How electric cycles can revolutionise last-mile delivery economics | Opinion
In the race to enhance last-mile delivery operations, businesses are increasingly turning to electric vehicles (EVs) as a viable solution. Among the various types of EVs, electric bicycles (e-bikes) have emerged as a promising option for efficient and cost-effective last-mile deliveries.
Raghuveer Chadalavada, CEO and Co-founder of Aurita Bikes shares his perspective on the operational efficiencies and cost savings enabled by using electric bicycles for last-mile deliveries.
Last Mile Delivery unit economics is all about the Total Cost of Ownership (TCO), which includes the Capex (Vehicle Cost) and the Opex (Vehicle Maintenance and Spares Cost). Compared to traditional internal combustion engine (ICE) vehicles, e-bikes offer lower upfront costs, reduced maintenance expenses, and lower fuel or energy consumption. The operational costs of e-bikes, including electricity charges and battery maintenance, are considerably lower than those associated with ICE vehicles. By optimizing routes and reducing delivery time, businesses can increase their productivity and serve a larger customer base within a given timeframe.
Last Mile Delivery Ecosystem
To understand the whole Last-Mile Delivery ecosystem, there are key role players involved.
– Demand Creators (e.g., Swiggy, Zomato, Amazon, Flipkart) provide value-added services to end customers and create a demand for doorstep delivery.
– Third-Party Logistics Players (e.g., Mahindra Logistics, Lighting Logistics) act as a backbone for demand creators, delivering goods to end customers and managing the delivery partners/riders and vehicle fleet.
– Rental Companies (e.g., Yulu, Eveez) provide an alternative to third-party logistics, renting out vehicles to delivery partners/riders.
– OEMs (e.g., Hero Electric, Okinawa) deliver purpose-built vehicles to rental companies or third-party logistics players for last-mile delivery operations.
– Delivery Partners/Riders, who are gig workers, play a crucial role in the value chain, responsible for delivering the end packet to customers.
The Advantages of eBikes
Comparing different 2W form factors (eMotorbike, escooter, ecycle), eCycles always have the lowest TCO. Utilizing ecycles provides a significant advantage in cost savings. Typically, ecycles have a TCO that is 70-80% less than a petrol 2W, while e-scooters have a TCO that is 40-50% less. This difference of 30%-20% gives an advantage in the overall transaction. However, ecycles have their own set of limitations concerning maximum speed, payload carrying capacity, ability to travel longer distances, rider comfort, and overall vehicle life.
The Growing Potential of eCycles in Last Mile Delivery
Since e-cycles are generally non-CMVR vehicles and do not require special licenses, a wider audience can access work in the growing Last Mile Industry as valuable Delivery Partners/Riders. It becomes crucial to get the right set of design, engineering, and commercial feasibility for ecycles in Last Mile Delivery.
Some applications of ecycles in Last-Mile Delivery include Quick Commerce, Food Delivery, and E-commerce last mile in denser regions.
These applications generally involve packet sizes below 25-30 kg, average speeds below 25 km/h, and delivery radii ranging from 3-5 km. The volume of deliveries in these subsegments is significant and growing rapidly.
Insights from Aurita Bikes
At Aurita Bikes, successful collaborations with Mahindra Logistics for Amazon Last Mile deliveries have demonstrated tangible benefits. For every packet delivered, a 15% cost reduction has been achieved, resulting in a total cost reduction of around ₹1.88 lakh over a vehicle life of 3 years. Furthermore, sustainability savings of around 2.8 tons of CO2 have been saved over the same vehicle lifespan. These achievements were attained without compromising the delivery time, user experience, riding comfort, or packet safety.
TCO Comparison
In comparing the Total Cost of Ownership between the E-Scooter and Utility E-Cycle, as well as the Utility E-Cycle and Petrol 2W, we can gain valuable insights into the financial aspects of these vehicle choices over a three-year holding period.
For the E-Scooter, the cost of operation amounts to approximately ₹21,504, considering an annual operational cost of ₹7,168. In contrast, the Utility E-Cycle presents a more economical option with an operating cost of around ₹10,478, given its lower annual operational cost of ₹3,493. This represents a significant cost-saving advantage of approximately 51.39% when opting for the Utility E-Cycle over the E-Scooter.
Furthermore, when comparing the Utility E-Cycle with the Petrol 2W, the cost difference becomes even more pronounced.
The Petrol 2W’s TCO stands at ₹252,771, significantly higher than the Utility E-Cycle’s TCO of ₹42,978. These calculations underscore the financial benefits of embracing low-speed electric vehicles, like the Utility E-Cycle, as they demonstrate substantial cost advantages over traditional petrol-powered options. By considering the TCO, individuals and organizations can make well-informed decisions to not only reduce expenses but also contribute to sustainable and environmentally friendly transportation solutions.
Conclusion
The statistics highlighting a 50% jump in cargo bike sales in Europe last year indicate the growing acceptance of electric bicycles for last-mile delivery purposes. The Indian market has the potential to replicate this trend by offering suitable cost-effective products. With the government’s supportive stance and the potential for cost savings, operational efficiency, and environmental sustainability, the economics of using electric bicycles for last-mile deliveries are highly favorable. By embracing electric bicycles, businesses can unlock a greener and more efficient last-mile delivery system, contributing to a sustainable future while meeting customer expectations. The time is ripe for businesses to tap into the economic and environmental advantages of electric bicycles in last-mile deliveries.
Aurita Bikes is present in over 10 cities, has about 15 full-time employees and has a manufacturing capability of over 500 cycles a month.
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