The economics for cab services to switch to Electric Vehicles

Corporate or Employee Transport Services make for 23% of pan-India taxi market and this space is expected to grow to USD 6.6 billion by 2022 from its current size of USD 3.5 billion, says a WBCSD report.

EVreporter got in touch with a Pune based company that provides employee transport to corporates in Pune, Mumbai and Bangalore. They manage a fleet of 1600 diesel engine cars and have started EV operations since last 2 months. 

Related: How does BluSmart manage its all-electric fleet?

Though the electric cars cost substantially more than Diesel cars, Mayur Balsane – Co-founder at Skylar Cabs shared the maths behind their decision to start including electric cars in their fleet.

1. Capital – As compared to 7-8 lakhs for a diesel car, an EV like Mahindra e-Verito costs around 11.4 lakhs. That means the average cost of acquisition is higher by around Rs 4 Lakh per car. The additional capital expense also includes the purchase and installation of fast chargers.

2. For their operations, the cost of charging comes around 4,500 INR per car per month, whereas the monthly cost of diesel is approximately 24,000 INR per vehicle – this provides an operational saving of approx. 20,000 INR per car per month.

3. The company hopes to achieve parity on Total Cost of Ownership (between Diesel cars and electric cars) in a period of about 2 years.

4. Speaking about the life of the vehicles in their business, Mayur informed that practically a diesel car stays in the business for no more than 5 years (as clients do not accept the cars older than that), close to average life expected from an EV. 

5. This presents a prospect of reaping annual operational savings of around INR 200,000 per car from the third year of operations of an electric car vis-a-vis a diesel car.

About the challenges associated with running an electric fleet, we got the following inputs:

1. The company could run a diesel car for 250-280 km in 12-13 hours of a day’s work, whereas an electric car is run for 180-200 km per day. Intelligent alignment of routes and vehicles is required to accommodate for this change in dynamics.

2. Charging Infrastructure cost – e-Verito effectively provides a range of 140 km as per Skylar’s experience. During the afternoon, the cars are charged on a fast charger that takes 1.5 to 2 hours to charge up to 80%. The company relies on its own charging infrastructure established at the premises, consisting of both fast and slow chargers. Slow chargers (provided by the OEMs) are used mostly during night time and weekends.

The one-time cost of purchase and installation of a twin-gun fast charger came at around 5.5 Lakh.

3. For diesel taxis, there is a prevalence of DCOs i.e. Driver cum Operators who attach their cars with a fleet operator reducing the burden of capital investment on the business. However, this is not the case with EVs because of the higher sticker price. Companies either procure the vehicles investing high Capex or have to find investors or leasing companies on a monthly fee.

4. The battery makes for the priciest part of an EV, and there is a risk of reduced battery life because of frequent fast charging, low power quality and fluctuations in voltage. The battery warranty covers 1,25,000 km or 3 years whichever is earlier. In an unlikely instance, if the battery is severely damaged due to any reason after the warranty period, it could mean a huge business risk. No separate partial insurance is available for the battery. 

Recent reports claimed that the government may mandate taxi aggregators to convert 40% of their fleet to EVs by 2026. Despite the challenges listed in this article, traditional taxi companies have started looking at electric cars as a suitable alternative to diesel vehicles for fleet operations catering to different use cases. While Skylar Cabs is looking to expand its EV fleet to 100 cars over next year from the current count of 5, companies such as Lithium Urban and BluSmart have made great strides in Corporate Transport and Ride-hailing business respectively using all-electric fleets.

Read about business opportunities in the EV space here.

Also Read: ZoomCar’s experience with their electric fleet

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