applications and thereby spur the development of India’s BET ecosystem.
- States could provide preferential electricity rates for users and utilities to help maintain lower levelized costs of charging for users. Many states have introduced preferential electricity rates for electricity supply to EV chargers, ranging between ₹4/kWh and ₹9kWh. Lower electricity rates can help shift the TCO parity year sooner. This highlights that states can play an important role in closing TCO gaps between BETs and diesel trucks and helping to kickstart India’s BET transition.
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