Delivery services of companies like BigBasket are a lifeline for the emerging electric bike startup ecosystem in the country. While consumers baulk at the initial cost of electric bikes, their limited range and the hassle of recharging batteries, the equation changes when it comes to last-mile delivery
Commander Ganapathi Subramanyam is no stranger to electric vehicles (EVs). His first posting after graduating from the naval college of engineering in the late 1990s was aboard an electric submarine in Visakhapatnam. Now, as head of innovation for BigBasket, he’s overseeing a push by the online grocer into use of electric bikes and three-wheelers for last-mile delivery.
It may seem facetious to club submarines and bikes but shifting to a fleet of thousands of EVs across India is no less tricky than navigating underwater. Yet, BigBasket aims to ramp up its fleet of 800 EVs to 4,000-5,000 in two years, according to Subramanyam.
Delivery services of companies like BigBasket are a lifeline for the emerging electric bike startup ecosystem in the country. While consumers baulk at the initial cost of electric bikes, their limited range and the hassle of recharging batteries, the equation changes when it comes to last-mile delivery.
In the case of BigBasket, these vehicles are deployed for deliveries from their so-called 5K stores serving customers within a radius of 10-12km.
Hence the range is not an issue and the store provides charging points for the bikes. Most of all, what makes a difference is that a delivery person’s electric bike covers 60-80km in a day, against around 20km for a normal user. So, the savings on fuel kick in faster, quickly making up for the higher upfront vehicle cost compared to a petrol bike.
Typically, a two-wheeler will carry orders for a two-hour delivery slot, then return to the store where the battery can be recharged. This falls well within the battery range of around 80km.
The big plus for BigBasket is the drop in cost per order. “Straight away we have a 30-40% reduction in overall operational costs because of energy charges being a quarter of petrol or diesel prices. Subsidized electricity for electric vehicles cuts the energy cost further,” says Subramanyam.
The lowering of operating expenses takes into account the amortization cost that’s factored into the payment per order for its logistics service providers.
It’s an asset-light model because BigBasket doesn’t own the vehicles. Part of Subramanyam’s role is to persuade logistics partners to shift to EVs for mutual benefit. Apart from the cost benefit in doing so, an incentive is the charging infrastructure provided by the BigBasket stores.
The fast-growing demand for EVs in last-mile delivery has spawned new business models. Delhi-based electric bike maker Euler Motors, for example, offers “mobility as a service”. That is, apart from manufacturing the bikes, Euler provides a logistics service by retaining a roster of drivers. BigBasket, Blue Dart, Ecom Express and Udaan are among its customers for this parallel business.
“The thesis is to pursue the commercial segment which is already TCO (total cost of ownership)-positive,” says Arpit Agarwal of Blume Ventures, an early investor in Euler. “The second part of that thesis is to give an end-to-end service to tide over the cold start problem of not having an ecosystem.”
The biggest impediment to getting into the manufacturing of EVs is uncertainty over the demand for them. That’s the problem Euler is attempting to tackle with its two-in-one model.
Agarwal believes government incentives and subsidies for adoption of EVs have fallen short despite policy pronouncements setting targets for a shift to e-bikes in order to curb pollution and reduce the oil import bill.
It’s moot whether the automotive lobby is blocking higher incentives. But automotive vehicle manufacturers saw a slowdown in sales in the past couple of years, which puts them in a catch-22 situation. On the one hand, they are wary of electric vehicles cannibalizing their IC (internal combustion) engine vehicles. On the other hand, “if they don’t invest in electric vehicles, they may end up cannibalizing their future”, says Agarwal.
For now, until EVs become more affordable for general consumers, either through higher subsidies or lower battery costs, it’s the e-commerce, grocery and food delivery companies that will drive adoption. The model varies from place to place and company to company.
In the case of BigBasket, it is open to all comers providing EVs for last-mile delivery. There are full-fledged logistics companies that have EV fleets and drivers. Then there are manufacturers like Euler Motors for two-wheelers and Hyderabad-based Eto Motors for three-wheelers that also have a logistics arm. And finally, there are aggregators who don’t own the vehicles, but even they are shifting to EVs.
“Some aggregators were providing the service to us through third-party drivers registered with them. But we see a shift there. The aggregators also want to jump on to the electric vehicle bandwagon,” says Subramanyam.