Amazon India had plans to add 10,000 EVs to its delivery fleet by 2025. In December 2024, it achieved this target a year ahead of schedule. Amazon’s decision was in response to the Delhi government’s Delhi Motor Vehicle Aggregator and Delivery Service Provider Scheme, 2023, which set targets for fleet electrification in the state.
Other last mile delivery fleet aggregators are also rapidly advancing towards electrification through voluntary initiatives close on the heels of the extension of the central government’s purchase subsidies. Zomato’s all-electric ‘large order fleet’ has caught the attention of analysts and customers alike. Flipkart has announced the intention to convert 100 per cent of its delivery fleet to electric by 2030.
While electric vehicles have consumer-friendly features like noiseless driving, interactive dashboards with easy-to-navigate UI and can be charged at lower prices than the cost of refuelling ICE vehicles, their ultimate function must not be forgotten.
Air pollution has become a lethal menace not just in India but across the busiest of global cities. The Delhi Aggregator policy is meant to address exactly this. In the drive for fleet renewal across the country, last mile delivery fleets can be the low hanging fruit — they can be easy to start with.
Delhi government’s initiative for fleet renewal, though commendable, as it has preceded the centre in fleet aggregator electrification drive, has several issues that need to be addressed. The targets are too stiff and do not take the ground realities into account.
The scheme advises the aggregators to on-board EVs as a certain percentage of their new fleet over a period of time. This doesn’t consider concerns around driver / EV availability for large-scale operators like Ola, Uber and Zomato where most of the driver on-boarding is voluntary.
There may not be adequate number of EVs available in the market to meet the government-advised targets for these companies. Thus, government-mandated fleet electrification targets, with ambitions to level the playing field and attend to the urgency of fleet renewal in the country may have a missing link with the industry’s realities.
Broadly, there are two kinds of fleet aggregators in India: Ride hailing services and last-mile goods delivery services.
The Union Ministry of Road Transport and Highways released a very concise yet complete set of regulations to govern the operational and other ancillary activities of fleet aggregators in India. Promulgated in 2020, these guidelines set out rules for aggregator license issuance, driver verification, fare regulation and driver and passenger safety, among other essential aspects.
However, it did not spell out any fleet electrification targets in pursuance of the Prime Minister’s Net Zero commitment. In contrast to this, Delhi government is the first state in the country which assigns vehicle electrification targets to fleet aggregators.
However, last-mile delivery fleets also have their own challenges and issues. In general, there are two fleet aggregator business models: either the aggregator is a platform owner, on-boarding independent delivery partners, or the aggregator is a fleet owner, employing driver partners. In the first case, the driver partners invest their own capital to buy the vehicle, thereby requiring financial support in many cases.
A financing institution like Revfin offers up to 30 per cent (annualised reducing rate) or 17 per cent (flat interest rate) and the borrowers can choose a loan tenure ranging from six months to 60 months to meet their financial needs. This is expensive financing as compared to less risky sectors like housing and education.
In the second case, where driver partners are employed by the fleet aggregator, multi-sector funding is available, including from banks, non-banking financial companies, venture capital funding, green bonds and multilateral banks. Indian domestic banks have limited legacy data to ascertain residual value of EVs which negatively impacts their lending decisions to EVs or to fleet aggregators.
“Traditional underwriting processes are not conducive to gig-workers and new age fleet operators with limited or no formal credit history,” noted a 2022 World Economic Forum (WEF) report authored in collaboration with NITI Aayog.
The same report goes on to offer a solution to this dilemma, “to de-risk lending and cost of finance for large fleets, a tri-partite lending agreement between lenders, OEMs and fleet asset owners can spread the risk across parties.”
Additionally, the report suggests that to address the high perceived risk associated with EVs, OEMs can set initial expectations on residual value of used vehicles through buy-back programmes or battery and product warrantees.
Another challenge with large-scale deployment of e-delivery fleets is the sparse charging infrastructure in India. Even though Delhi, with ambitions of becoming the EV capital of India, has more than 4,000 public chargers, it is still insufficient to serve the growing number of E-2W and E-3W in the state.
“An ambitious policy to support large-scale deployment of charging and battery swapping infrastructure that creates stable cash-flows and attracts patient capital can be a game-changer,” according to the above-mentioned WEF report, co-authored with NITI Aayog.