Urban freight transport is of crucial importance to the economic vitality of urban areas, providing both urban residents and businesses the necessary goods and services. Today, close to 71 percent of the freight transported in the country is completed on road. However, although it provides necessary commodities and services, freight transportation has a negative impact on metropolitan areas. Each of these freight operations generates vehicle travel, which causes air pollution, congestion, traffic accidents, and many other problems for urban transportation systems.
To address these issues and forge a sustainable way forward, WRI India brought together more than 20 leading commercial electric vehicle (EV) manufacturers, logistics operators, financing experts, and practitioners. The stakeholders discussed these issues and deliberated upon four critical themes regarding the electrification of the commercial freight sector:
- Lack of data on urban freight movement: As urban logistics activities are mostly managed by the private sector, data on freight movement in the city, which are required to improve the efficiency and decarbonization of the freight sector, are lacking.
- Policy and regulatory gaps: Although FAME (Faster Adoption and Manufacturing of Hybrid & Electric Vehicles) 1 & 2 provide incentives to promote personal EVs and buses, commercial freight vehicles are currently not under their ambit. Regulatory mechanisms and transition pathways have not been defined in states that have a limited focus on this sector.
- Technological hurdles: In addition to challenges related to the weight of the battery required to support large payloads and long-distance travel, the topography, climate, temperature, and road conditions also affect the performance of electric freight (e-freight) vehicles.
- Lack of financing options: Owing to the lack of information on the lifecycle, performance, and viability of e-freight vehicles, this sector has extremely limited financing options, with companies having to rely on investor capital or customized financing packages with non-banking financing companies (NBFCs).
The stakeholders, representing the commercial vehicle ecosystem, deliberated on the opportunities and challenges in scaling up commercial freight electrification in the country. Some of the key insights and recommendations provided by the panelists were the following:
- Provide policy and regulatory support to accelerate the transition of road freight.
- Evolve new technologies, standardize processes, and forge mutual collaborations among various stakeholders to usher in decarbonization strategies for the sector.
- Institute production-linked subsidies, which will cut costs and encourage more manufacturers and business enterprises to switch to EVs.
- Develop viable business models and financing structures to enable smaller lenders to join the market for electrification of fleets.
- Identify specific use cases to showcase the viability of electric freight vehicles in Indian conditions.