Why should the EV Market focus on Commercial Fleets?

Exploring why commercial fleet vehicles make more sense in the EV market rather than personal passenger vehicles.

If you have been following my blogs, you might know already that I am a big sucker for Electric Vehicles and I have been researching the EV market for the past 2.5 years. And I am still bullish on the EV market.

I highly recommend checking my previous blogs on - The Automobile War: EV vs. ICE and Battery as a Service (BaaS)

Recently, I was going through the trends of EV sales around the world and was astonished to see that the sales of EVs have gone down drastically. (Read more here)

However, while writing this blog, the EV market has bounced back in its sales.

One insightful trend that I spotted was the growth rate of the commercial fleet EVs over the personal EVs. To give you a picture, Tata Motors' sales of 4-wheeler EVs grew by 37% MoM in March '24 whereas Tata Motors' sales of Electric Bus fleet grew by 63% in the same period. (Source: EV reporter)

Even though the adoption rate is terrible, the rate of growth for commercial vehicles is something that needs to be closely watched. So I went into the rabbit hole and found some crucial insights about commercial EVs and why they make more sense over than personal EVs.

One golden rule in the EV market is

Any EVs to be +ve climate impact and cost effective, you need high utilisation rate!

But why?

To explain this, let’s set aside the debate of Personal EVs versus Commercial EVs and focus on fuel engines versus electric engines.

Manufacturing an EV leads to 2x emissions compared to an Internal Combustion Engine (ICE)

Because of the amount of energy spent on Lithium mining and turning them into a battery is huge. And even after you start using an EV, the electric energy that it consumes is not clean since we get that energy only by burning coal. However, that can be optimized and controlled in a leaner process. But still, the battery manufacturing for an EV is still high energy consumption.

Hence it takes N number of kilometres before an EV becomes cleaner or gains parity in terms of total emissions as compared to an ICE vehicle. In simple words, the EV has to be used a lot before it can offset all the emissions and energy consumption spent on it.

For instance, in a Tata Nexon EV, let’s say it takes 100,000 km before it becomes cleaner to offset all the emissions it had caused to manufacture it. However, the average personal vehicle consumption is just 60,000 km. So the math works only if you run an EV enough. If not, you are neither saving costs nor saving emissions. Whereas in a commercial vehicle has utilisation rate is pretty much high relative to a personal vehicle.

Hence it makes more sense to focus on building and expanding EV commercial vehicles rather than personal EVs.

Thus an ideal target market for the EV market would be school buses, public transport, tractors, trucks, forklifts and all other commercial vehicles where the utilization rate is high.

But that doesn't mean personal EV doesn't make sense anymore. If you have a high utilisation rate with your personal EV car, then for sure you can make a positive ROI with your EV as an investment. However, if you still worry about range and charge anxiety issues, then the best option is to opt for Hybrid vehicles.

What do you think about this? Comment down your thoughts :)