Trucks are the backbone of India’s logistics industry and supply chain. Although trucks account for less than 3% of the total vehicle population, they generate approximately 45% of road transport emissions, significantly impacting the country’s carbon footprint.[1] Decarbonizing road freight is crucial to India’s climate goals, for which zero-emission trucks (ZETs) can play a key role in cutting carbon emissions. However, the widespread adoption of ZET faces major hurdles, including high upfront costs, limited charging infrastructure, and restricted access to financing. As the trucking industry stands at the cusp of transformation, evaluating both existing and emerging business models is critical for stakeholders to drive an efficient and sustainable freight transition.

EXISTING MODELS AND THEIR CHALLENGES

India’s trucking sector relies on fleet operators who transport shipments for consignors, with small fleet operators (SFOs), owning 1–5 trucks, dominating over 75% of the market, while large fleet operators (LFOs), owning 20+ trucks, hold about 10%.[2] Fleet operators primarily procure diesel trucks through outright purchases from OEMs, which ensures greater control over asset utilization and resale, making it a financially preferred strategy. At the same time, vehicle leasing is also a viable alternative for SFOs due to lower down payments and affordable EMIs. Some leasing models also allow for the option of vehicle ownership at the end of the lease term. However, since lease payments for LFOs, while deductible, do not offer the same long-term financial advantages as outright purchases, they are not as popular.

Financing of trucks is predominantly done through asset-backed financing or leasing, with 80–90% of the cost covered by debt and operators making down payments of 10–20%. For instance, to procure a truck priced between INR 30-40 lakhs ($36,000 – $48,000), fleet operators typically pay an upfront amount of INR 10 lakh ($12,000) and repay the loan over a period of five years. They then sell the vehicle for INR 20 lakh ($24,000), using the resale proceeds as a down payment for new acquisitions. By selling the aged vehicle well before its end of life, operators minimize rising maintenance costs while preserving cash reserves for future fleet upgrades. This has led to a thriving secondary market for trucks.[3]

However, the high cost of ZETs, coupled with the expense of charging infrastructure, makes outright purchases financially burdensome for fleet operators, especially SFOs with limited access to capital. SFOs also lack strong credit profiles, which heightens lender risk and restricts their access to lower-cost financing. The weak secondary market and uncertain resale values further discourage adoption, as lenders hesitate to offer competitive financing options due to residual value risks. Furthermore, the deployment of charging infrastructure remains a significant hurdle, as it falls outside the core business operations of fleet owners. On the other hand, the leasing model, while reducing upfront capital requirements, does not resolve the absence of an established resale market for EFVs. Therefore, without structural changes in the business models and policy interventions to stabilize resale values, scaling ZET procurement remains a challenge for fleet operators.

EMERGING BUSINESS MODELS TO SUPPORT ZET ADOPTION

The adoption of ZETs requires innovative business models to address the significant upfront costs, infrastructure challenges, and risk distribution among stakeholders. Traditional procurement methods are inadequate for the capital-intensive nature of electric trucks and their associated charging infrastructure. Emerging business models, such as battery leasing and battery swapping, which have been successfully implemented in the electric two-wheeler and three-wheeler segments, can be adapted for the road freight sector to reduce upfront costs and operational downtime with ZETs.

The Battery-as-a-Service (BaaS) model enables fleet operators to purchase a vehicle without the battery and subscribe to a service that provides access to, maintenance of, and replacement of the battery. This approach shifts the cost from a capital expenditure (CapEx) to an operating expense (OpEx), making it more financially viable for fleet operators. The OEM/battery manufacturer provides the battery on a subscription basis, thereby reducing the vehicle’s upfront cost. In this case, the fleet operator must pay only for the vehicle, along with a monthly battery subscription fee.

Another variation of the BaaS model is battery swapping, which reduces the downtime of ZETs by allowing owners to exchange depleted batteries for fully charged ones. A third-party provider retains ownership of the batteries, offering them on a subscription or pay-per-use basis, thereby reducing the ZET’s initial purchase cost, streamlining maintenance, and improving overall operational efficiency.[4] Unlike the battery subscription model, this model involves swappable batteries, reducing the vehicle operator’s dependency on charging infrastructure.

Lastly, the new-age Truck-as-a-Service (TaaS) model provides access to ZETs by bundling essential services, including maintenance, insurance, and charging infrastructure. TaaS providers serve as a single point of coordination, partnering with OEMs for vehicle sales, service providers for maintenance and insurance, and charging companies for infrastructure. This not only reduces financial barriers but also simplifies ZET procurement and management for operators, thereby encouraging their entry into ZET operation.

These emerging business models can transform the ZET landscape by addressing key hurdles to uptake. The adoption of these models can pave the way for a scalable ZET ecosystem by lowering the entry barriers for ZET adoption and creating operational efficiencies for the value chain actors.

CONCLUSION

Conventional business models have matured over the years, suiting the needs of the existing fossil fuel-based trucking ecosystem. As the industry transitions to electric mobility, there is a need for a shift toward new-age business models. Emerging models, such as BaaS and TaaS, can reduce the burden of OpEx and facilitate the scalable adoption of ZETs. However, to ensure long-term viability, these models must be complemented with a robust financial framework that addresses risks, optimizes cash flow, and supports infrastructure investment.

Our next blog in this series will explore the necessary financing framework to support the transition to ZETs, covering key aspects of innovative financing models, risk mitigation strategies, policy support, and investment structures needed to accelerate adoption at scale.

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[1] https://www.theclimategroup.org/our-work/publications/early-market-outlook-report-electrification-medium-and-heavy-duty-trucks

[2] https://www.niti.gov.in/sites/default/files/2021-06/FreightReportNationalLevel.pdf

[3] https://www.moneycontrol.com/news/technology/auto/daimler-india-enters-used-truck-vehicle-exchange-segment-5659761.html

[4] https://www.hh.se/download/18.38f604db17cdbca68f648bc3/1635846507778/Sweden-China%20Bridge,%20Newsletter%203,%202021-09-10%5B19%5D.pdf