How demand aggregation halved the cost of running buses 

M Ramesh | Updated on: May 31, 2022

Govt wants 50,000 more e-Buses

The recently-concluded tender for 5,450 e-buses — the country’s largest to date — has thrown up a pleasant surprise. The cost of running a bus service has been brought down to less than ₹45 per km for an e-bus from ₹75–90 for a regular, diesel-powered bus. Tata Motors has won 5,000 buses, Olectra (part of the Megha Engineering group) 300 buses, and VolvoEicher 150.  

Some interesting learnings came out of this tender, which was completed in April. 

The first is that it is the beginning-of-the-end for diesel; with such cost advantages, an e-bus is an obvious choice over a diesel one.  Second is the power of the common-sensical model of ‘demand aggregation’. The government-owned Convergence Energy Services (CESL) aggregated the demand for five cities in five different states and placed one single tender for 5,450 buses. The bulk order made it possible for a bus OEM — in this case, Tata Motors — to quote low per-km prices for running a bus service.

(In this model, the vehicle manufacturer itself doubles as a bus operator, either through a subsidiary or by outsourcing.) 

More demand

And now, it is learnt that governments are keen on an encore, only on a much bigger scale. All stakeholders – NITI Aayog, the Ministry of Road Transport and Highways, and a number of other state governments — are asking CESL for more such tenders. 

NITI Aayog is said to be keen on getting 50,000 e-buses on roads as early as possible The Ministry of Road Transport and Highways, on the other hand, is checking if buses older than ten years that are owned by State Transport Undertakings could be replaced by e-buses. There are about 70 STUs in the country and while it is not clear as to how many of the buses they run are older than 10 years, it is certain that the number is not less than 35,000. 

Capacity concerns

While the emerging volumes are heartening, the big question is whether the country has enough capacity to produce these many buses. Assembly line capacity exists, but the supply chain has yet to gear up; without a robust supply chain, every major component would need to be imported.

There are nine electric bus manufacturers in the country — Ashok Leyland, Tata Motors, VolvoEicher, BYD Company, Olectra Greentech, JBM Auto, Solaris Bus & Coach, Deccan Auto and Zhongtong Bus and Holding Company.  All these put together can today produce not more than 1,500 business 

And this, is the third learning emerging out of the tender — domestic manufacturing capacity needs to be ramped up rapidly. 

Carbon offsets

Finally, comes the point of carbon credits — electric buses can fetch saleable carbon offsets, It is not clear if there is a move to get the offsets, but it is pertinent to note that Mahua Acharya, MD & CEO of CESL, has a background in dealing with carbon credits; she is unlikely to pass up the opportunity.  

Published on May 30, 2022
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