Electric vehicles are better suited for the commercial segment than for passenger transport, according to Mahesh Babu S, chief executive officer of Switch Mobility, the electric vehicle arm of Ashok Leyland. In a wide-ranging interview with TNIE, he talks about payment security in e-bus procurement, policy continuity, foreign markets, raising capital and much more. Excerpts:
Is higher upfront cost and lack of financing hindering electric commercial vehicle sales?
While the upfront cost of light commercial vehicles (LCVs) and buses is 1.5X and 3X, respectively, higher than diesel counterparts, a driver/ operator saves `5,000-8,000 per month which is a substantial amount. It makes more sense to adopt electric vehicles in the commercial segment than the passenger vehicles segment because you’re not going to drive 200 km a day.
Does Switch Mobility struggle to find investments?
We’re looking for the right partner, who will jointly work with us to scale up the business. When we started, Covid happened. Then there was the (Russia-Ukraine) war, followed by higher interest rates, leaving the market conditions unfavourable. Our chairman Dheeraj Hinduja announced Ashok Leyland will invest because this business is the future of the group and it will continue to invest in Switch.
Why is e-bus procurement for State Transport Undertakings (STUs) not taking off?
Globally, buses are purchased from OEMs and operators who run at a pay-per-km model. In India, we have a gross cost contract model where the OEMs have to invest in buses, drivers, charging infrastructure, and maintenance and then collect on a per-km basis. The challenge here is finance. The government aims to introduce 50,000 e-buses in five years. This needs at least `10,000 crore financing from banks and it is going to add up to 12 years. This will be challenging unless the government intervenes. It needs to be resolved.
How do you propose we solve this?
Our suggestion is that the government subsidise buying buses to de-risk the capex and hand over operations to external operators backed up by OEMs. We have represented this to the government and they are now coming up with a payment security mechanism, which is very critical for adoption. The fact that EV operational cost is `25 cheaper should be the incentive for STUs (state transport undertakings) to move away from diesel.
Amid talks of FAMEIII, what are the industry’s expectations in terms of policy?
We have been asking for a consistent, long-term policy. If you have a five-year policy, then the industry investment into that technology will be consistent because there is a guarantee that there will be business for five years.
How can we shift heavy commercial vehicles to EV?
Electric, hydrogen fuel cells and ICE (internal combustion engine) are available, but there is no answer for electrification of trucks.