First Principles First | Scaling e-rickshaws one operator at a time

By Jagriti Arora
Three-wheelers have been an integral part of urban mobility in India. They are preferred for their ability to navigate through traffic, provide timely deliveries, and require less maintenance compared to heavy commercial vehicles. When electrified, three-wheelers are highlighted for their role in reducing carbon emissions, improving air quality, and supporting sustainable urban mobility. We posit that understanding the financial viability and operational efficiency of e-rickshaws on a unit level is essential for successful scaling. To that end, this study delves into the unit economics of operating e-rickshaws, focusing on the variations in operational costs and revenue generation.

Electric three-wheelers include both e-rickshaws and e-autos. Both forms are becoming increasingly popular as a mode of transportation, particularly in urban areas, due to their low running costs, ease of maintenance, and eco-friendly nature. They are also considered the “low hanging fruit” for accelerating EV adoption in India, with urban transport systems generally servicing major route networks, leaving first/last mile connectivity unserved (ET Auto, 2019). This is evident from the EV adoption in this category: Over 50% of the three-wheelers sold across India in March 2024 were electric, compared to the 8.55% in two-wheelers, 2.14% in cars and SUVs, and 6.61% in buses, as seen here in the EV-Ready India dashboard. However, not all electric three-wheelers are alike. There is a distinction between e-rickshaws and e-autos, as they serve different purposes, owing to their design and target customer.

E-Autos: Also known as electric auto-rickshaws, e-autos resemble traditional auto-rickshaws but are powered by electric motors. They come under the L5M category according to Indian automotive categorisation, which typically refers to motor vehicles with three wheels used for carrying passengers. E-autos have a more robust build and are designed to navigate busier and more varied urban and peri-urban environments. They are equipped with electric powertrains that offer better torque and can achieve higher maximum speeds compared to e-rickshaws.

E-Rickshaws: E-rickshaws are a low-cost variant of electric three-wheelers without a direct internal combustion engine (ICE) counterpart. They are smaller, lighter, and designed primarily for short-distance travel within neighbourhoods or for last-mile connectivity. E-rickshaws are usually powered by conventional lead-acid batteries, though there’s a trend towards adopting lithium-ion batteries for better performance. Their motor size is below 2kW, restricting their speed to up to 25 kmph.

It is important to distinguish between the two and manage India’s decarbonisation transition in a way that maximises the benefits and minimises the negative impacts.

This study, however, only focuses on e-rickshaws because it occupies a distinct space in the e-three wheeler ecosystem. Additionally, it’s more unorganised and has fragmented data. Analysing the unit economics helps in determining the profitability and sustainability of scaling e-rickshaws. It provides insights into the costs, revenues, and potential returns associated with each e-rickshaw unit, guiding decision-making on expansion strategies, at both individual and ecosystem level.

This study presents the unit economics of operating an e-rickshaw under four scenarios: operator-owned Li-ion e-rickshaws with charging, operator-owned Li-ion e-rickshaws with swapping, rented e-rickshaws with charging, rented e-rickshaws with swapping. The analysis also sheds light on an alternate scenario where a lead-acid battery rickshaw has been illegally procured, only to see if the unit economics work better. Additionally, the e-rickshaw ecosystem is likely to experience reduction in profit when market saturation is achieved.

Before delving into the unit economics of e-rickshaws presented in Table 2, it’s crucial to outline the underlying assumptions that frame our analysis. These assumptions provide context and clarify the parameters within which the subsequent findings should be interpreted:

The cost of buying an e-rickshaw is highly variable. We have identified various models from OEMs and calculated an average. These costs have been presented in table 1. The average cost of buying an e-rickshaw is INR 1,84,000.

Costs and models of various e-rickshaws offered by top OEMs Source: The costs were procured from a listing website TruckDekho

Loan Acquisition for Vehicle Purchase:

• Loan amounts can range from 20% to 80% of the invoice cost of the e-rickshaw, with a maximum loan amount of INR 1.5 lakhs. (LokSuvidha, 2024)
• The interest rate can vary depending on factors such as the location, loan tenure, and customer profile, with Terra Finance offering an interest rate of 16%. (Terra Motors India, n.d.). We have considered the lowest interest rate, i.e. 16%.
• The loan tenure can range from 12 to 36 months. (LokSuvidha, 2024) We have considered the average, i.e. 2 years.
• The formula used to calculate the monthly EMI (Equated Monthly Instalment) is as follows: EMI = [P x R x (1+R)^N]/[(1+R)^N-1], resulting in a monthly EMI of INR 8,589. ( P = INR 1,50,000; R = 16%; N = 24 (2 years * 12 instalments)).

Battery Replacement Costs:

• For rented e-rickshaws, it is assumed that the cost of battery replacement is borne by the driver, not the owner.
• Battery costs incurred by swapping are not included in the “batter cost” section, but adjusted in the revenue.

Daily Revenue Before Market Saturation:

• To calculate the average daily earnings of e-rickshaw drivers, we considered the range mentioned in the following sources:
• INR 10 per kilometre (Fickling, 2024)
• INR 500–600 (TOI, 2019)
• INR 301–600 (Agarwala & Gogoi, 2019)
• Up to INR 3,000 (Syndicate Motors, 2021)

The average daily earnings:

(10 + 500 + 301–600 + 3,000) / 4 = Rs 952.75 (approximately Rs 953; rounded off to 1000, for ease of calculation)

• Depreciation rate has been assumed to be 20% (EY Parthenon et al., n.d.).
• Maintenance has been assumed to be INR 8,000 for Li-ion battery rickshaw, and INR 10,000 for lead acid battery rickshaw (Agarwala & Gogoi, 2019).

Source: The sources, where applicable, have been mentioned in endnotes.

The unit economics associated with e-rickshaws, including initial costs, maintenance, and potential revenue fluctuations due to market saturation, significantly influence their adoption and operation. Policymaker involvement is crucial in this context as they monitor and respond to these dynamics. Their role includes assessing the effectiveness of existing financial aid frameworks, the adequacy of operational infrastructure, and the regulatory environment to ensure it supports a sustainable growth trajectory for the e-rickshaw sector. Furthermore, ensuring that safety and maintenance standards are adhered to and managing the density of operational licences are central to maintaining service quality and safety for operators and passengers alike. These actions are instrumental in shaping a market that not only supports the proliferation of e-rickshaws but also contributes to broader environmental goals and urban mobility improvements.

End Notes:
Figure taken from India Development Review
Assuming the battery has a voltage of 12V and a capacity of 2kWh, Average cost of battery of these specs is INR 18,000; the operator can sell the battery to the dealer after a year; the total cost would thus be half of INR 18,000, i.e. INR 9,000.
Battery Cost obtained from calculating an average of minimum cost of batteries offered by different manufacturers; Liv guard — INR 6500; Okaya — INR 9500; Tata green — INR 9400; Exide — INR 8000; Pilot — INR 6000; Average Lead Acid battery cost = INR 7,880.
It has been assumed that an e-rickshaw operator makes INR 1,500 per day, based on India Development Review.

EDITORS: Aishwarya Raman, Executive Director, OMI Foundation; Anish Michael, Lead, Centre for Future Mobility, OMI Foundation

References:
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