Understanding the Economics of Lease Models for Electric Buses and Trucks in India

Authored by Ms Alpna Jain, Co-Founder and Chief Business Officer, Drivn.

Electric vehicles are becoming a practical choice on Indian roads. We are already seeing electric buses in cities and EVs ferrying goods in last-mile deliveries. The momentum is real: electrification of commercial transport is happening. But if electric buses and trucks are going to move from pilots and experiments to something that genuinely reshapes transport economics in India, the challenge isn’t technology, it’s money.

At first glance, electric commercial vehicles present a compelling financial proposition. Compared to their diesel counterparts, they offer significantly lower running costs, simpler maintenance requirements, and the added advantage of reduced emissions, an important consideration in a country working to improve cost efficiencies.

For instance, while a diesel bus may cost around ₹50 per kilometre to operate, a comparable electric bus can bring this down to approximately ₹35 per kilometre on a like-for-like basis, translating into nearly 30% savings in operating costs. These savings are not merely incremental—they play a critical role in offsetting the higher upfront capital cost of electric vehicles over their lifecycle.

A large chunk of the upfront cost is the battery. Even after dramatic price drops over the last decade, it still accounts for roughly a third to almost half of the total vehicle cost. That upfront capital is a real barrier. Operators know the long-term savings are attractive, but they also know the risks: how long will the batteries really last? What will they be worth in a few years? These questions aren’t abstract; they affect cash flow, financing, and confidence.

This is why leasing must stop being treated as a niche option and become a cornerstone of EV adoption in commercial transport. Ownership-heavy models lock in high upfront costs and leave operators exposed to residual value risk. Leasing, by contrast, realigns economics with usage and spreads risk in ways that make electric fleets viable from day one.

Today, operators are having trouble accessing traditional financing for electric commercial vehicles. Banks and NBFCs are hesitant to underwrite these assets due to uncertainties surrounding the new technology. Because these large institutions are slow to adapt, they offer inflexible terms, demand higher upfront deposits, and offer much shorter loan tenures. Since an electric bus is already significantly more expensive than its internal combustion engine (ICE) counterpart, these stringent financing requirements drastically inflate the upfront capital required. Furthermore, shorter loan tenures result in much higher periodic payments, wiping out operational savings and making it unprofitable for fleet operators to operate the vehicles.

To make the comparison more tangible, consider a standard electric passenger bus operating on a fixed route with predictable utilisation of 15,000 km per month. Assume the operator earns ₹75/km, implying a monthly revenue of ₹11.25 lakh, and incurs operating costs of ₹35/km (towards maintenance, fuel, staff, permits, tolls and taxes), implying a monthly operating cost of ₹5.25 lakh.

The resulting EBITDA is ₹6.00 lakh per month. Traditional debt financing for EVs is typically limited to 4–5 years, driven by lenders’ caution about technology performance and residual value. For a bus costing ₹1.50 crore, financed at 80:20 debt-equity with debt priced at ~10.5%, this translates into a monthly EMI of approximately ₹2.7 lakh—a heavy fixed burden that eats into otherwise attractive operating margins.

Leasing structures, however, are better aligned to the underlying asset life.

With OEM-backed AMC frameworks and growing visibility into 8–10-year asset performance, leases can extend over 7–10 years, lowering periodic payouts and easing cash flow pressure. More importantly, leasing transfers the hardest-to-price risks—battery life, residual value, and end-of-life uncertainty—away from operators. From the lessor’s lens, the same structure creates a predictable cash-yielding asset.
And that is the real shift. Electric buses are not struggling because they don’t work—they are struggling because they are being financed like assets of the past.

The winners in this transition will not be those who own the most buses, but those who deploy capital the most efficiently. For operators, leasing removes the barrier to scale; for lessors, it converts electric mobility into an annuity-backed infrastructure play.

The Lease Models Taking Shape in India

India’s leasing market for electric commercial vehicles is taking shape around a few clear formats.

• The most pivotal structure driving private adoption is the operating lease. In this model, a dedicated leasing partner raises the necessary debt and equity to purchase the electric buses or trucks outright. The lessor owns the vehicle and leases it to a private fleet operator for a fixed tenure. Payments are predictable and closely linked to usage or structured as fixed monthly fees. This setup completely removes the upfront capital expenditure burden from the fleet operator while ensuring the leasing company absorbs the residual value and technology risks.

• Battery as a Service (BaaS) is another emerging structure. Since the battery is the most expensive component of the vehicle, separating its ownership reduces upfront cost. The operator pays for battery usage instead of purchasing it outright. This also shifts battery degradation risk to the supplier.

• Energy as a Service (EaaS) applies a similar approach to charging infrastructure, where operators pay based on electricity consumption rather than owning charging assets. The Indian market is therefore moving toward layered contracts rather than a single uniform model.

Stakeholders and Their Economic Incentives

A strong EV leasing ecosystem is thus built on the foundation of mutual incentives among stakeholders who come together to achieve predictable cash flows and risk management.

Fleet operators use leasing to preserve capital and scale faster. Instead of allocating large sums to vehicle purchases, they align payments with operating revenue. Leasing also reduces exposure to residual value risk and rapid technology change.

For lessors, electric buses and trucks represent attractive long-term contracted assets, particularly in segments with fixed routes. Beyond the financial appeal of reduced maintenance costs compared to ICE vehicles, these assets offer a compelling avenue for deploying green capital and meeting broader sustainability and ESG mandates. Furthermore, the inherent technological nature of EVs provides unprecedented visibility. With built-in telematics and data-driven monitoring, lessors can track the performance and usage of their assets in near real-time, enabling dynamic risk assessment and highly disciplined capital allocation.

For OEMs, the leasing ecosystem provides a more stable and robust demand base, extending beyond initial vehicle sales to include service and lifecycle revenues. Battery suppliers and energy companies are also poised to benefit from this transition, with opportunities to create new revenue streams based on usage, performance, and lifecycle management.

Leasing works when risk is distributed to those best equipped to manage it, and value is created across the lifecycle rather than at the point of sale. The success of EV leasing in India will depend not just on financial structures, but on how effectively these stakeholder incentives are aligned.

Which Commercial EV Segments Are Best Suited for Leasing?

Leasing is most effective in segments where utilisation is high and predictable. In India, private inter-city and intra-city electric buses are clear examples. These buses often run on fixed routes, clocking consistent daily kilometres, which makes cash flows easier to model. The predictability of usage aligns neatly with private operating lease models, allowing fleet operators to scale their services without massive capital expenditure, while lessors recover their investments over long-term contracts.

Mid-mile and last-mile logistics are another strong fit. Urban delivery vehicles typically operate on short, repeatable routes with high daily utilisation and fast turnaround cycles. That consistency improves cost forecasting and makes it easier to structure lease payments against usage. According to research by the International Council on Clean Transportation, electric light commercial vehicles can deliver total cost of ownership savings of 15 to 25 percent compared to diesel in many operating conditions. For sectors such as e-commerce, FMCG distribution, and urban delivery, leasing reduces upfront capital needs while capturing these operating savings.

Heavy-duty electric trucks are still in an early stage. Vehicle costs remain high, and long-haul public charging infrastructure is still developing. However, fixed hub-to-hub operations, such as port logistics or industrial corridors, provide controlled environments where depot charging is possible. Leasing can support early adoption in such cases by lowering capital exposure and spreading risk.

Segments with volatile utilisation or uncertain route economics are less suited to structured lease models.

Industry Growth Trends and Challenges

The Indian commercial electric vehicle industry has now reached a critical point where economic viability is increasingly aligned with strategic imperatives. As per World Resources Institute (WRI India), the Indian government aims to have 30% electric vehicles in the country by 2030, where transport emissions already exceed 13% of the country’s energy-related emissions, making the transition to electric a structural imperative rather than a niche transition. At the same time, NITI Aayog estimates that the electrification of logistics could lower the country’s oil import bill by $15–20 billion every year by 2030, further solidifying the economic imperative for faster adoption.

Yet to move beyond current aspirations, it is essential to address critical challenges that go beyond simple cost reduction. These include the high upfront costs of batteries, the absence of charging infrastructure for heavy-duty vehicles, the lack of standardized battery warranties, and uncertainty regarding the residual value of electric vehicles.

Next Step for India

India’s EV transition is entering a different phase. The early years were about proving that electric buses and trucks could run reliably. The next phase is about proving they can be financed at scale.

For commercial fleets, the turning point isn’t just technology—it is financial structuring. By shifting the procurement model to operating leases, the market can move away from heavy upfront capital requirements and create predictable revenue streams for both lessors and operators.

Heavy trucks now face the same structural test. The PM E-DRIVE Scheme signals policy support, but subsidies alone won’t unlock adoption. A heavy-duty truck is an expensive, long-life asset. Its economics depend on utilisation certainty, charging access, and residual value clarity. Until those risks are structured properly, capital will move slowly.

This is why closed-loop applications matter. Port-to-warehouse routes, industrial corridors, cement and steel transport lanes—these are not just early adopters. They are controlled environments where mileage is fixed, charging can be centralised, and revenue is often contract-backed. When usage is predictable, leasing becomes viable. When leasing becomes viable, capital scales.

Electrification is necessary. But the real shift will come when electric buses and trucks are treated less as experimental vehicles and more as structured, cash-flow-generating assets. That transition from product to platform is what will define India’s next stage of growth.

Also Read: Battery leasing models are becoming the backbone for the used e-2W & 3W market