The report anticipates that government subsidies and advancing technologies will contribute to further reducing the capital costs associated with electric buses
ICRA predicts a robust demand for electric buses, driven by substantial operational savings compared to conventional diesel buses. The agency estimates that electric buses will make up 11–13 percent of new bus sales by the fiscal year 2025.
The report anticipates that government subsidies and advancing technologies will contribute to further reducing the capital costs associated with electric buses. The electric bus segment has already demonstrated progress, with volumes and penetration levels improving consistently to reach 7 percent in the fiscal year 2023.
ICRA acknowledges the steady progress made towards achieving electric bus deployment targets under the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) scheme, with expectations for increased momentum until the scheme expires in March 2024.
The government's efforts to encourage electric bus adoption include bid aggregation under tenders from Convergence Energy Services Limited (CESL). While the first two tenders saw healthy interest and participation from original equipment manufacturers (OEMs), the third tender faced limited participation due to concerns about a lack of payment security mechanisms and a proposed dry lease model of operation.
ICRA emphasises the importance of addressing OEM concerns related to the implementation of payment security mechanisms and the availability of long-term funding avenues to sustain the pace of electrification in the country.
The government's recent announcement of the PM e-Bus Sewa scheme, aiming to provide 10,000 electric buses to 169 cities under a public-private partnership (PPP) model, is expected to support electric bus volumes as subsidies gradually phase out with the expiration of the FAME II scheme in March 2024.