Units Economic in Electric vehicles.

Units Economic in Electric vehicles.

The only reason electric vehicles (EVs) are not yet widely used is economics, despite their superiority to internal combustion engine (ICE) vehicles. Compared to ICE vehicles, EVs were significantly more expensive for comparable performance. The cost of an electric vehicle’s battery has dropped by 85% in the past decade, and it accounts for up to 35% of the cost of a vehicle. The initial cost of EVs is still higher than that of ICE vehicles at the current battery prices, but in many use cases, the Total Cost of Ownership (TCO) is lower and close to breakeven.

India is an interesting business sector for EVs. In India, 78% of the market for ICE four-wheelers (4W) and 85% of the market for ICE two-wheelers (2W) are concentrated at prices below INR 1 million and INR 90,000, respectively. At the current battery prices, it is difficult to offer an electric vehicle with comparable performance in these price ranges. While the forthright expense of EVs is higher, their working expense is essentially lower. As a result, an important aspect of the “EV purchase decision” is the Total Cost of Ownership, or TCO.

The TCO equation also changes significantly for each vehicle category (two-wheel, three-wheel, private, and commercial vehicles) and end use case (retail, commercial).

Two Wheelers

The E-2W industry in India can be broadly divided into three groups: low speed (up to 25 kilometers per hour), medium speed (under 40 kilometers per hour), and high speed (up to 60 kilometers per hour). Today, the majority of the market is concentrated in the low- and medium-speed categories due to their mass-market price points and favorable TCO comparison to the high-speed category.

For a retail use case of 20 kilometers per day, the TCO of EVs for low/medium speed scooters is 25-40% lower than that of the entry-level ICE 2Ws. Excluding the subsidy benefit, high-speed e-scooters and e-motorcycles, on the other hand, have a TCO that is 15-20% higher than that of mid-range (125 CC) ICE 2Ws. At approximately 40 kilometers per day, a high-speed e-2W reaches TCO breakeven.

It makes more financial sense to use e-2Ws for commercial purposes. At 60 kilometers per day, the TCO of an e-2W is 10-40% lower (depending on speed specifications). Today, most commercial customers buy used cars. Due to the extremely low cost of fuel and upkeep, a medium speed e-2W still offers a TCO that is 15% lower than that of an older ICE 2W.


E-Ricks have perfectly accommodated the need for inexpensive connectivity in the last mile. In India, there are close to 0.7 million E-Ricks on the market. Currently, lead acid batteries make up 80 percent of this unorganized market. The shift to Li-particle is inescapable and is starting to occur. In terms of total cost of ownership, Li-ion-based E-Ricks are comparable to Lead Acid variants. TCO for Li-ion variants is 10% lower than that of lead acid ones thanks to the FAME-II subsidy. This benefit in TCO does not take into account other advantages of Li-ion, such as a shorter charging time and minimal range deterioration over battery life (both of which reduce the amount of downtime for E-Rick drivers during the day).


Compared to ICE vehicles, E-Autos have a larger battery (8 kWh) and are therefore more expensive up front. However, an E-Auto has a TCO that is approximately 15% lower than that of an ICE Auto for an average daily use case of 100 kilometers. Even without taking into account the FAME-II subsidy benefit, the total cost of ownership (TCO) of an e-Auto is lower than that of an ICE Auto powered by CNG.

Passenger Cars

A good-performing electric car in the sub-INR 1 million price range, which is the core of the current market, cannot be offered at the current battery prices. In this manner, excepting the early EV models (Verito and Tigor), electric vehicles in India have been sent off in mid-premium cost range (Nexon, Kona, ZS). These models don’t have a lower total cost of ownership (TCO) despite the higher price. TCO at ZS/Kona is approximately 10% higher than that at ICE. With just 2% more TCO than its ICE counterpart, Nexon is closer to TCO breakeven. In the retail use case, lower asset utilization (30 kilometers per day) is the primary contributor to the negative TCO.

TCO advantages are provided by the e-4Ws commercial use case. The TCO of an e-4W is 12 percent lower than that of an ICE 4W for an average daily use case of 120 kilometers. This makes the e-4W TCO even more appealing in cities with a lot of traffic because, unlike an ICE, which loses mileage when the engine is idle in traffic, an EV can save energy through regenerative breaking.

Commercial Vehicles

Due solely to a push from policymakers, EV adoption in the commercial sector is expected to be led by buses. TCO parity for buses is still a long way off because of the extremely large batteries (200 kWh). A city e-bus’ total cost of ownership (TCO) is 40% higher than that of a diesel-powered bus. This difference in TCO is covered by the FAME-II subsidy, allowing it to break even with its ICE counterpart.

EVs have begun to make sense in the Indian market in terms of TCO. In a recent Avendus report, the following: In our book, “Electric Vehicles: Charging Towards a Bright Future,” we provide a thorough analysis of the EV market opportunity in India. To review the in-depth TCO calculations as well as other aspects of the EV industry in India and around the world, you can download the report from this page.

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