5 challenges to decarbonizing India’s freight economy (and how to solve them)

Freight vehicles represent 30-35% of total diesel consumption in India and are responsible for 45% of transport-related pollution in the country. This sector’s electrification would significantly decrease the industry’s carbon footprint.

In this article, Inderveer Singh – Founder & CEO of EVage, discusses the challenges in the electrification of India’s urban freight sector and steps that can be taken to overcome those challenges.

The two sides of India’s urban freight sector

Transporting commercial goods across urban environments is the backbone of the local economy. As India’s economy rises on the global stage, the urban freight sector becomes increasingly crucial. The need for urban freight is set to increase by 140% within this decade, and current logistical infrastructure cannot meet this demand. The BloombergNEF Zero Emission Vehicle Factbook 2022 indicates that 3.8% of current global oil demand was reduced due to the global proliferation of EVs. However, current adoption trends indicate that emerging countries like India will continue to contribute the majority share of carbon emissions, even a decade from now.

The urban freight sector relies heavily on road transportation, which accounts for 71% of urban freight. Bengaluru’s blossoming urban economy is a strong example of the need for efficient urban shipment. With post-pandemic numbers showing significant growth in logistical vehicles, India’s IT hub is all set to be one of the world’s most rapidly growing economies. 

Despite the promise of a booming urban economy, the urban freight sector faces a critical challenge. Freight vehicles represent 30-35% of total diesel consumption in India and contribute to massive air pollution. Carbon emissions from this sector will exceed 1,200 million tons by 2050, a dizzying number. The Deloitte Manufacturing Report 2022 states that 95% of manufacturing decision-makers expect their firms to increase their investment in sustainability measures. Commercial logistics would be an excellent place to start.

The urban freight sector is responsible for 45% of transport-related pollution in the country, and there is an urgent need to consider the environmental impacts of the movement. One option has become the clear path forward- electric vehicles. While commonly considered for personal and public use, the urban freight sector’s electrification would significantly impact and efficiently decrease the industry’s carbon footprint. Moreover, setting up charging stations and making EVs priced at scale could soften the blow on India’s environment due to its economic growth. 

Five critical challenges in electrifying urban freight in India

The global conversation about the potential of EVs grows louder by the day, with major automotive players investing in their research and development. However, while EVs are a promising solution, there are a few critical challenges to this strategy, primarily due to the current state of the Indian urban freight sector. Here are a few of the main impediments to the adoption of EV-led transportation.

1. Insufficient data about urban freight movement

A clear statistical sense of the sector is required to understand the need for EVs and a roadmap to include them in urban freight transport. The lack of data on the exact number of urban freight vehicles, routes, and cargo creates hurdles in decarbonizing the freight sector. This is a result of the primarily privatized players in the industry without a single overarching authority. To effectively include EVs, work must be done nationally to comprehend the sector better.

2. Predominantly unorganized nature of the sector

The urban freight sector is dynamic and constantly evolving, with multiple players distributing cargo. Extensive efforts to research and understand the sector’s complexities are required to make sense of its unorganized nature. Since most vehicles in the urban freight sector are privately owned by the drivers and are primarily unorganized, we need a more targeted approach than a broad strategy to electrify urban freight mobility. 

3. Limited financing for e-freight vehicles 

Green financing for electric two-wheelers and cars has accelerated significantly. Despite this, most electrification efforts are directed towards vehicles for individual use and public transport, such as buses. However, financing alternatives for e-freight vehicles are severely constrained due to a lack of knowledge on the performance and viability of EVs in the freight transportation sector. The lack of awareness surrounding the environmental impact of the urban freight sector hampers decarbonization. There must be a general desire to invest in the e-freight space to create cost-effective options.

4. Technological barriers to electrification 

While EVs have met with success in other nations, the technology to produce them at scale remains a barrier. Building from scratch to meet 4W LCV criteria is a different challenge but more impactful than modifying ICE-built platforms. The ideal battery parameters, potential EV ranges, and anticipated performance need to be streamlined as there are still a lot of studies on the technologies required to power e-freight vehicles. Intensive work must be done to understand the on-ground requirements to support the e-freight movement, from the location of charging stations to the financial needs of infrastructure.

5. Need for better regulations and infrastructure 

We need more clarification on the regulations and testing for e-freight vehicles. Policy measures must be put in place to incentivize the shift towards e-freight, mainly because of the private nature of the sector. Regulations must be put in place to standardize the use of EVs to avoid discrepancies across the board. Incentives for EV adoption for urban freight movement and more accessible charging infrastructure will also be helpful.

What can we do to overcome these bottlenecks?

Despite these obstacles, prompt action can aid in adopting electric infrastructure for urban freight mobility and a reduced carbon footprint. The urgent need to decrease air pollution cannot be shunned and must be met head-on. Below are a few vital steps in the direction of decarbonization. 

1. Data streamlining by a single authority to get a comprehensive structure of the sector.

2. Financial incentives by the government to encourage private players to adopt EVs rather than diesel-based vehicles.

3. Providing cost-effective EV options to make their large-scale use more affordable and accessible. Pitchbooks Q3 2022 Mobility Tech Report highlights the highest VC activity in the Electric Vehicle OEM and last-mile delivery segments, encouraging signs for large fleet manufacturers hungry for innovative and cost-effective solutions.

4. Ensuring small loans to fleet owners supported by the government to soften the risk of electrification.

5. Clear regulations on the technology and infrastructure for EVs to provide clarity and uniformly adopt decarbonization.

6. Implementing a national scrapping policy spotlighting replacement of EVs and retrofitting.

7. Generating enthusiasm for public and private partnerships to tackle electrification collaboratively.

Rocky Mountain Institute (RMI) has highlighted logistics cost savings as a key highlight in their Zero Emission Truck Deployment Report 2022. In India, the cost of logistics as a share of GDP is roughly 14%. Transportation and fuels account for the majority portion of these spends and can be lowered by more than 17% over the lifetime value of the vehicle simply by shifting to EV trucks. 

While the obstacles to electrification seem intimidating, they are by no means insurmountable. A shift to e-freights is essential if India wishes to decrease the negative environmental impact and achieve its decarbonization goals by 2050. Given the high-priority nature of the issue, collaborative work must be undertaken to battle air pollution and enact positive change.