At Arkam, we are interested in markets where adoption depends on solving real operational bottlenecks. India’s EV market is one such shift, where lower operating costs and strong demand are running ahead of fleet readiness, financing, battery trust and supply-chain maturity.
This piece looks at why last-mile commercial EV adoption is not just a vehicle problem, but an ecosystem problem involving OEMs, logistics providers, driver-owner-operators, dealers and infrastructure players.
“EV Supply Side and the Strategy Behind Inertia
Market conditions have never been better for the Indian EV ecosystem. Soaring oil costs have pushed petrol and diesel to record highs, causing significant pain for businesses and consumers alike. EV economics continue to attract attention. Depending on how you compute it, there is a 6-10x operating cost advantage for EVs over combustion vehicles, across both passenger and commercial use cases.
At INR 105 per litre of petrol, a combustion vehicle may cost INR 10-11 per km to operate, while the comparative cost for an EV is roughly around INR 1 per km for a vehicle with a 30 kW battery. This math, along with the massive environmental and human health benefits of lower pollution, should seal the deal.
Bottlenecks for the market to take off are also with supply. Today, there are over 80 OEMs building EVs in India. The well-known ones on the commercial side include Tata, Mahindra, Piaggio, Altigreen and Zypp, among others.
For consumer EV two-wheelers, every existing ICE OEM from Hero to TVS has plans, in addition to new players such as Ampere, Okinawa, Ather and Ola Electric. Retail demand for two-wheelers is still evolving in India, but with massive potential. The main constraints are still around range anxiety, cost comparisons with ICE two-wheelers and financing. This shift will happen, but it seems fairly safe to assume a 3-5 year time horizon to get to scale. The fundamental question is how OEM start-ups compete in terms of the capital needed to expand against well-funded OEMs.
The e-commerce last-mile commercial use case is strong, but there are two major friction points relating to OEMs and logistics vendors. This is where market bottlenecks become most visible for last-mile commercial and e-commerce EV logistics.
First, OEMs are still struggling to get the right specs in place. Today, the best a three-wheeler EV does is around 100 km a day on a single charge, with a few vehicles claiming 150 km. These vehicles are still getting aligned with charging infrastructure and battery swapping options.
A counter-argument is that e-commerce three-wheelers typically do not run more than 70-80 km today, and it is more a question of individual owner-operator comfort with vehicle reliability. But overall, there is still a massive supply gap from the OEM side that should sort itself out in a couple of years or so. Even at that time, demand is likely to outstrip supply.
Inertia can be strategic
The second issue is the time it is taking for existing fleet operators and 3PLs to transition their offerings to EVs The main factors influencing this are:
Today, these companies fulfil less than 10% of their demand with EVs, and most of their contracts with e-commerce companies, for example, are based on their own ICE vehicle supply chains. It is not that existing logistics providers like Delhivery, Porter or Mahindra Logistics have their head in the sand, or are ignorant of the upcoming market shift.
Clients want to shift to EVs, but logistics vendors are dragging their feet as their own suppliers have significant challenges to overcome. We estimate that 85% of two- and three-wheeler supply on major aggregator platforms and 3PL companies comes from driver-owner-operators who are in no hurry to shift to EVs despite the cost advantages. This fleet inertia is not only about resistance to change. It reflects financing, reliability and residual-value concerns across the EV supply chain.
The main challenges for them are financing, with 25% IRR for EVs versus 12% IRR for ICE; range, where even if daily trips are 100 km or less, they want the flexibility to make a weekend trip that may be longer; and a lack of understanding of batteries and vehicle residual value, which has a big impact on cost of ownership.
So, 3PL vendors are in wait-and-watch mode and are unlikely to make a big shift to EVs unless they can find a way to help their suppliers bridge the gaps above. This will get solved over the next 24-36 months as large end customers like Flipkart and Amazon demand more EV trips.
As my friend Subhabrata Ghosh, who has great insights and spends significant time with EV participants, put it, “the buyer has to go through a process of education that is not there yet” on both the consumer and commercial side.
He also brought up the point on dealerships needing to transform and being in search of a business model. Today, most dealerships depend on after-sales service as a meaningful source of revenue: air filters, oil filters, coolant, engine oil, among the many line items you see in your servicing bill. Dealers make money selling these, as well as add-ons such as insurance and vehicle financing.
An EV motor has fewer than 20 moving parts versus around 2,000 parts in a combustion engine, meaning significantly lower maintenance. What happens to aftermarket parts and service for today’s dealerships in an EV world? How do dealers reimagine their business?
When industry-wide change happens, there are a lot of interdependent moving pieces that do not necessarily fall into place neatly at the same time. These missing elements create opportunities for new players even as incumbents try to minimise value destruction. “
For any Indian EV startup and manufacturing investors, the larger opportunity lies in the friction points slowing EV adoption today. As fleets, marketplaces and large enterprise customers push harder for this transition, the missing layers around financing, EV and battery infrastructure, supply reliability and fleet intelligence will become critical company-building spaces.
