How trucking can achieve 100% Zero Emission Truck (ZET) sales by 2047

Touching upon the role of all key stakeholders including the government, manufacturers, buyers, users, lenders and states, Karthick Athmanathan, Professor of Practice – IIT Madras, spoke to TrafficInfratech on how the trucking can achieve 100% Zero Emission Truck (ZET) sales by 2047, in tune with India’s commitment to become Net Zero by 2070 and the mission of attaining Viksit Bharat status of becoming a developed nation by its centennial year of independence.

In the context of trucking, the driving factor is Net Zero 2070 and Viksit Bharat 2047. The third Automotive Mission Plan (AMP), with a vision for the next 22 years from 2025 till 2047, is likely to be split as 5 + 7 + 10 year sub-plans- and, it is likely to study the feasibility and method for reaching 100% Zero Emission Vehicles sales by 2047. In the context of ZET, the good news here is, for Medium & Heavy Duty Trucks, three of the top four players- Tata Motors, Ashok Leyland and Bharat Benz- have declared Net Zero dates from 2045 till 2050. So, close to 80% of the market seems to be converging towards the AMP date.

 

What remains unclear is unresolved challenge of the uncertainty of the states being able to supple quality and quantity power to the trucks. Turnaround time of electric trucks as compared to diesel ones is not a concern for most applications- we are now getting data that shows that eTrucks in India managed about 10km/hr higher average speed as compared to diesel trucks.

– Karthick Athmanathan

 

“Net zero for these companies is going to be expensive without producing ZETs. One can safely assume that if you say net zero, the cost-effective way for a company to reach that is by producing and selling zero emission trucks. This is just a fair assumption, not necessarily a definite outcome. Net zero can also be done by buying credits, but it will be too expensive and not viable. This is at a macro level.

“Who are the stakeholders today? While the current favourite topics focus on battery, lithium, cobalt, manganese, rare earth elements, permanent magnets, China as an undependable supply chain etc., all these are not the major issues. The key stakeholders are the government, the vehicle manufacturers, the vehicle buyers and the people who have to provide electricity. The government is interested in keeping its environmental and commercial commitments. OEMs want a profitable and predictable regulatory pathway, something which is clear and sensible and not too obstinate.

“Both government and OEMs are agreed that there is not one single route to achieving net zero for trucking, but multiple pathways. Some applications and segments might move from diesel to LNG to electrification, others from diesel to CNG to hydrogen and some directly to electrification. This depends on the business basics and operational feasibility of each segment. Essentially, there are about 15 different uses for our trucks- called applications- and about six segments depending on size and type of vehicles such as tippers, trailers and tractor trailers that are further classified based on number of axles and tonnage. Each of these segments and applications will be taking a different route to that net zero destination point. We have to support this. We have to enable this.

“While the central government and OEMs have a clear understanding, we are not at all clear whether the state governments are in a position to supply quality and quantity power- something very critical for eTrucks. Electricity being supplied to passenger vehicles today has deterrents such as chargers being broken, cables stolen, power cuts in the area resulting in no power supply. If this happens to trucks, the country’s economy will get affected- as will businesses and public. We cannot take such risks. We still do not have visibility on the ability of the state to provide quality and quantity power.

“If we focus on a smooth regulatory pathway and good charging infrastructure, the supply and value chains will automatically fall in place- this is the basics in any industry. The next thing to sort out is finance. The buyer of the truck has to make profits. In the initial days, the cost of electrification will be high and Viability Gap Funding will be required. The best tool for this is to give toll waiver to the truck buyers because toll cost is anywhere between Rs. 6 to Rs. 15 per km. Maybe 100% waiver for the first 10 years and 50% waiver for the next 5 years during which time the government will have to compensate the road concessionaire from a dedicated account. There could be other cost offsets as incentive to the buyers too. But it is important to note that no long-term adoption is going to work if it depends on VGF for more than 10 years.

“India sells about 300,000 to 400,000 trucks a year. Of this, in my assessment, 20% of the trucks being sold are already doing enough travelling and transportation to justify electrification even without subsidy. It is already cost effective for some applications to electrify. The classic example is where in all cement industries, the 55-tonne tractor-trailers are aggressively converting to electric trucks because buyers have realized that it is cheaper and there is money to be saved here.

“The second aspect of financing is the loan. The lender has no idea of the value of the truck 3 years down the line- and this is likely to continue at least for the first 50,000 eTrucks or so. If there is a payment default, he is not sure of the eTruck’s resale price and it is the only collateral. Though delinquency is very low in the trucking industry as truck owners pay their dues promptly, it is still necessary for us to help financiers in derisking. Most of the technology risk is now being taken by the OEMs, who offer all-included Annual Maintenance Contracts (AMCs) for the eTrucks for a long period- something like Rs.5 per km for 7 years, including replacement of battery if required. The First Loss Risk Product, especially in the context of the value of the eTruck being confiscated, is a financial instrument designed to protect lenders or investors from the initial losses in a pool of assets, often used in securitization or structured finance. It shifts the risk of default to a third party, like a guarantor or insurer, who absorbs the first losses. In this case, the third party is a Government-enabled and Government-backed SPV, which offers to cover a percentage of the losses to the lender, thereby making the loan process easier for both parties involved.”