India’s e-commerce sector will become the world’s second-largest by 2030, driving significant growth in last-mile deliveries and associated environmental impacts. Electric vehicles (EVs) offer a promising solution for sustainable last-mile logistics, but adoption faces barriers such as high upfront costs and infrastructure challenges.
Picture this: You’re lounging on your couch, scrolling through shopping apps. With a few taps, you’ve ordered dinner, groceries, and that gadget you’ve been eyeing. Convenient, right? But have you ever wondered about the journey these items take to reach you and, more importantly, the environmental cost of that final leg of their trip?
Growth of E-commerce Last Mile Connectivity in India
With the rapid growth of leading platforms like Amazon, Blinkit, and Zomato, along with the emergence of ONDC, India’s online shopper base is projected to become the second largest globally by 2030, with nearly 500-600 million shoppers catered to by millions of vendors.
Last-mile connectivity refers to the final stage in the delivery process, where goods are transported from a distribution centre or a warehouse to the end user. It covers various application areas, such as food delivery, quick commerce, and e-commerce. Led through constant increases in digital penetration, disposable income, consumerism, and new offerings, last-mile deliveries are expected to grow at a CAGR of 15-20%over the next five years. The food delivery business is already processing around five million orders daily, and B2C e-commerce shipments are estimated to reach 12.3 million this year.
Environmental Impact of Last Mile Deliveries
The last mile seems to increasingly become a problem for the urban environment in e-commerce logistics. According to projections from the World Economic Forum, last-mile deliveries are likely to increase by 78% globally by 2030, while the number of delivery vehicles might surge by 36% in the densest urban areas. With this growth, corresponding 32% increases in emissions and 21% rises in congestion are expected, with peak-hour commuters gaining an extra 11 minutes daily. Quick commerce and on-demand food delivery services have only accelerated the last-mile logistics opportunity. These business models, prioritising point-to-point delivery and extremelyshort fulfilment times(10/15 min delivery for quick commerce, 30 min delivery for food businesses), add to the urban congestion and environmental issues. As India’s e-commerce market expands—projected to grow at a CAGR of 21.5% to reach $99 billion by 2024—the environmental impact of last-mile deliveries is set to intensify.
Electric Vehicles: The Potential Solution?
Electric vehicles are emerging as the dark horse to address the growing challenges of last-mile logistics. Although their up-front costs may raise eyebrows, EVs seem an intelligent long-term gamble for e-commerce players. Most of the electricity used to power these vehicles is of renewable origin, with the charging stations leveraging India’s vast solar potential. While we are still in the initial laps with EVs in their proof-of-concept phase, industry giants are already positioning themselves at the starting line. Zomato has partnered with Yulu, a light EV manufacturer, aiming to have only electric delivery vehicles by 2030, while Flipkart wishes for 25,000 EVs on the road in the same period. Swiggy has also partnered with Gogoro to introduce electric vans for large delivery loads. On the broader picture, however, India’s EV sector’s growth has been very slow. By 2022, aggregate EV adoption rests at an infimal figure of 1.1%, way short of the Asian average of 17.3% over a similar period (S&P Global Ratings). However, there’s a silver lining in the organised fleet sector, where EV penetration reaches a more encouraging 5-10%. This disparity in potential and actual adoption rates raises a critical question for the sector: Should we look into other sustainable options, or are EVs the only way to transform last-mile logistics?
Adoption of EVs in the Indian Market
Although EVs can potentially literally literalise the last-mile delivery space in urban logistics in India, adoption has been slower than expected. This is partly due to the high upfront costs of EVs compared to conventional vehicles, lingering doubts concerning the reliability of technology, distance range anxiety amongst drivers, and challenges related to affordable financing options. These many barriers create a complex landscape for EV integration in a price-sensitive Indian market.
While the industry is developing and new technologies are being implemented, there are quite clear ways through which the original equipment manufacturer can accelerate EV adoption and overcome initial hurdles. To take on these challenges and increase the adoption of EVs, OEMs could adopt the following strategies:
Highlight Lower Total Cost of Ownership (TCO): As per a BCG report, with reduced fuel and maintenance costs, EVs offer 10-40% less TCO than internal combustion vehicles. Hence, clearer and more frequent communications around the long-term financial benefit of EVs should be essential parts of marketing strategies directed towards fleet operators. Introduction of new age mileage KPIs like cost per kilometre, which can be tracked regularly to illustrate the savings, can also be a lever.
Enhance the Value Proposition: The OEMs should not just look to offer a vehicle but facilitate a complete ecosystem for EVs. Value-added bundling of allied services, such as charging infrastructure, telematics, and maintenance, would add great value for fleet operators, helping them eliminate multiple pain points in transitioning to electric vehicles from conventional ones.
Focus on B2B Sales: Can help get more EV asset operators on board, sell more volumes, and leverage higher penetration rates of 5-10% already seen among the organised fleet operators compared with the overall market rates of 1.1% as per S&P Global Ratings. The focus areas can be last-mile logistics partners, quick commerce, and food delivery platforms.
As batteries become increasingly cheaper, sales networks expand, and with continuous government support with policies such as FAME-II subsidies, the conditions are getting more conducive towards electric mobility. We must identify the obstacles—infrastructure, economic, or technological—to this transition and work out more effective solutions to overcome them. Only by directly attacking each of these challenges head-on can we hope to accelerate the EV drive and translate the vision into a sustainable and efficient last-mile delivery network.
Sustainable Last-Mile Logistics: Short-Term Strategies and Long-Term Collaboration for India’s Green Transition
While electrification of last-mile fleets is the most impactful solution to cut emissions in last-mile logistics, the intrinsic challenges require short-term and alternative solutions. Some levers that can help reduce emissions in the short term include cross-utilisation of fleets to reduce idle time and variable costs by making EV fleets available for multiple uses in this fast-emerging shared economy setup, thus improving RoI. Urban consolidation centres, load pooling, and micro-hubs are some of the logistics strategies that can consolidate miles travelled radically for products from different suppliers. Delivery route optimisation and increasing deliveries per km through re-routing and incentivising the use of express lanes for delivery go a long way in reducing emissions.
According to the World Economic Forum, these measures can reduce emissions by as much as 4-5%. These strategies, in effect, are the low-hanging fruits that can be addressed quickly in case stakeholders reach a consensus and with minimum required government intervention, driven essentially by technology-based solutions. Drone-based deliveries and last-mile connectivity with green hydrogen are some of the ambitious measures waiting in the wings but are yet awaiting the proof-of-concept stage. The following roadmap outlines essential interim solutions that India can implement to facilitate the transition towards greater adoption of EV fleets.
The trident, comprising the government of India, the EV OEMs, and the e-commerce firms, would have to work in collaboration with a vision towards the net zero emissions goal of 2070. The government can propel this by enhancing its subsidies and building robust nationwide charging infrastructure while encouraging private-public partnerships. Additionally, mandating carbon labelling could help induce indirect pressure by consumers on e-commerce companies to invest in green logistics solutions. EV OEMs will have to focus on the development of affordable models, enhancement in battery technology, and offer end-to-end services. E-commerce firms can further propel this transition through commitments for EV fleets, building supporting infrastructure in their supply chain, and aggressively adopting these options for emission-free logistics.
Authors Bio: Ayush Chakraborty is currently pursuing PGP at the Indian School of Business and is an alumnus of IIT-BHU, Varanasi. He brings in his experience while working in the FMCG and Fintech industries. He has worked in the supply chain divisions of Unilever and AB InBev, where he contributed to building sustainable strategies for global operations before transitioning to a Strategic role at Jodo. He is passionate about sustainability and clean energy, continuously seeking innovative solutions to drive environmental impact.
Authors Bio : Nishant Gupta is currently pursuing PGP at the Indian School of Business and is an alumnus of the Punjab Engineering College, Chandigarh. Working at the centre of sustainability and analytics, Nishant has developed data science-led solutions for CPG companies to eliminate wastage and optimise demand planning and energy consumption. Passionate about accelerating the transition to net zero, Nishant seeks innovative renewable energy and clean mobility space solutions.
DISCLAIMER : The views expressed in this blog/article are author’s personal.