Mobilising Electric Vehicle Financing in India, a report released by NITI Aayog and Rocky Mountain Institute (RMI) India analysed that the transition to EVs will require a cumulative capital investment of Rs 19.7 lakh crore including EVs, charging infrastructure, and batteries over the next decade. The report highlights the role of finance in India’s transition to electric vehicles (EVs).
Identifying the market size of Rs 3.7 lakh crore for the financing of EVs in 2030, it stated that it is about 80 per cent of the current size of India’s retail vehicle finance industry which is worth Rs 4.5 lakh crore at present.
According to Amitabh Kant, CEO, NITI Aayog, “The need of the hour is to mobilise capital and finance towards EV assets and infrastructure.” Adding on he said, “As we work towards accelerating the domestic adoption of EVs and push for globally competitive manufacturing of EVs and components like advance cell chemistry batteries, we need banks and other financiers to lower the cost and increase the flow of capital for electric vehicles.”
The EV ecosystem in India has been focussing on overcoming the adoption hurdles in terms of technology cost, infrastructure availability, and consumer behaviour. Another significant hurdle is financing that needs to be addressed to pace up India’s transition to electric mobility. At present, the users are facing various challenges including high-interest rates, high insurance rates, and low loan-to-value ratios.
In an effort to curb these challenges, NITI Aayog and RMI have identified a toolkit of 10 solutions that financial institutions such as banks and non-banking financial companies (NBFCs), as well as the industry and the government, can put in action to catalyse the required capital.
Clay Stranger, Senior Principal, Rocky Mountain Institute, said, “Re-engineering vehicle finance and mobilising public and private capital will be critical to accelerating the deployment of the 50 million EVs that could be plying on India’s roads by 2030.”
The 10 solutions recommended in the report include financial instruments such as priority-sector lending and interest-rate subvention. Others are related to creating better partnerships between OEMs and financial institutions by providing product guarantees and warranties. Furthermore, a developed and the formal secondary market can improve the resale value of EVs and improve their bankability. “The identified barriers within EV finance need to be tackled in a structured manner with innovative financing models,” said Randheer Singh, Senior Specialist at NITI Aayog.
Besides finance, the report also recommends digital lending, business model innovation, fleet and aggregator electrification targets, and the creation of an open data repository for EVs. Further, it determines that investment in India’s transition to electric mobility has the potential to create significant economic, social, and environmental benefits for the country. As the economics of EVs continue to improve, new business models and financing instruments gain acceptance, and government programmes drive early adoption and promote domestic manufacturing, India’s EV market is poised for growth in the coming decade.
(With inputs from PIB)