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— 1 —
A TOOLKIT OF SOLUTIONS TO MITIGATE RISKS AND ADDRESS MARKET BARRIERS
BY NITI AAYOG AND ROCKY MOUNTAIN INSTITUTE, JANUARY 2021
MOBILISING FINANCE
FOR EVs IN INDIA — 2 —
ABOUT THE AUTHORS
ABOUT NITI AAYOG
The National Institution for Transforming India (NITI Aayog) was formed via a resolution of the Union Cabinet
on 1 January 2015. NITI Aayog is the premier policy ‘Think Tank’ of the Government of India, providing
both directional and policy inputs. While designing strategic and long-term policies and programmes for
the Government of India, NITI Aayog also provides relevant technical advice to the Centre and States. The
Government of India, in keeping with its reform agenda, constituted the NITI Aayog to replace the Planning
Commission instituted in 1950. This was done in order to better serve the needs and aspirations of the people
of India. An important evolutionary change from the past, NITI Aayog acts as the quintessential platform of
the Government of India to bring States to act together in national interest, and thereby fosters Cooperative
Federalism.
ABOUT ROCKY MOUNTAIN INSTITUTE (RMI)
Rocky Mountain Institute (RMI)—an independent non-profit founded in 1982—transforms global energy use to
create a clean, prosperous, and secure low-carbon future. It engages businesses, communities, institutions, and
entrepreneurs to accelerate the adoption of market-based solutions that cost-effectively shift from fossil fuels to
efficiency and renewables. RMI has been supporting India’s mobility and energy transformation since 2016. — 3 —
AUTHORS AND ACKNOWLEDGMENTS
AUTHORS
NITI AAYOG
Amitabh Kant
Randheer Singh
ROCKY MOUNTAIN INSTITUTE
Clay Stranger
Ryan Laemel
RMI INDIA
Akshima Ghate
Isha Kulkarni
*Authors listed alphabetically.
CONTACTS
NITI Aayog: Randheer Singh (singh.randheer@gov.in)
Rocky Mountain Institute:
Ryan Laemel (rlaemel@rmi.org)
RMI India: Isha Kulkarni (ikulkarni@rmi.org)
ACKNOWLEDGMENTS
The authors would like to thank the following
organisations and individuals for offering their
insights and perspectives on this work:
• RMI India – Mandar Patil
• Rocky Mountain Institute – Pranav Lakhina,
Radhika Lalit, Ali Rotatori
• Areon Mobility – Abhinav Singh, Aman Singh
• Autovert – Sachin Mehta
• Axis Bank – Sumit Bali
• Council on Energy, Environment and Water –
Vaibhav Pratap Singh, Abhinav Soman
• CDC Group – Veronica Di Bella, Akshara Gopinath
• EVage – Sonali Bagchi, Inderveer Singh
• Micelio – Anand GCP, Vidyashankar M,
Vasudevan Rajesh
• Natural Resources Defense Council – Charu Lata,
Polash Mukerjee, Poonam Sandhu
• RevFin – Sameer Aggarwal
• Tata Motors – Dipanjan Banerjee, Sharan Singh
• World Bank Group – Suvranil Majumdar
SUGGESTED CITATION
NITI Aayog and Rocky Mountain Institute, Mobilising
Finance for EVs in India: A Toolkit of Solutions to
Mitigate Risks and Address Market Barriers, January
2021.
Available at NITI Aayog:
http://www.niti.gov.in/
Available at Rocky Mountain Institute:
https://rmi.org/insight/mobilizing-finance-for-evs-in-
india/
Available at RMI India:
https://rmi-india.org/insight/mobilising-finance-for-
evs-in-india/
Images courtesy of iStock/Shutterstock unless
otherwise noted.
The views and opinions expressed in this document
do not necessarily reflect the positions of the
institutions or the government. While every effort
has been made to verify the data and information
contained in this report, any mistakes or omissions
are attributed solely to the contributors and not to
the organisations they represent. — 4 —
On behalf of NITI Aayog and Rocky Mountain Institute, it is our pleasure to introduce this report, Mobilising Finance
for EVs in India: A Toolkit of Solutions to Mitigate Risks and Address Market Barriers. The report identifies solutions to
direct capital and financing to aid in India’s EV transition.
India has signalled that the future of mobility is electric. The economics of vehicle electrification are improving, with
battery pack prices decreasing from about INR75,000/kWh in 2010 to INR13,000/kWh in 2019. Despite a dip in EV sales
in 2020, due to the economic effects of COVID-19, confidence in India’s EV future will continue to grow as technology
costs decline further, operators gain experience with EVs, and new business models prove their viability.
Yet, many well-documented barriers to EV adoption remain, ranging from technology cost to infrastructure buildout
to consumer behaviour. The public and private sectors are diligently working together on solutions to each of these
barriers. These solutions include:
• Production-Linked Incentive (PLI) Scheme, with an outlay of INR18,100 crore (USD2.4 billion) for the Advanced
Chemistry Cell battery sector
• Faster Adoption and Manufacturing of Electric Vehicles (FAME) India Scheme, Phase II with an outlay of
INR1,000 crore (USD135 million) for the deployment of charging infrastructure
The need of the hour, however, is the mobilisation of capital and finance towards EV assets and infrastructure.
According to this report, the quantum of capital and finance required for India’s EV future is considerable. Between
2020 and 2030, the estimated cumulative capital cost of the country’s EV transition is INR19.7 lakh crore across
vehicles, charging stations, and batteries. The projected size of the annual loan market for EVs is INR3.7 lakh crore
in 2030.
Multistakeholder collaboration and innovative solutions are needed to
access low-cost financing at this scale. Financial institutions, industry
players, government bodies, and civil society must work together to
ensure that the solutions outlined in the report are explored.
Innovations in finance and technology can accelerate the country’s shift
to shared, electric, and connected mobility. Two widely cited photos
illustrate this point. In the first, dated 1900, it is very difficult to locate the
first car on Fifth Avenue in New York City. In the second, dated 1913, it
is more difficult to locate the horse carriage among a sea of cars on the
same street.
What fuelled this rapid transition? Ford reduced the cost of a car by
62 percent in 13 years, and General Motors and DuPont invented auto
loans. We are seeing similar technological and financial innovation at
work today.
We would like to express our gratitude to those who generously
contributed their time and expertise to this report. We look forward to
working together to implement these solutions and others to support
India’s EV goals.
Sincerely,
Shri Amitabh Kant (CEO, NITI Aayog)
and Mr. Clay Stranger (Senior Principal, RMI)
FOREWORD
Both photos are of New York City’s Easter
parade and were taken 10 years apart.
Top (1900) by the National Archives and
Records Administration. Bottom (1913) by
the Library of Congress. — 5 —
EXECUTIVE SUMMARY.....................................................................................................................
INTRODUCTION....................................................................................................................................
INDIA’S VEHICLE FINANCE INDUSTRY......................................................................................
BARRIERS TO SCALING UP FINANCE .......................................................................................
TOOLKIT OF SOLUTIONS TO MOBILISE FINANCE ..............................................................
SIZE OF THE OPPORTUNITY..........................................................................................................
PATH FORWARD..................................................................................................................................
ENDNOTES ............................................................................................................................................
TABLE OF CONTENTS
06
08
13
19
25
35
37
39 — 6 —
The Government of India (GoI) has made an
ambitious commitment to the creation of demand for
EVs through the Faster Adoption and Manufacturing
of (Hybrid and) Electric Vehicles (FAME) India
Scheme. Additionally, the promotion of domestic
manufacturing through the National Mission on
Transformative Mobility and Battery Storage has
supplemented the scheme. As the economics of
electric vehicles (EVs) continue to improve and
new business models gain acceptance, India’s EV
market is poised for significant growth in the coming
decade.
Key barriers related to EV adoption—including
technology cost, infrastructure availability, and
consumer behaviour—must be overcome. Incentives
that reduce the upfront cost of EVs, such as the
FAME II incentive in India or federal tax rebates in
the US, are a critical first-order solution to address.
Although less commonly discussed, financing—in
terms of the cost and quantum of capital—is another
hurdle for India’s electric mobility transition. End-
users currently face a range of challenges. High
interest and insurance rates apply to retail loans,
loan-to-value ratios are low, and specialised finance
options are limited.
According to our analysis of future passenger and
freight vehicle sales, India’s weighted-average EV
sales penetration has the potential to be about
70 percent in 2030. This value is based on
forecasted cost competitiveness and expert
interviews.
The quantum of finance required for this EV
adoption scenario is considerable. Between 2020
and 2030, the estimated cumulative capital cost of
the country’s EV transition will be INR19.7 lakh crore
(USD266 billion)—across vehicles, electric vehicle
supply equipment (EVSE), and batteries (including
replacements). The estimated size of the annual
EV finance market will be INR3.7 lakh crore
(USD50 billion) in 2030.
1
We have identified 10 solutions that financial
institutions (FIs), the EV sector, and the government
can adopt to help mobilise the capital and financing
associated with India’s EV transition. These include
six targeted instruments and four ecosystem
enablers:
TARGETED INSTRUMENTS
1. Priority sector lending (PSL): The Reserve
Bank of India (RBI) requires 40 percent of net
bank credit to be deployed towards priority
sectors. Inclusion of EVs in PSL guidelines would
incentivise banks to increase lending towards
the sector.
2. Interest rate subvention: Subventions act as
a subsidy on commercially offered interest
rates, with the government bearing the balance
through associated banks. Such schemes would
substantially improve the affordability of loans.
They have already been enacted in other sectors
and at a state level for EVs in Delhi.
3. Product guarantees and warranties: Reducing
the uncertainty associated with EV models will
improve their bankability. Original equipment
manufacturers (OEMs) can provide assurances
in the form of guarantees (to FIs) and warranties
(to buyers) on the performance of their products.
4. Risk-sharing mechanism (government and
multilateral-led): Mechanisms and facilities that
partly or entirely cover possible losses associated
with financing EVs (due to their unclear resale
value) can be capitalised at the national or
multilateral level. These would distribute risk and
provide FIs with an opportunity to build their trust
in the sector.
5. Risk-sharing mechanism (fleet operator-led):
Fleet operators and final-mile delivery companies
can leverage their existing FI relationships to
provide partial credit guarantees and utilisation
guarantees to driver-partners. They could share
the risk between stakeholders in case of default
and enhance loan availability for delivery drivers.
EXECUTIVE SUMMARY — 7 —
6. Secondary market development: Industry-led
buyback programmes and battery-repurposing
schemes will help OEMs and the central
government catalyse a secondary market for EVs.
This would improve the residual value of EVs,
providing FIs with an avenue for resale in case of
borrower default.
ECOSYSTEM ENABLERS
• Digital lending: Digital sourcing, underwriting, and
sanctioning can streamline EV loans by helping
overcome the operational and logistical challenges
of vehicle financing.
• Business model innovation: Piloting and
commercialising new business models, combined
with the flow of patient capital, can demonstrate
the potential of the sector. Additionally, they would
help build trust in EVs and normalise them in the
market.
• Fleet and aggregator electrification targets:
The electrification of final-mile delivery, ride-
hailing, and corporate transport fleets can act as
a strong market signal for stakeholders across the
ecosystem, especially OEMs and FIs.
• Open data repository for EVs: FIs need access to
data on EV specifications, real-world drive cycles,
actual charging costs, and operating expenditures.
This will help such institutions accurately assess
risk, determine appropriate interest rates, and
design effective leasing programmes.
Together, these solutions aim to mitigate risks
associated with technology, policy, manufacturers,
resale, utilisation, maintenance, and customers.
They aim to improve the confidence of FIs in
financing EVs for end-users. These solutions will
likely play important roles in India’s economic
recovery following COVID-19 by supporting EV sales,
manufacturing, and business models—all of which
can boost job creation and local value addition.
Engaging Indian FIs in the electric mobility dialogue
will be critical to operationalising these solutions.
Convening stakeholders from the financial industry,
OEMs, fleet operators, government, and others can
help prioritise EV financing. Identifying actionable
steps is key to working towards implementation.
In addition, FIs need help to understand EV
technology and business models, and stay up to
date with the policy landscape. Educational materials
can help lower risk and increase confidence. Finally,
innovative procurement and leasing initiatives that
lead to early deployments at scale can help prove
the techno-economic viability of EVs and increase
supply-chain investments.
Supporting the design of effective financing
solutions can help unlock the capital needed
for India’s EV transition. We look forward to
collaborating with partners across the EV ecosystem
to elevate the role of finance.
EXECUTIVE SUMMARY — 8 —
INDIA’S ELECTRIC MOBILITY OPPORTUNITY
India has made a strong commitment to electric
mobility.
1
The country’s EV transition is gaining
traction due to: 1) demand creation, 2) state
EV policies, and 3) domestic manufacturing.
Simultaneously, the market for electric mobility in
India is growing, enabled by policy, compelling and
improving economics, and the emergence of new
business models and investment opportunities.
1. DEMAND CREATION
In 2015, the Department of Heavy Industry,
Government of India, launched its flagship incentive
programme, the FAME India Scheme, to accelerate
EV adoption.
• FAME I supported 2.8 lakh electric and hybrid
vehicles, with demand incentives totalling about
INR970 crore (USD130 million)—saving nearly
7 crore litres of fuel and abating over 17.2 crore kg
of CO
2
.
2
• FAME II began in April 2019, with an outlay
of INR10,000 crore (USD1.4 billion). It aims to
drive large-scale adoption of EVs and charging
infrastructure and develop a robust domestic
EV ecosystem. EVs eligible under FAME II can
cumulatively save 74 lakh tonnes of carbon dioxide
(MtCO
2
) emissions over their lifetime.
3
At the central level, multiple interventions are
being implemented to support demand creation.
For example, the Goods and Services Tax (GST)
on EVs sold with batteries was reduced from
12 to 5 percent. The Ministry of Road Transport and
Highways exempted EVs from permit requirements
and recommended that states reduce or waive road
taxes for EVs.
4
Additionally, the Ministry of Housing
and Urban Affairs amended the Model Building Bye-
Laws, 2016, to establish charging stations in private
and commercial buildings.
5
2. STATE EV POLICIES
At the subnational level, 10 states have notified EV
policies that are being implemented, while six others
are drafting their EV policies.
INTRODUCTION
EXHIBIT 1: CUMULATIVE LIFETIME OIL AND NET CO
2
SAVINGS OF VEHICLES ELIGIBLE UNDER FAME II
VEHICLES1.56 MN
17.2
7.4
1 MN
3.0
2.6
0.5 MN
7.2
3.2
55,000
2.5
0.1
7,000
4.5
1.5
OIL SAVINGS
(INR ‘000 CRORE)
NET CO
2
EMISSIONS
SAVING (MILLION
METRIC TONNES)
TOTAL
2W 3W 4W BUS — 9 —
3. DOMESTIC MANUFACTURING
Under the FAME II guidelines, incentives are
available only for EVs with a predefined level
of localisation. The goal is to promote domestic
component manufacturing. The industry shows
promise, with OEMs introducing a range of new EV
products over the past year. Several states, such
as Karnataka and Maharashtra, have also made
manufacturing a focal point of their state EV policies,
by offering fiscal benefits to create EV clusters.
In addition, the National Mission on Transformative
Mobility and Battery Storage was approved in
March 2019. Its goal is to increase domestic battery
manufacturing and accelerate the adoption of
e-mobility. Its focus areas include creating roadmaps
for Advanced Chemistry Cell (ACC) battery
manufacturing, formulating phased manufacturing
programmes (PMP) for batteries, developing
Corporate Average Fuel Economy (CAFE) norms, and
leveraging Make in India. The GoI cabinet recently
approved the PLI scheme to encourage ACC
manufacturing with an outlay of INR18,100 crore.
ECONOMICS OF ELECTRIFICATION
The economics of EVs are improving yearly, driven
by a reduction in battery prices and improvements
in vehicle efficiency. Many segments and use cases
are already showing competitiveness with internal
combustion engine (ICE) vehicles based on a total
cost of ownership (TCO).
• Electric two-wheelers: Final-mile delivery is
a promising use case, as significant fuel-cost
reductions are possible. There exist both national
(i.e., INR20,000 under FAME II) and state subsidies
(e.g., INR5,000/kWh under the Delhi EV policy,
plus a top-up of INR7,500/kWh for the first one
lakh EVs registered in Delhi).
However, even without incentives, at the same
interest rate ICE vehicles (ICEVs) receive, electric
two-wheelers for goods delivery could reach TCO
parity (at about INR 2/km) with equivalent petrol
models by the end of 2020.
6
EXHIBIT 2: STATUS OF STATE EV POLICIES AS OF JANUARY 2021
NOTIFIED DRAFT
S.
NO.
STATEDAY MONTH YEAR
TIME
SINCE
(MONTHS)
1
2
3
4
5
6
7
8
9
10
25
th
14
th
8
th
10
th
7
th
16
th
1
st
2
nd
6
th
7
th
2017
2018
2018
2019
2019
2019
2019
2019
2020
2020
39
34
31
21
17
15
14
13
5
5
SEPTEMBER
FEBRUARY
JUNE
MARCH
AUGUST
SEPTEMBER
NOVEMBER
DECEMBER
AUGUST
AUGUST
KARNATAKA
MAHARASHTRA
ANDHRA PRADESH
KERALA
UTTAR PRADESH
TAMIL NADU
MADHYA PRADESH
UTTARAKHAND
TELANGANA
DELHI
NOTIFIED
DRAFT
1
2
3
4
5
6
8
th
14
th
23
rd
15
th
16
th
11
th
2018
2019
2019
2019
2020
2020
28
16
15
14
10
1
SEPTEMBER
JUNE
SEPTEMBER
NOVEMBER
MARCH
DECEMBER
ASSAM
BIHAR
GUJARAT
PUNJAB
GOA
HARYANA
INTRODUCTION — 10 —
• Electric three-wheelers: In the ride-hailing use
case, electric auto-rickshaws are close to cost
parity based on TCO, especially in Tier-2 and
Tier-3 cities, where shorter trip distances require
smaller batteries (i.e., less than 3 kWh).
7
In the
final-mile delivery use case, electric three-wheelers
are already cheaper than their CNG counterparts
on a TCO basis (at about INR2.5/km) in some
geographies such as Delhi. This is primarily due
to national and state incentives, including interest
rate subvention.
8
• Electric four-wheelers: It is generally not yet
economical to electrify private cars. However,
evidence from EV fleets, such as BluSmart,
suggests that electric ride-hailing cars are already
economical in cases where vehicle utilisation is
between 150 and 220 km/day.
9
EXHIBIT 3: RECENT DEVELOPMENTS IN INDIA’S START-UP ELECTRIC MOBILITY ECOSYSTEM.
14,15,16,17
• Electric buses: Analysis suggests that the TCO
of an intra-city electric bus (e-bus) is lower
than an equivalent diesel bus in a bus-to-bus
comparison (at INR47/km for a 12-meter AC bus
with a daily utilization of 200 km).
10
However, for
fleet conversion, this may vary depending on
local costs and service requirements. Studies
have indicated that more than one e-bus may be
required to replace one conventional bus due to
range limitations of early generation electric buses.
However, proper planning and charging strategies
can reduce this replacement ratio.
11,12
INVESTMENT OPPORTUNITIES
Significant venture capital has flown into the
ecosystem. Indian EV start-ups have raised
INR4,490 crore (USD601 million) between 2014
and 2019, highlighting the potential of EV business
models.
13
Industry analysts expect the shared mobility market
to experience rising demand. Ride-hailing and rental
applications could see up to 50 and 100 percent year-on-
year growth through 2025, respectively.
RIDESHARE
Electrification of freight use cases is on the rise. Flipkart
became the first e-commerce marketplace to commit to
100 percent adoption of EVs by 2030, joining The Climate
Group’s EV100 coalition of companies.
DELIVERIES
The International Finance Corporation (IFC) invested
INR60 crore (USD8 million) in Bengaluru-based Lithium
Urban Technologies, an electric commuter services
provider, in April 2018.
COMMUTER
SERVICES
Mitsui invested INR150 crore (USD20 million) in Delhi-based
SmartE, an electric last-mile service provider, in July 2019.
LAST-MILE
CONNECTIVITY
INTRODUCTION — 11 —
BARRIERS TO EV ADOPTION
Despite improving economics and growth across the
ecosystem, many well-documented barriers to EV
adoption in India remain, including:
1. Technology cost: In a few segments, the high
upfront cost of EVs is slowing adoption despite
the potential for lower TCO. There is an ongoing
need to further reduce the upfront cost and TCO
in many use cases through various instruments.
2. Policy implementation: National-level policy can
be complemented with added fiscal incentives at
the state level. Non-fiscal incentives will also be
important in developing a favourable operating
environment and customer confidence for EVs.
3. Manufacturing and supply: Despite growing
product diversity, there is still a need for greater
customized product and model availability,
and more fit-for-purpose models. Further, more
domestic manufacturing of advanced batteries
and cells, battery management systems, electric
motors, motor controllers, and other components
is needed. OEM capital has recently focused on
the migration of ICEVs to Bharat Stage VI (BSVI)
standards, while the industry is experiencing
lower sales due to COVID-19. This is hampering
supply-side investment in EVs.
4. Infrastructure buildout: The introduction of
advanced batteries and longer-range vehicle
modes can address customer concerns about
range. Alongside these developments, electricity
distribution companies (discoms), charging
service providers, and other actors can focus on
building robust charging infrastructure networks.
Using smart technology that communicates with
the electric grid will unlock additional value from
demand-side management.
5. Consumer behaviour: Demand for more
affordable EV products is expected, as
consumers reduce spending in the short
term due to COVID-19. This potential shift in
consumer preferences may affect manufacturers’
investment and production decisions.
EV FINANCE
In addition to these commonly discussed barriers,
access to low-cost finance is still a formidable
barrier that warrants multistakeholder attention
and innovative solutions. EV sales are expected
to slow in the short term due to: 1) the economic
impact of COVID-19 and 2) the recent investment
flow by OEMs towards BSVI standards (April 2020).
Improving access to attractive financing products
can be key to drive EV demand.
19
High financing cost and uncertainty around long-
term economics—including resale value—remain
both real and perceived issues for FIs. There are
risks associated with the nascency of the electric
mobility ecosystem. They have given rise to
problems such as high interest and insurance rates,
low loan-to-value ratio, and limited financing options
for retail customers. This may lead to unsecured
borrowing from the unorganized sector at even
higher rates.
Further, both the vehicle finance and EV sectors
are diverse. Levels of TCO parity and incentive
structures available for each segment, use case,
and stakeholder are different. Private electric two-
wheelers, for example, would have vastly different
parameters to consider in financing compared to
e-buses used for public transport. This creates the
need for government, industry, and FIs to collaborate
on a set of customised EV financing solutions. It also
creates a role for OEM-owned financial companies
to help define the market.
INTRODUCTION — 12 —
PURPOSE OF THIS REPORT
Mobilising Finance for EVs in India: A Toolkit of
Solutions to Mitigate Risks and Address Market
Barriers aims to serve the following purposes:
• Landscape assessment: Take stock of the
structure, stakeholders, and practices in India’s
conventional vehicle finance ecosystem and its
emerging EV finance ecosystem.
• Barrier assessment: Understand current barriers
and risks associated with lending to EVs, and
scaling up the size of the financing market and
diversity of products for EVs.
• Solution identification: Create a toolkit of short-,
medium-, and long-term solutions to help FIs,
government, and other stakeholders enable low-
cost EV financing.
INTRODUCTION — 13 —
CONTEXT AND OVERVIEW
India’s retail vehicle finance industry has evolved
since the 1990s to be worth an estimated INR4.5
lakh crore (USD60 billion) today.
20,21,22
This is
primarily a result of economic liberalisation and
growth in the automotive market.
As of 2020, the flow of finance from the organised
sector (i.e., banks and non-banking financial
companies (NBFCs)) is about:
• 50 percent to four-wheeler passenger vehicles (PVs)
• 40 percent to commercial vehicles (CVs)
• 10 percent to tractors and two-wheelers
Financing penetration—i.e., the share of vehicles
financed through loans by the organised sector—
varies by segment and is expected to be:
• 35 to 50 percent for all two-wheelers
• 80 percent for all four-wheeler PVs
• 95 percent for new light-, medium-, and heavy-
duty CVs
INDIA’S VEHICLE FINANCE INDUSTRY
Financing penetration seems to be associated
with economics and use cases of vehicles. Less
expensive segments and use cases are seeing lower
levels of financing and vice-versa. The unregulated
autorickshaw segment is unique. Here, the
penetration of financing by the organised sector is
very low due to the high-risk nature of borrowers.
Preowned CVs are more affordable for driver-
owners, who may also not be seen as bankable.
This could be one of the reasons for lower
penetration of financing. For all new CVs,
penetration is high. Fleet operators’ prefer to have
loans linked to the vehicles instead of their balance
sheets.
Loan tenures for different segments are generally
similar (about three to four years, except for two-
wheelers, which are shorter). Loan-to-value (LTV)
ratios, i.e., the portion of asset value financed,
vary—from 70 to 75 percent of the vehicle for two-
wheelers to 80 to 90 percent for CVs. Interest rates
are usually floating, rather than fixed, and vary by
lender. — 14 —
EXHIBIT 4: KEY STAKEHOLDERS IN INDIA’S VEHICLE FINANCE INDUSTRY
KEY STAKEHOLDERS
Captive vehicle
financiers
Insurance companies
Non-captive vehicle
financiers
Insurance agents or
brokers
Fintech companies
Bajaj Finance,
Mahindra & Mahindra
Financial Services,
Tata Motors Financial
Services
Bharti AXA, HDFC
Ergo, ICICI Lombard
Cholamandalam
Finance, IndoStar
Capital, Manappuram
Finance, Shriram
Transport Finance
Global-India
Insurance Brokers,
Hero Insurance
Broking, Mahindra
Insurance Brokers
RevFin, Three Wheels
United (TWU)
OEM-owned NBFCs that provide specialised
and subvention-linked products to
customers
State- or privately-owned insurance
providers often allied with banks or non-
captive financiers
Other privately owned NBFCs that provide
smaller pools of finance at higher interest
rates in non-metro areas
Privately owned companies that aggregate
and negotiate insurance offerings, often
allied with captive financiers to provide
specialised products at dealerships
Privately owned companies that lend
through technology and digital platforms
Venture capital funds
National development
banks
Multilateral/ bilateral
development banks
Micelio Fund,
Sequoia Capital
Indian Renewable
Energy Development
Agency (IREDA),
Small Industries
Development Bank of
India (SIDBI)
Asian Development
Bank (ADB),
CDC Group,
World Bank Group
Private investors that provide equity to
mobility startups, early-stage ventures and
fintech
State-owned Indian FIs that provide equity
and/or debt to mobility startups, large fleet
owners, and businesses for sustainable
economic development
Publicly owned international FIs that provide
equity and/or debt to banks, NBFCs, and
businesses for transitioning fleets for
sustainable economic development
NBFCs
LONG-TERM
INVESTORS
MOTOR
INSURANCE
OTHER DEBT/EQUITY CAPITAL
INSURANCE
CATEGORY STAKEHOLDEREXAMPLESDESCRIPTION
BANKS
FINANCING
Public sector
undertaking (PSU)
banks
Private sector banks
Bank of India,
Canara Bank, State
Bank of India (SBI)
Axis Bank, HDFC
Bank, ICICI Bank,
IndusInd Bank
State-owned commercial FIs that provide
longer tenure, lower interest loans
Privately owned FIs that specialise in larger
transactions for institutions, fleets, and
vehicles in urban areas
INDIA’S VEHICLE FINANCE INDUSTRY — 15 —
BANKS AND NBFCs
Initially, NBFCs had the largest market share in the
vehicle finance industry. Later, private and public
banks and OEM-owned captive vehicle financiers
emerged as key players. Recently established
fintech companies have also found a niche in digital
lending for vehicles.
Banks made up 56 percent of the market share
in India in FY19, the rest being NBFCs. Both
these categories specialise in lending to different
customers.
23
Broadly, banks dominate the four-
wheeler passenger vehicles market. Captive NBFCs
are particularly active in lending for two-wheelers,
while non-captive NBFCs are prominent in the
commercial vehicle market.
MOTOR INSURANCE AND LONG-TERM
INVESTORS
The vehicle (‘motor’) insurance industry is diverse
and spurred by investment and support from banks,
NBFCs, and OEMs. It comprises companies and
brokers or agencies that act as aggregators and
negotiators.
Long-term investors, such as development banks,
facilitate infrastructure loans to governments, and
business-level debt or equity for FIs and logistics
companies. Venture capital spurs the mobility
ecosystem through early-stage investment.
THE CURRENT LANDSCAPE OF EV FINANCE
VEHICLE FINANCING
Only recently have specialised EV loans been
introduced. Most segments, other than e-rickshaws,
lack specialised products.
E-RICKSHAW LOANS
With the rapid growth of the e-rickshaw market,
FIs are offering dedicated, collateral-free loans:
• IndusInd Bank partnered with OEM Lohia Auto
Industries (in March 2017). The bank offers retail
vehicle finance for three-wheeler electric models
across 11 Indian states. While interest rates are
floating, loans are offered directly through the
dealer, making the process hassle free.
• Ujjivan Small Finance Bank signed a memorandum
of understanding (MoU) with OEM Green Shuttle
Technology (in July 2019). It offers passenger and
cargo three-wheeler loans at attractive interest
rates.
• Bank of India and Punjab National Bank offer
e-rickshaw financing with LTV ratios of up to
85 percent. The maximum tenure is 48 months.
• Micro Units Development and Refinance
Agency (MUDRA) loans were designed to
support microenterprises in India. MUDRA
provides refinance support to banks, NBFCs
and microfinance institutions in lending up to
INR10 lakh (USD13,500). E-rickshaws are eligible
for MUDRA loans.
24
These recent initiatives require income tax returns
and credit scores, which are often difficult for
e-rickshaw drivers to provide. As a result, financing
penetration remains low.
INDIA’S VEHICLE FINANCE INDUSTRY — 16 —
ELECTRIC FOUR-WHEELER LOANS
The economics of shared mobility services like ride
hailing are compelling. Such services can benefit
significantly from specialised financing solutions for
electric cars.
SBI started the Green Car Loan, the only specialised
product for electric cars, in April 2019. Highlights
include:
• A discount of 20 basis points on existing car loan
interest rates. As of September 23, 2020, SBI’s
mean interest rate for all cars was 9.52 percent,
indicating that on average the SBI Green Loan
would charge an interest rate closer to 9 percent.
• To reduce costs, the processing fees for the first
six months of the scheme was waived.
• The maximum repayment period was increased to
eight years.
• An LTV ratio as high as 90 percent is offered.
BUSINESS MODEL INNOVATION
Innovative business models and procurement
schemes aim to make up for low financing
penetration. Their focus is on reducing upfront costs
and technological risk by leveraging leasing, battery
separation, and economies of scale.
INDIA’S VEHICLE FINANCE INDUSTRY — 17 —
Equity/personal
funds
Retail loans/
vehicle
financing
Demand
aggregation/
bulk
procurement
(in between
purchase and
lease-all)
Debt/corporate
loans
Fleet operators
or owners buy
vehicles through
equity or personal
funds.
Fleet operators
or owners buy
vehicles using
specific vehicle
loans.
A third party
purchases vehicles
in bulk, to leverage
economies of scale.
The vehicles are
sold or subleased
to fleet operators or
drivers.
Fleet operators
or owners buy
vehicles through
company-level debt
or other loans.
• Provides greater
control over
assets
• No dependency
on other
stakeholders
• Loans are linked
to vehicles rather
than the balance
sheet
• Room to raise
debt for other
functions
• Higher volume
reduces
transaction and
unit costs
• Diversified risk
exposure is across
the customer pool
if the technology
is underutilised
• High upfront cost
for the owner
• Subject to high
interest
• Low LTV ratios
• Success is
dependent on
procurement
volume
• Requires
interagency
coordination
• Reduces capacity
to raise debt for
operations or
expansions
• Bangalore-based
Lightning Logistics
purchased its final-mile
delivery fleet entirely
through equity.
• The SBI Green Car
Loan programme
offers financing for
e-4Ws.
26
• EESL leased electric
cars to ride-hailing
company BluSmart.
So far 300 EVs,
procured in bulk from
Mahindra & Mahindra
and Tata Motors, have
been leased.
• In 2017, Energy
Efficiency Services
Ltd. (EESL) issued
green bonds worth
INR640 crore (USD100
million) to support
its environmentally
focused initiatives.
25
Y
Y
Y
Y
BUSINESS
MODEL
PRESENT
IN INDIA
(Y/N)
FINANCING
MECHANISM
DESCRIPTION KEY BENEFITS KEY DRAWBACKS EXAMPLES
PURCHASE
LEASE-ALL
Dry and end-
to-end leases
Wet lease/
operating
expense
(OPEX)
Fleet operators
or owners lease
vehicles from
OEMs. End-to-end
contract options
include repair
and maintenance
services.
The transit authority
or fleet owner
procures the EV
from fleet operators
and pays for service
on a per-kilometre
basis. The authority
or owner keeps
the fare revenue,
handles scheduling,
routing, service
standards. The
operator oversees
operations and
maintenance.
• Spreads
payments over
time
• Longer lease
term payments
comparable to ICE
segments
• The transit
authority or
owners assume
revenue risk
• Operators
assume financial,
technology, and
operational risks
• Require OEMs to
develop financial
and after-sale
service capacities
• Relies on
institutional
capacity and
interagency
coordination
• Requires greater
technical
assistance
• Areon Mobility is a
logistics company
leasing 30–40 e-2Ws
to final-mile delivery
companies. They aim
to grow to hundreds
of units.
• EESL offers a dry
lease model on
electric sedans to
State governments at
INR22,500 a month
for six years.
27
• The Department of
Heavy Industry (DHI)
and NITI Aayog have
recommended the
wet-lease model to
India’s State Transport
Undertakings (STUs).
They propose
deploying 5,595
e-buses under FAME
II via a Gross Cost
Contract (GCC).
Y
Y
EXHIBIT 5: BENEFITS AND DRAWBACKS FOR BUSINESS MODELS USED FOR ELECTRIC VEHICLES
INDIA’S VEHICLE FINANCE INDUSTRY
(CONTINUED) — 18 —
GOVERNMENT INTERVENTIONS
To lower the TCO of EVs, most government
initiatives have provided capital expenditure
(CAPEX) and annual operating expenditure
(OPEX) incentives. Prominent interventions aimed
specifically at financing include:
• DHI has recommended an OPEX-based model by
NITI Aayog to STUs. The model will deploy a total
of 5595 e-buses under FAME II.
• The Delhi EV Policy provides an interest rate
subvention of 5 percent on loans for buying
e-autos and e-carriers. Delhi Finance Corporation
(DFC) and its empanelled Scheduled Banks and
NBFCs are developing a scheme on interest rate
subvention. The Policy aims to bring more traction
to this price-sensitive and financially challenging
segment.
• The Kerala Finance Corporation (KFC) has created
a programme to provide low-cost loans for EVs
in the state.
29
Buyers pay a 20 percent down
payment and avail a 3 percent point interest
rate subsidy, resulting in an interest rate of
7 percent. Loans are capped at INR50 lakh and
have a tenure of up to 5 years. All registered
vehicle forms and both private and commercial
use-cases are eligible. A credit score of 680 or
higher is required, with salary slips to verify that
total deductions from their salary (including the
equated monthly installment of the loan) do not
exceed 80 percent of their gross salary.
BUSINESS
MODEL
PRESENT
IN INDIA
(Y/N)
FINANCING
MECHANISM
DESCRIPTION KEY BENEFITS KEY DRAWBACKS EXAMPLES
Battery
swapping
Pay-as-you-
save® (PAYS®)
28
Battery leasing
Fleet operators give
access to (owned,
leased, or shared)
battery swapping
stations. Affiliated
drivers can
purchase vehicles
without batteries.
Utilities purchase
batteries and
provide charging
infrastructure. Bus
operators repay
them over time at a
PAYS tariff.
A utility, OEM, or
third-party buys
batteries and leases
them to a fleet
owner or operator.
The vehicle is
financed separately.
• Separating the
battery cost to
make EVs less
capital intensive
for the vehicle
owners
• Better battery
management by
involving a battery
provider
• Improves the
potential to
monetise grid
services such as
demand response
• Procure the
battery at
minimum cost
• Leveraging the
utility’s balance
sheet, rate-basing,
and cost-recovery
mechanisms
• Reduce cost for
bus operators
• High upfront
cost for the
infrastructure
provider
• Heavily
dependent on the
financial health of
the utility
• Relies on utility’s
ability to pass on
increased rates
to offset battery
costs
• Limited OEM
battery offerings
• Nascent
legislative
environment
• Policies are still
being formulated
• Ola Electric has set
up battery-swapping
stations for two- and
three-wheelers in
Delhi in partnership
with discoms BSES
Yamuna and BSES
Rajdhani.
• Clean Energy Works
has designed PAYS
schemes for e-buses
in the US and South
America.
• India can achieve the
electrification of public
transport with this
model.
• PAYS for segments
such as two-wheelers
can be piloted through
private discoms.
• Proterra, a US e-bus
manufacturer, offers
a battery-leasing
programme. A city
procures the bus
without the battery
and leases the
battery from Proterra
through fixed-service
payments.
• Bengaluru-based,
Autovert is an IoT-
enabled leasing
firm for personal
mobility e-2Ws. In
addition to full vehicle
subscriptions, it is
setting up a battery
subscription facility.
Y
N
(however,
it is
common in
efficiency
financing)
Y (early
stages)
BATTERY SEPARATION
INDIA’S VEHICLE FINANCE INDUSTRY — 19 —
• ELECTRIC BUSES FOR CITY SERVICES VIA GCC
Debt finance requirements and fees (see Exhibit 6)
make it difficult for operators to purchase e-bus
fleets. Typically operators are required to finance
about 25 percent of the total capital cost as equity,
representing a significant down payment for a fleet
of e-buses.
30
Innovations are transforming the amount and
scale of financing needed, reducing costs and
risks associated with EVs. However, the following
examples illustrate that regardless of business
model and stakeholders involved, finance remains
a bottleneck:
• E-2WS FOR FINAL-MILE DELIVERY
Demonstrating business model viability is a
challenge for fleet operators. Many find it difficult
to access equity or debt to purchase vehicles
that they lease to drivers for deliveries. High
daily utilisation and robust charging networks are
needed for economical electrification.
• E-3WS FOR INTERMEDIATE PUBLIC TRANSPORT
Due to higher capital costs, drivers require
financing to purchase e-rickshaws or e-autos.
However, they lack a credit history to prove their
loan repayment ability. Unavailability of collateral
further limits their financing options.
BARRIERS TO SCALING UP FINANCE
EXHIBIT 6: BARRIERS TO FINANCING ELECTRIC BUSES FOR
CITY SERVICES VIA GCC
DEBT FINANCE
• Requires bank
guarantee
• Requires collateral
• 0.5–1.5 percent of
amount as fee
75%
EQUITY
25% — 20 —
KEY CHALLENGES
HIGH INTEREST RATES
Interest rates for EV loans tend to be higher than
ICE vehicles. For a privately operated electric car
in Delhi, banks charge a marginally higher interest
rate than a conventional vehicle.
31
However, a
commercially operated electric car could be charged
up to 14 to 15 percent, compared to 12 percent for a
diesel car.
32
The difference is more significant for e-2Ws, with
interest rates as high as 20 percent or more.
33
This
increases the equated monthly instalment (EMI) paid
by vehicle owners, adding to ownership costs.
LOW LOAN-TO-VALUE RATIOS
Banks offer loans for EVs with only partial financing
and a low LTV ratio to mitigate risk.
34
The low
LTV ratio ensures that the financier can recover
substantial costs in case of borrower default despite
a potentially low resale value.
Small operators or drivers may not possess the
equity to accommodate the low LTV ratio. They
will be forced to seek unsecured high-interest
supplementary loans from the unorganised sector.
COVID-associated fear of borrower default has
further lowered LTV ratios, worsening the problem.
LIMITED FINANCING OPTIONS
Most FIs in India do not offer specialised products
for EVs, except for the SBI Green Car Loan scheme.
In Norway, China, the UK, Australia, and other
countries, most leading banks offer such products,
contributing to high EV adoption rates. Operators in
India are forced to choose loans with high interest
rates, low LTV ratios, and shorter repayment periods.
Banks and NBFCs need collateral for EV loans in
addition to the vehicle, in cases where the credit
history of the borrower is unavailable or unreliable.
This increases the challenges faced by aspiring
EV operators and owners.
HIGH INSURANCE COSTS
EV owners also pay higher insurance than
conventional models. Since a vehicle’s insurance
cost is based on its CAPEX, the higher the upfront
cost, the higher the insurance premiums. For
example, the cost of insurance for a privately-owned,
commercially registered, self-driven car in Delhi is
INR0.29/km for an EV. However, for an equivalent
diesel ICE vehicle, it is INR0.18/km.
35
In some cases, insurance companies may perceive
higher risks of technology failure and high costs of
repair. As a result, they may ascribe higher rates
due to a lack of historical performance data on EV
products and business models.
BARRIERS TO SCALING UP FINANCE — 21 —
UNDERLYING CAUSES
The underlying factors to the above barriers can be categorised as asset risk and business model risk
(Exhibit 7). Asset risk is directly associated with the vehicle being financed. Business model risk relates to the
bankability of the borrower’s credit profile, expected utilisation, and operational patterns.
EXHIBIT 7: KEY CHALLENGES AND UNDERLYING CAUSES IN EV FINANCE
BARRIERS TO SCALING UP FINANCE
LOW CONFIDENCE
OF FINANCING
KEY CHALLENGES
UNDERLYING CAUSES
HIGH INTEREST RATES
LOW LOAN-TO-VALUE
RATIO
LIMITED FINANCING
OPTIONS
HIGH INSURANCE
RATES
BUSINESS MODEL RISK
UTILISATION RISK
CUSTOMER RISK
OPERATIONS AND
MAINTENANCE RISK
TECHNOLOGY RISK
POLICY RISK
MANUFACTURER
RISK
RESALE RISK
ASSET RISK — 22 —
ASSET RISK
1. TECHNOLOGY RISK
FIs are risk averse due to the lack of reliable data
on EV performance—in terms of range, asset life,
maintenance requirements, load capacity, aand
more—especially in the Indian context.
Insurers are reluctant to insure what may be
considered unproven vehicles and components
due to unknown risks associated with short-
and long-term use. The lack of guarantees or
warranties from manufacturers exacerbates
these issues.
In the past five years, battery technology has
advanced significantly, and EV technology
continues to improve. Some FIs are concerned
that the assets they are financing today could
become obsolete in the future, similar to
smartphone technology.
2. POLICY RISK
Boosting FI confidence will increase lending and
other forms of financing to the EV sector. FIs are
keen to see durable and effective national- and
state-level policies. Clarity and certainty around
policies that support vehicle segments through
TCO parity will help. Lack of awareness on the
details of national- and state-level policies,
and challenges accessing incentives result in
increased risk perception around EV financing.
The geopolitical risk to global EV supply chains
could also contribute, especially in a post-COVID
economy. This may trigger a ‘wait and watch’
approach rather than the proactive financing and
investment needed.
3. MANUFACTURER RISK
While the EV market is growing, only a few EV
OEMs are established and proven. Most OEMs
lack historical data on product performance
and service. Additionally, FIs may not have
onboarded newer OEMs on formal lending
procedures.
OEMs may be selling EVs at low or negative
margins, due to the high capital cost of EVs,
creating a risk associated with their balance
sheets.
36
Cumulatively, this presents FIs with the
risk of lending for an unfamiliar, untrusted asset.
4. RESALE RISK
EVs have a reduced resale value due to the
nascent ecosystem and a lack of a secondary
market. In some segments (e.g., e-rickshaws),
although a secondary market exists, it is
unstructured, and the residual value of vehicles
is still unproven. Financiers are at risk if
borrowers default, as the repossessed vehicle
would be collateral for resale. This directly
contributes to higher interest rates and low LTVs.
Other risks associated with EVs—such as
major policy changes or poor technological
performance—also contribute to FIs fearing even
lower resale values.
BARRIERS TO SCALING UP FINANCE — 23 —
BUSINESS MODEL RISK
UTILISATION RISK
EVs have a high capital cost with low operating
expenses. This is different from ICE vehicles, where
variable costs are high. As a result, EVs are most
viable at high utilisation levels. For commercial
operators, the bankability of an EV is dependent
on the FI’s confidence in projected cash flows.
This requires the establishment of new business
models in India.
For example, public charging infrastructure is
still being built in most cities. For fleet operators,
utilisation depends on drivers being able to use
these charging stations. Charging at home is not
always an option for drivers, given grid reliability
and parking challenges. Such uncertainty and risk
can lower FI confidence in financing fleets for this
use case.
CUSTOMER RISK
Individual drivers need to opt for formal financing
due to the high upfront cost of EVs. Having
previously never borrowed from the organised
sector, they lack credit history that guarantees their
ability to pay back loans. FI criteria, such as personal
and family history, place of residence, or education
level may not be inclusive to first-time borrowers,
increasing the risk they represent.
OPERATIONS AND MAINTENANCE RISK
Operational aspects of EV use—such as battery
replacement, voltage fluctuations, or technical
requirements of charging infrastructure—are yet
to be understood in India. The vehicle’s lifecycle
may be shortened by a lack of awareness around
maintenance requirements and patterns, reducing
bankability. Improper maintenance due to the
absence of trained mechanics is also likely to
reduce an EV’s resale value.
ECOSYSTEM CHALLENGES
OPERATIONAL AND LOGISTICS COSTS
The vehicle financing industry is composed of a
vast number of small FIs run mostly through local
branches across India. They rely on manual labour
to collect documents and award loans. Many FIs,
especially NBFCs, have high OPEX, on account of
door-step collections and sales force payouts.
Changing products and procedures will need to
penetrate to all levels and all geographies within
India. However, reorientating and retraining existing
employees in EV financing will present FIs with
resource and time constraints.
NBFC LIQUIDITY ISSUES
The NBFC sector has been facing a liquidity
crunch since late 2018 following the bankruptcy of
Infrastructure Leasing & Financial Services (IL&FS).
This has tightened funding for vehicle financiers,
prompting a reduction in lending and increased risk
aversion in the sector.
37
New fintech-based EV lending models such as
Delhi-based RevFin and Bengaluru-based Three
Wheels United (TWU) enable access for high-risk
customers. Eventually, they may need access to low-
cost finance from larger banks, lest they fall prey to
the same problems faced by NBFCs today.
SEGMENT AND USE CASE ASSESSMENT
EV segments and use cases present different
considerations. Additionally, varying degrees of
asset and business model risk are associated with
them (see Exhibit 8).
BARRIERS TO SCALING UP FINANCE — 24 —
EXHIBIT 8: ANALYSIS OF BUSINESS MODEL RISK VS. ASSET RISK ACROSS SEGMENTS AND USE CASES
SEGMENT OR USE CASEBUSINESS MODEL RISKASSET RISK
E-2Ws – private
E-2Ws – delivery
E-cars – rideshare
E-cars – commuter services
E-cars – private
E-3W auto-rickshaws –
intermediate public
transport (IPT)
E-3W carriers – delivery
E-buses
Private e-2W customers are likely riskier to lend
to than private e-4Ws customers.
E-2W and e-3W delivery drivers with assured
utilisation contracts contribute to lower business
model risk.
E-buses benefit from a minimum guaranteed
run. However, customer risk is likely to be higher
because of poor credit and repayment histories.
Lack of guaranteed demand and utilisation may
result in high business model risk. IPT drivers
are also comparatively more disaggregated,
increasing the likelihood of default (nearly
30 percent).
E-3Ws lack repair and maintenance networks,
except in North India (Bihar, Delhi, Uttar Pradesh),
adding to the high business model risk.
E-4W commuter services are likely to have a
lower business model risk. Optimised routes
and the ability to meet minimum utilisation help
achieve TCO parity.
For e-4W rideshare, the economics depends
on hitting 200-plus km/day, which might not
be feasible.
38
This increases the risk around
utilisation and profitability.
E-2Ws are a simpler and more mature technology
with compelling economics. They garner strong
policy support and theoretically have a higher-than-
average resale value due to a larger customer pool.
E-2Ws have low asset risk overall.
However, delivery operators have expressed
concerns over reliability, resulting in higher asset risk.
IPT e-3Ws may have higher technology and
manufacturer risk compared to other categories,
including e-3Ws for delivery. Lack of reliable
performance data and technology nascency are
contributing factors.
E-4Ws have the lowest asset risk due to large
established OEMs. However, e-4Ws used for
ridesharing and commuter services have a higher
asset risk. They are utilised more and therefore
have lower resale value.
E-buses are likely to have higher asset risk brought
on by higher cost and uncertain resale value.
HIGH BUSINESS MODEL RISK
LOW BUSINESS MODEL RISK
HIGH ASSET RISKLOW ASSET RISK
BARRIERS TO SCALING UP FINANCE
E-CARS E-2Ws E-3Ws E-BUSES — 25 —
TARGETED INSTRUMENTS
End-user financing for EVs can be mobilised through financial instruments that directly address challenges
and reduce risks in the short, medium, or long term.
TOOLKIT OF SOLUTIONS
TO MOBILISE FINANCE
INSTRUMENT
SHORT TERM
CHALLENGES AND RISKS
ADDRESSED
OUTCOMEKEY STAKEHOLDERS
Central government, FIs
OEMs, FIs
Central and State
governments; FIs; national,
bilateral and multilateral
development banks
Fleet operators, FIs
Central and State
governments, OEMs, FIs
Increased access to
capital
Lowered cost of capital
Lowered cost of capital
and increased access to
capital
Increased access to
capital
Lowered cost of capital
Limited financing options
Technology risk,
manufacturer risk
Technology risk,
manufacturer risk,
utilisation risk, resale risk
Technology risk, customer
risk, utilisation risk
Resale risk, policy risk
Priority sector lending
Product warranties and
guarantees
Government and
multilateral-led
Fleet operator-led
Secondary market
development
Central and State
governments, FIs
Lowered cost of capitalHigh interest ratesInterest rate subvention
MEDIUM TERM
LONG TERM
RISK-SHARING MECHANISMS — 26 —
SHORT TERM
PRIORITY SECTOR LENDING
TOOLKIT OF SOLUTIONS TO MOBILISE FINANCE
SOLUTION 1: PRIORITY SECTOR LENDING
OVERVIEW
BENEFITS
STATUS
KEY CONSIDERATIONS
AND NEXT STEPS
• The Reserve Bank of India’s (RBI) Priority Sector Lending (PSL) requires that banks
deploy 40 percent of net credit in sectors that align with national priorities and
inclusive development.
• PSL certificates are issued when banks write loans to priority sectors. Banks with
surplus loans to priority sectors (i.e., above 40 percent) can sell PSL certificates to
banks with a deficit of the same.
• PSL inclusion needs to be initiated simultaneously with initiatives that focus on
reducing risks associated with EVs—such as product warranties, risk-sharing
mechanisms, and secondary market development. Together, they will increase the
banks’ confidence in offering attractive interest rates.
• The benefits of the intervention can be maximised by creating an EV-specific PSL
target. As with the renewable energy PSL guidelines, internal lending limits for
individual owners and fleets could be introduced. These could depend on the
economic life of the vehicle.
• Since 2015, the priority sector includes renewable energy based on
recommendations from the Internal Working Group. Bank loans for renewable
energy (up to INR30 crore) are eligible for PSL classification. The limit for individual
households is INR10 lakh.
39
• Led by SBI, PSU banks in 2019 requested PSL recognition for retail lending to EVs in
2019. FICCI and NITI Aayog have also advocated for the same.
40,41
• Banks would be incentivised to add EV financing to their PSL portfolios and help
develop a long-term funding source for the sector.
• PSL certificates will also reduce the cost of capital for early movers such as fintech
companies and catalyse non-captive vehicle financiers.
NBFCs
Include EVs under priority sector lending
that directs bank credit towards the sector
Increase share of EVs
financed to meet PSL targets
Increase number of EVs
financed due to on-lending
On-lend PSL
requirements on EVs
Consult for
design of PSL
mandates and
limits
RESERVE BANK
OF INDIA
BANKS
NITI AAYOG
AND CSOs
BORROWERS — 27 —
INTEREST RATE SUBVENTION
SOLUTION 2: INTEREST RATE SUBVENTION
OVERVIEW
BENEFITS
STATUS
KEY CONSIDERATIONS
AND NEXT STEPS
• Interest rate subventions or buydowns improve the affordability of loans.
The government bears the balance interest rate through associated banks.
• Subvention schemes function as subsidies on commercially offered interest rates.
By discounting tens of basis points, they deliver significant savings on compound
interest over the loan’s tenure.
• A popular intervention at the national level, subvention has already been
implemented in the agriculture, education, handlooms, and housing sectors.
At the state level, interest rate subvention is a part of the Delhi EV Policy.
• States implementing or developing EV policies should consider interest rate
subvention.
• To achieve long-term impact on the sector, states can pair subvention with
supporting instruments. For example, pairing it with secondary market development
will help improve the confidence of FIs and reduce perceived risks.
• The Delhi EV Policy’s interest rate subvention scheme is in its early stages.
Implemented through the DFC and other empanelled banks, the scheme buys
down up to 5 percent of the interest rate on e-autos and e-carriers.
• Subvention schemes effectively function as subsidies on commercially offered
interest rates.
TOOLKIT OF SOLUTIONS TO MOBILISE FINANCE
Provide loans with
discounted interest rates
Advise the design
of a subvention
scheme
Reimburses
subvention costs
Creates a mandate
to buy down interest
rates for EVs
BORROWERS
NITI AAYOG
AND CSOs
GOVERNMENT
BANKS — 28 —
SOLUTION 3: PRODUCT GUARANTEES AND WARRANTIES
OVERVIEW
BENEFITS
STATUS
KEY CONSIDERATIONS
AND NEXT STEPS
• Product guarantees create partnerships between OEMs and FIs. OEMs assure the
performance of their vehicles, while FIs create dedicated financing lines for these
products.
• OEMs offer product warranties to buyers. They assure the vehicle’s quality, covering
the costs of repairs and replacements of specific parts for a predetermined period or
utilisation.
• The industry and FIs can consult each other on designing minimum product
guarantees and warranties for various EV segments. Such minimums would increase
buyer and financier confidence.
• Many e-rickshaw models have established guarantees, such as between Lohia Auto
Industries (an OEM) and IndusInd Bank.
• Electric cars that offer warranties include Hyundai Kona (five years, unlimited
kilometres), and Tata Nexon EV (eight years or 1.6 lakh kilometres, whichever is
earlier).
• Guarantees leverage relationships between OEMs and FIs, and an OEM’s balance
sheet. This helps reduce technology and manufacturer risk associated with lending
to EVs.
• Warranties similarly enable attribution of possible product failure to the OEM rather
than the borrower. They also reduce OPEX of EV owners, by covering the cost of
repair and/or replacement.
MEDIUM TERM
PRODUCT GUARANTEES AND WARRANTIES
TOOLKIT OF SOLUTIONS TO MOBILISE FINANCE
EXTERNAL
CONSULTANTS
Provide low-interest, longer tenure loans
for assessed EV products
Assess product offering and
counterparty risk of OEM
Assure product performance
and balance sheet strength
Provide time- or utilisation- defined
warranties for components or entire EVs
OEMs
BORROWERSBANKS
AND
NBFCs — 29 —
RISK-SHARING MECHANISMS (GOVERNMENT AND MULTILATERAL-LED)
SOLUTION 4: RISK-SHARING MECHANISMS (GOVERNMENT AND MULTILATERAL-LED)
OVERVIEW
BENEFITS
STATUS
KEY CONSIDERATIONS
AND NEXT STEPS
• Risk-sharing mechanisms help expand financing by creating guarantees or facilities
that partly or entirely cover loan repayment risk. The loss covered could be from
general default, regardless of the cause, or due to specific risks.
• National and multilateral development banks, and CSOs can design risk-sharing
mechanisms for consideration, at the behest of GoI.
• Andhra Pradesh’s Partial Risk Guarantee Funding for Energy Efficiency scheme will
help FIs (eight banks and three NBFCs) finance energy efficiency in sectors such as
industries, buildings, and agriculture.
42
• The Indian Renewable Energy Development Agency (IREDA) is setting up a ‘green
window’. Through loan-loss reserves and loan guarantees, they seek to improve the
risk-return profile of clean energy projects, including EVs.
43
• The model distributes risk associated with an asset class in the short term. FIs get
an opportunity to build trust in technology, manufacturers, and business models.
Depending on the design of the risk-sharing facility, the model can also mitigate
customer risk.
TOOLKIT OF SOLUTIONS TO MOBILISE FINANCE
BILATERAL AND
MULTILATERAL
DEVELOPMENT
BANKS
PHILANTHROPY
RISK-SHARING FACILITY
Consult on design of
facility, and setting terms
and eligibility criteria
• Creates loan loss
reserves and loan
guarantees
• Covers general
default or loss due
to specific risks
Provide low-interest,
longer tenure loans for EVs
Provide capital,
and/or incubate
facility
Provide capital,
and/or incubate
facility
BORROWERS
NITI AAYOG
AND CSOs
NATIONAL
DEVELOPMENT
BANKS
CENTRAL
GOVERNMENT
BANKS
AND
NBFCs — 30 —
RISK-SHARING MECHANISMS (FLEET OPERATOR-LED)
SOLUTION 5: RISK-SHARING MECHANISMS (FLEET OPERATOR-LED)
OVERVIEW
BENEFITS
STATUS
KEY CONSIDERATIONS
AND NEXT STEPS
• Fleet operators (and asset-light final-mile delivery companies) can share default risk
with FIs by providing partial credit guarantees for full-time driver partners. They can
also offer utilisation guarantees to driver partners.
• The employment duration of drivers should be considered when guaranteeing their
EV loans.
• The GCC model—developed by NITI Aayog and recommended by DHI for e-bus
procurement under FAME II—has a provision in the contract known as ‘minimum
guaranteed run’. The provision provides operators of an e-bus service with a
utilisation guarantee for a predetermined number of kilometres per day, per route,
to help overcome utilisation risk.
• Fleet operators who understand technology and utilisation are better positioned
to assess the bankability of driver partners. Additionally, fleet operator-led risk-
sharing leverages the relationship between drivers and fleet operators, and the fleet
operators’ balance sheet to reduce customer risk proactively.
• Assured vehicle use, through utilisation guarantees, will help achieve TCO parity,
and further reduce risk.
TOOLKIT OF SOLUTIONS TO MOBILISE FINANCE
FLEET
OPERATORS
Provide low-interest,
longer tenure loans for EVs
Provide partial credit
guarantees and utilisation
guarantees for driver partners
Assess bankability and
provide capacity building
on maintenance
BANKS
AND
NBFCs
BORROWERS
(DRIVER
PARTNERS) — 31 —
LONG TERM
SECONDARY MARKET DEVELOPMENT
OVERVIEW
BENEFITS
STATUS
KEY CONSIDERATIONS
AND NEXT STEPS
• EV resale value can be improved by developing and formalising a secondary market.
OEMs can initiate buyback programmes, guaranteeing repossession, refurbishment,
and eventual resale of vehicles. Smartphone buybacks are popular in India.
Manufacturers purchase old phones at predetermined rates in exchange for new
phones. Replicating this model for EV components holds merit.
• Batteries are the most capital intensive component of an EV. Repurposing
programmes can help develop a secondary market for batteries. They can be used
for energy storage in rooftop solar or other similar renewable energy projects.
• Buyback programmes would require OEMs to develop after-sales and financial
capacities. However, tie-ups with FIs could help overcome this hurdle. Collaborations
throughout the value chain would be crucial to realising the potential of a secondary
market for EVs.
• OEMs can join hands to operate a branded and guaranteed second-hand EV market.
• OEM Inverted Energy’s buyback plan provides INR10,000 in exchange for batteries
at the end of their warranty period.
44
• Secondary market development will assure FIs of the salvage value of EVs and help
remove resale risk in case of borrower default. A separate secondary market for
repurposing batteries can be created, opening up opportunities in processing and
urban mining.
• Prospective owners who cannot finance a new EV will benefit from the availability
of a secondary market.
SOLUTION 6: SECONDARY MARKET DEVELOPMENT
TOOLKIT OF SOLUTIONS TO MOBILISE FINANCE
Sell EV through buyback
programmes in case of default
Guarantee repossession,
refurbishment, and resale of EVs
Sell batteries for recycling or
repurposing as energy storage
Provide low-interest,
longer tenure loans for EVs
BORROWERS
GOVERNMENT
BATTERY
PROGRAMMES
OEMs
BANKS
AND
NBFCs — 32 —
EXHIBIT 9: OTHER INTERNATIONAL CASE STUDIES ON EV FINANCE
Finance is gaining recognition as an important lever for the global EV transition. Several countries
have leveraged instruments like the ones identified to support lower-cost financing and greater
access to finance for EVs.
Australia’s green bank, Clean Energy Finance Corporation, has established an Asset Finance
program. They partner with FIs in the country to provide low-cost finance to small-scale assets,
including low-emission vehicles. This has helped several banks distribute risk inherent to EVs and
set up green loan schemes.
Transport Scotland, an agency of the Scottish Government, funds a facility offering interest-free
loans of up to GBP28,000 for an electric car and up to GBP10,000 for an electric motorcycle or
scooter. The loan has a repayment period of up to six years. Used electric vehicles are also eligible,
with lower caps on loan amounts.
Global captive vehicle finance companies Toyota Financial Services (USA) and Hyundai Capital
Services (Korea) have raised green bonds using the green asset-backed security (ABS) model for
EVs. These are being used to provide discounted debt financing to mobility service providers.
Subnational governments can establish state EV authorities to coordinate funding and financing
programs. California State Bill 633 established a state EV authority responsible for developing
incentives, rebates, tax credits, loan guarantees, seed funds, and matching grants to start
early-stage markets. Additionally, the authority was required to lower the cost of capital and
unlock private capital.
RISK-SHARING MECHANISMS
INTEREST RATE-FREE LOANS
USE OF GREEN BONDS
STATE EV AUTHORITIES
TOOLKIT OF SOLUTIONS TO MOBILISE FINANCE — 33 —
ADDITIONAL SOLUTIONS: ECOSYSTEM ENABLERS
In addition to reducing risks, alleviating operational
hurdles and signalling market commitment to
electric mobility could also help FIs build confidence
in the EV ecosystem.
DIGITAL LENDING
Digital lending occurs when loans are sourced,
underwritten, and sanctioned digitally. Technology
and data analytics enhances the efficiency and
efficacy of the lending process. It will provide
unbiased decision-making and help overcome
operational and logistical challenges associated
with conventional vehicle lending in India.
In 2019, digitally executed loans accounted for
5.7 percent of all loans. Of all digitally executed
loans, only 5 percent were for vehicles.
45
Digital
lending is forecasted to increase to 19 percent of all
bank loans and 10 percent of NBFC loans by 2024.
FIs show a willingness to scale digital lending, by
either developing their own capacities or through
collaborations.
Digital lending has already shown promise in
supporting EV deployment in India. Three Wheels
United (TWU), founded in 2014, finances electric
three-wheelers in Karnataka and Tamil Nadu. TWU
leverages technology and partnerships with drivers,
OEMs and final-mile delivery companies. They
club loan collection, asset management, income
generation and behavioural data.
Fintech company RevFin, incorporated in 2018 as
an NBFC, finances and insures e-2Ws and e-3Ws for
individual customers. They use technology to assess
a borrower’s bankability and make the repayment
process simpler through customised tenures and the
elimination of intermediaries.
Digital lending can streamline processes and reduce
dependency on field personnel trainings on EV
technology and policy. This can reduce costs and
make EV finance accessible across geographies.
BUSINESS MODEL INNOVATION
Commercialising innovative business models
at scale, through funding, experimentation, and
commitment can build financing and adoption trust
required for improving the penetration of EVs. For
example, normalising leasing and rental models
can take electric mobility mainstream and build
confidence in the ecosystem.
Pilot projects can provide the proof points required
to iterate electrification and charging infrastructure
business models in India. Patient capital towards
mobility-as-a-service and indigenous manufacturing
are essential for this transition. Venture capital
funding can catalyse the investment potential in
electric mobility, and provide early-stage support to
deploy technology and services faster.
FLEET AND AGGREGATOR ELECTRIFICATION
TARGETS
Electrification of fleets is spurring EV uptake today.
EV demand at scale is being built because of high
utilisation of final-mile delivery and ride-hailing
services, and defined corporate transport routes.
They act as a market signal for new technology,
improved financing, and supportive policy.
The Climate Group’s EV100 coalition is an example
at the forefront of fleet electrification. Together,
EV100 members have committed to deploying
over 20 lakh vehicles globally by 2030. They will
also install charging infrastructure at more than
2,000 workplace and customer parking sites. Eight
of EV100’s 88 member companies are Indian.
46
By ambitiously setting out future EV purchasing
requirements, such initiatives can drive mass EV
roll-out.
OPEN DATA REPOSITORY FOR EVS
Robust data is a critical prerequisite to vehicle
finance. FIs rely on data to design leasing
programmes and determine interest rates and other
financing terms. While FIs have historical data for
ICE vehicles, such data is less commonly available
for EVs. FIs will be better able to accurately assess
risk and allocate financing for EVs using data on
vehicle specifications, real-world drive cycles, actual
charging costs, and other operating expenditures.
TOOLKIT OF SOLUTIONS TO MOBILISE FINANCE — 34 —
Promoting the use of open data will help expand
access to such data for EVs. According to the
National Informatics Centre, “A dataset is said to be
open if anyone is free to use, reuse, and redistribute
it. Open Data shall be machine readable, and it
should also be easily accessible.”
47
The Government
of India hosts open data portals with datasets for
many sectors.
The United Kingdom (UK) launched a National Data
Repository (NDR) on petroleum-related information
and samples. By providing timely and transparent
data access to industry, academia, and the public,
the UK facilitates disclosure, reporting, and
investment.
48
Other compelling examples include
the US cities of Austin and Chicago, which are global
leaders in open data portals. Each host dozens of
publicly available transportation-related datasets.
49
TOOLKIT OF SOLUTIONS TO MOBILISE FINANCE — 35 —
According to our existing analysis of future
passenger- and freight-vehicle sales, India’s
weighted-average EV sales penetration has
the potential to be about 70 percent in 2030
across segments based. The analysis is based
on forecasted cost competitiveness and expert
interviews.
To understand the total capital and financing
requirements for this EV adoption scenario, we
estimated the cumulative capital cost of vehicles,
SIZE OF THE OPPORTUNITY
EXHIBIT 10: CAPITAL COST OF INDIA’S EV TRANSITION FROM 2020 TO 2030
EXHIBIT 11: INDIA’S EV FINANCING MARKET IN 2030
electric vehicle supply equipment (EVSE) hardware,
and batteries (including replacements) between
2020 and 2030. We also estimated the size of
the loan market for EVs in 2030. The estimated
cumulative capital cost of India’s EV transition is
INR19.7 lakh crore (USD266 billion) by 2030 (see
Exhibit 10). The estimated size of the organised EV
finance market is INR3.7 lakh crore (USD50 billion)
in 2030 (see Exhibit 11). The customised solutions
outlined in this report can help mobilise capital and
financing to realise India’s EV ambitions.
CUMULATIVE CAPITAL COST OF INDIA’S EV TRANSITION, 2020–2030: INR19.7 LAKH CRORE (USD266 BILLION)
SIZE OF INDIA’S EV FINANCING MARKET IN 2030: INR3.7 LAKH CRORE (USD50 BILLION)
INR LAKH CRORE
PASSENGERFREIGHT
PASSENGER EVS FREIGHT EVS BATTERY REPLACEMENT EVSE
INR3.7 LAKH
CRORE — 36 —
Our existing passenger and freight transport
decarbonisation models account for the best
available sales data for 2020. They estimate
future vehicle stock by segment and fuel type
based on factors such as historical vehicle stock,
annual utilisation, established relationships
between GDP and demand, and projected EV
sales penetration levels.
SIZE OF THE OPPORTUNITY
EXHIBIT 12: APPROACH TO ESTIMATING CAPITAL COST AND FINANCING MARKET SIZE OF INDIA’S EV TRANSITION
• Capital cost of India’s EV transition: Cumulative cost of vehicles, EVSE hardware, and batteries
(including replacements) between 2020 and 2030 for specified EV sales penetration levels
• EV finance market size: Size of loan market for EVs (not including EVSE) in 2030
• Future vehicle stock for passenger and freight sectors based on our analysis
• EV sales penetration levels in 2030 by segment
• Current capital cost of EVs, EVSE, and batteries based on public data and industry interviews
• Capital cost does not account for subsidies or insurance for EVs or soft costs for EVSE
• Goods and Services Tax (GST) is included and assumed to remain constant at 18 percent for
batteries and 5 percent for EVs
• Vehicle costs for all segments except buses and trucks decline until 2025, due to increases
in battery density and reductions in battery costs, as per BNEF analysis, and achievement of
economies of scale
• After 2025, potential cost reductions are not passed on to the end-user
• Number of chargers required for total EV stock is assumed constant throughout the period of the
analysis and does not account for increasing utilisation
• EVSE hardware costs are assumed to decline as per industry estimates
• Battery replacement requirement is based on 2,000 cycles
• USD-INR conversion rate is 1USD to 74INR
• Project total number of vehicles sold by segment through 2030
• Calculate number of new vehicles sold by segment per annum and apply EV sales penetration
levels (see below)
• Estimate capital cost of vehicles, EVSE hardware, and batteries (including replacements) using
annual EV sales and forecasted ex-showroom costs (based on current top selling EV models),
cost of associated EVSE, and battery pack prices
• Estimate size of financing market using calculated capital cost and forecasted loan-to-value ratios
and financing penetration levels (both based on industry interviews)
DEFINITIONS
KEY ASSUMPTIONS
APPROACH — 37 —
The ecosystem must design solutions to address
barriers across policy, technology, economics, and
behaviour to support the adoption of EVs in India.
Simultaneously, reengineering vehicle finance and
mobilising public and private capital will be critical.
STAKEHOLDER-SPECIFIC SOLUTIONS
Key stakeholders can help unlock the potential of
EV finance in India:
• Central and State governments: Government can
help increase access to low-cost financing at the
central and state levels. At the Centre, RBI can
include PSL mandates for EVs to increase finance
available for them. Also, the central government
or NDBs can capitalise risk-sharing facilities
to provide longer-tenure, lower risk financing.
Governments can create mandates to bring down
the interest rate for EV buyers, at both the central
and state levels, lowering the cost of financing for
end-users.
• OEMs, NBFCs, and private banks: OEMs and
FIs can help provide low-interest, longer-tenure
loans. OEMs can give NBFCs and private banks
confidence to create dedicated financing lines
for EVs by providing product guarantees for the
performance of their EV products. Similarly, OEMs
can assure buyers that they will cover specific
repair and/or replacement costs by giving product
warranties, helping EV owners assume less risk.
To further reduce risk, OEMs and FIs can work
together to create a secondary market for EVs that
improves their resale value.
• Fleet operators: Fleet operators can support the
government, OEM, and FI initiatives in several
ways. They can provide partial credit guarantees
for full-time driver partners to share default risk
with FIs. They can also offer utilisation guarantees
to driver partners to help achieve TCO parity.
They can also continue to improve fleet economics
and further develop the market by focusing on
business model innovation and setting fleet
conversion targets.
• National and multilateral development banks:
State-owned Indian development FIs and publicly
PATH FORWARD
owned international FIs can lower the cost of
financing by capitalising risk-sharing facilities.
They can also offer low-interest loans and other
financing products to start-ups, fintech companies,
and more.
• Start-ups and fintech: Venture capital funding can
catalyse investment in start-ups with innovative
business models and manufacturing. Fintech can
make the EV transition accessible to first-time
drivers without credit history and large domestic
EV markets where financing penetration is low
(i.e., e-2Ws and e-3Ws).
SYSTEM-LEVEL SOLUTIONS
Aligning perspectives, driving common
understanding, and supporting early deployments
can build FI confidence and capacity:
ELECTRIC VEHICLE FINANCE FORUM
• Need: FIs should be engaged in the country’s EV
dialogue, as they add a necessary perspective to
policy frameworks and industry-led solutions.
• Opportunity: Create a convening platform to bring
together stakeholders from the financial industry
(FIs, insurers, and coalition bodies like IRDA),
OEMs and fleet operators with government bodies
like NITI Aayog, Ministry of Finance, and the RBI.
• Next step: Convene key ecosystem players to
discuss the current landscape of EV financing — 38 —
in the country. Identify actionable steps that the
government and industry can take to achieve
an EV financing market of INR3.9 lakh crore
(USD52 billion) in 2030.
EDUCATIONAL MATERIALS FOR FIS
• Need: FIs are looking for educational materials to
understand perceived risks, especially technology
and business model risks, associated with lending
to EV owners and operators.
• Opportunity: Produce and regularly update a
set of reference handbooks for various vehicle
segments and use cases. These books will
provide bankers with the most relevant data and
information on available models, technology
trends and costs, national- and state-level policies,
emerging business models, and more.
• Next step: Create one reference handbook as part
of a pilot for a high priority segment and use case.
A potential use case could be of two-wheelers for
final delivery deliveries.
PROCUREMENT AND FINANCING INITIATIVES
• Need: More early deployments at scale are
required to demonstrate the technological and
economic viability of EVs to FIs.
• Opportunity: Collaborate with FIs and energy
service companies (ESCOs) like EESL to design
and manage procurement and leasing initiatives.
• Next step: Design a demand aggregation, bulk
procurement, and leasing initiative for a market-
ready segment and geography.
These activities and other potential opportunities
will elevate finance’s role in India’s EV transition and
establish a community for exchanging knowledge.
This document intends to serve as a resource to aid
and inspire further action to finance EVs supporting
India’s social, environmental, and public health
goals.
EXHIBIT 13: POTENTIAL TO DRIVE EV FINANCE TO SCALE AT COP26
In the runup to the 26
th
UN Climate Change Conference of the Parties (COP26), the Government of
India has been participating in the COP26 Zero Emission Vehicle Transition Council. Alongside the
world’s largest and most progress automotive markets, they discuss working together to accelerate
the global transition to zero emission vehicles, in line with the goals of the Paris Agreement.
The future size of India’s vehicle market is large and its plans for manufacturing and adoption of
EV and EV components are ambitious. Other nations can benefit from India’s experience designing
and implementing EV policies and programmes, including current work on EV finance. NITI Aayog
has been working on a series of measures to ensure banks and financial institutions offer credit
at affordable rates to EV buyers, as well as greater availability of finance products customized
for EVs. The six financial instruments and four ecosystem enablers outlined in this report can
serve as a foundation for dialogue and solution making among member countries, global auto
manufacturers, development banks, and other financiers at COP26.
DRIVING GLOBAL IMPACT: INDIA AND EV FINANCE AT COP26
PATH FORWARD — 39 —
1 Press Information Bureau, PIB Delhi, “Mobility Solutions get a boost: National Mission on
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2 Department of Heavy Industry. https://fame2.heavyindustry.gov.in/
3 NITI Aayog and Rocky Mountain Institute (RMI), “India’s Electric Mobility Transformation: Progress to date
and future opportunities,” 2019. https://rmi.org/insight/indias-electric-mobility-transformation/
4 Ministry of Road Transport and Highways (Transport Section), Government of India, “Incentivisation
of Electric Vehicles and Induction of EVs in share mobility and public transport operations,” July 2019.
https://morth.gov.in/sites/default/files/circulars_document/Incentivisation_of_Electric.pdf
5 Town and Country Planning Organization, Ministry of Housing and Urban Affairs, “Model Building Bye-
Laws (MBBL – 2016) for Electric Vehicle Charging Infrastructure,” 2019. http://mohua.gov.in/upload/
whatsnew/5c6e472b20d0aGuidelines%20(EVCI).pdf
6 Dialogue and Development Commission of Delhi and Rocky Mountain Institute, “Deliver Electric Delhi:
Pilot on Electrification of Final-mile Delivery Vehicles in Delhi,” 2020. https://rmi.org/insight/deliver-
electric-delhi/
7 “India Business Guide to EV Adoption,” World Business Council for Sustainable Development, 2019.
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Emobility/Resources/India-Business-Guide-to-EV-Adoption
8 Dialogue and Development Commission of Delhi and Rocky Mountain Institute, “Deliver Electric Delhi:
Pilot on Electrification of Final-mile Delivery Vehicles in Delhi,” 2020. https://rmi.org/insight/deliver-
electric-delhi/
9 World Business Council for Sustainable Development, “Advancing Electrification of Ride-hailing in India:
A BluSmart Case Study,” 2020. https://www.wbcsd.org/Programs/Cities-and-Mobility/Transforming-
Mobility/Transforming-Urban-Mobility/REmobility/Resources/Advancing-electrification-in-ride-hailing-in-
India
10 A. Khandekar, et al., Lawrence Berkeley National Laboratory, “The Case for All New City Buses in India to
be Electric,” 2018. https://escholarship.org/uc/item/7d64m1cd
11 H. Ambrose, et al., “Exploring the Costs of Electrification for California’s Transit Agencies,” University of
California Institute of Transportation Studies, 2017. https://escholarship.org/uc/item/0fn8s2jh
12 Lingzhi Jin, The International Council on Clean Transportation, “Preparing to Succeed: Fleet-Wide
Planning Is Key in the Transition to Electric Buses,” July 2020. https://theicct.org/blog/staff/fleet-wide-
planning-key-to-ebus-transition-jul2020
13 Inc42 Media, “Electric Vehicle Market Outlook Report 2020,” 2020. https://inc42.com/reports/electric-
vehicle-market-outlook-report-2020/
14 P. Hertzke et al., McKinsey & Company, “The Unexpected Trip: The Future of Mobility in India beyond
COVID-19,” July, 2020. https://www.mckinsey.com/industries/automotive-and-assembly/our-insights/the-
unexpected-trip-the-future-of-mobility-in-india-beyond-covid-19
15 Flipkart Stories, Flipkart, “100% Electric Mobility by 2030 - Flipkart Joins The Climate Group’s EV100,”
August, 2020. https://stories.flipkart.com/100-electric-mobility-by-2030-flipkart-drives-towards-
sustainability-with-ev100/
16 Sajan C. Kumar, Financial Express, “Lithium to Raise $8 Million from IFC,” April, 2018. https://www.
financialexpress.com/industry/lithium-to-raise-8-million-from-ifc/1149207/
17 Nabeel A. Khan, The Economic Times, “SmartE Gets Rs 100 Crore Series B Funding from Japan’s Mitsui,”
July 2019. https://economictimes.indiatimes.com/small-biz/startups/newsbuzz/smarte-gets-rs-100-crore-
series-b-funding-from-japans-mitsui/articleshow/70325712.cms
ENDNOTES — 40 —
18 Mandar Patil and Akshima Ghate, Oxford Energy, “The Role of Incentives in Reducing the Total Cost of
Ownership of Electric Vehicles in Delhi, India,” 2020. https://www.oxfordenergy.org/wpcms/wp-content/
uploads/2020/07/OEF122.pdf
19 Pallavi Bhati, India Ratings and Research, “COVID-19: Electric Vehicle Penetration in India Could be
Delayed; PVs to be Worst Affected,” October 2020. https://www.indiaratings.co.in/PressRelease?pressR
eleaseID=52790&title=COVID-19%3A-Electric-Vehicle-Penetration-in-India-Could-be-Delayed%3B-PVs-
tobe-Worst-Affected-
20 EY, “Building a Strategic and Profitable Auto Finance Portfolio in India”, 2016. http://www.somkapoor.
com/India%20automotive%20finance%20POV.pdf
21 Rikin Shah et al., Credit Suisse Equity Research Asia Pacific, “India NBFC Sector: Long and Winding Road
to Recovery,” 2020.
22 Reserve Bank of India, “Sectoral Deployment of Bank Credit,” 2020. https://www.rbi.org.in/Scripts/BS_
PressReleaseDisplay.aspx?prid=49875
23 Tata Capital blog, Tata Capital, “How Different Is The Indian Used Car Loan Industry From Other
Countries?,” July 2019. https://www.tatacapital.com/blog/vehicle-loan/how-different-is-the-indian-used-
car-loan-industry-from-other-countries
24 Pradhan Mantri MUDRA Yojana, MUDRA Offerings, https://www.mudra.org.in/Offerings
25 ET Bureau, The Economic Times, “EESL to Raise $100m Via Green Bonds,” June 2017. https://
economictimes.indiatimes.com/markets/stocks/news/eesl-to-raise-100m-via-green-bonds/
articleshow/59263823.cms
26 State Bank of India, “Green Car Loan: For Electric Cars.” https://www.sbi.co.in/web/personal-banking/
loans/auto-loans/green-car-loan
27 Press Trust of India, ET Auto, “EESL Plans to Set Up EV Charging Stations in Kolkata,” September, 2019.
https://auto.economictimes.indiatimes.com/news/industry/eesl-plans-to-set-up-ev-charging-stations-in-
kolkata/70964366
28 Pay As You Save® (PAYS®) is a registered trademark in the United States of Energy Efficiency Institute
(EEI). Co-Principals Harlan Lachman and Paul A. Cillo created the PAYS system between 1998-1999. The
trademark applies within the U.S. Aspects of EEI’s PAYS system have been applied by Energy Efficiency
Services Ltd. (EESL) in India, to finance energy efficiency upgrades including LED light bulbs, street
lights, fans, and water and sewage pumps.
29 Kerala Finance Corporation, “Electric Vehicles.” https://kfc.org/common-pages/electric-vehicles
30 Expert interviews, NITI Aayog and Rocky Mountain Institute analysis
31 Amit Bhatt and Garima Agrawal, Scroll India, “Electric vehicles could help fight India’s pollution crisis–
but the lack of bank loans is a hurdle,” January 2021. https://scroll.in/article/981572/electric-vehicles-
couldhelp-fight-indias-pollution-crisis-but-the-lack-of-bank-loans-is-a-hurdle
32 Expert interviews, NITI Aayog and Rocky Mountain Institute analysis
33 Ibid
34 Vaibhav Pratap Singh and Labanya Prakash Jena, India Innovation Lab for Green Finance, “Financing
for Low-Carbon Auto Rickshaws,” September 2018. https://www.climatepolicyinitiative.org/wp-content/
uploads/2018/10/Financing-for-Low-Carbon-Auto-Rickshaws_Instrument-Analysis.pdf
35 Mandar Patil and Akshima Ghate, Oxford Energy, “The Role of Incentives in Reducing the Total Cost of
Ownership of Electric Vehicles in Delhi, India,” July 2020. https://www.oxfordenergy.org/wpcms/wp-
content/uploads/2020/07/OEF122.pdf
36 Patrick Hertzke et al., McKinsey & Company, “Expanding Electric-vehicle Adoption Despite Early Growing
Pains,” August 2019. https://www.mckinsey.com/industries/automotive-and-assembly/our-insights/
expanding-electric-vehicle-adoption-despite-early-growing-pains
ENDNOTES — 41 —
ENDNOTES
37 Press Trust of India, The Economic Times, “NBFC Crisis Poses More Bad Loan Risks for Banks: Moody’s,”
December 2019. https://economictimes.indiatimes.com/markets/stocks/news/nbfc-crisis-poses-more-
bad-loan-risks-for-banks-moodys/articleshow/72520496.cms
38 World Business Council for Sustainable Development, “Advancing Electrification of Ride-hailing in India:
A BluSmart Case Study,” 2020. https://www.wbcsd.org/Programs/Cities-and-Mobility/Transforming-
Mobility/Transforming-Urban-Mobility/REmobility/Resources/Advancing-electrification-in-ride-hailing-in-
India
39 Reserve Bank of India, “Master Directions – Priority Sector Lending (PSL) – Targets
and Classification,” September 2020. https://rbidocs.rbi.org.in/rdocs/notification/PDFs/
MDPSL803EE903174E4C85AFA14C335A5B0909.PDF
40 Press Trust of India, News18, “FICCI Urges Govt to Extend FAME-II Scheme Till 2025 to Boost Electric
Vehicle Demand,” July 2020. https://www.news18.com/news/auto/ficci-urges-govt-to-extend-fame-ii-
scheme-till-2025-to-boost-electric-vehicle-demand-2698069.html
41 Moneycontrol News, Moneycontrol, “NITI Aayog Reviews EV-related Policies, Recommends Bringing
Financing Under Priority Sector Lending,” August 2020. https://www.moneycontrol.com/news/
technology/auto/niti-aayog-reviews-ev-related-policies-recommends-bringing-financing-under-priority-
sector-lending-5746531.html
42 Express News Service, “Bankers’ panel formed to facilitate financing for energy-efficient projects,”
November 2020. https://www.newindianexpress.com/states/andhra-pradesh/2020/nov/16/bankers-
panel-formed-to-facilitate-financing-for-energy-efficient-projects-2224105.html
43 Natural Resources Defense Council and Council on Energy, Environment and Water, “Growing Clean
Energy Markets in India with Green Windows,” 2020. https://www.nrdc.org/sites/default/files/growing-
clean-energy-green-windows-202001.pdf
44 Press Trust of India, ET EnergyWorld, “Inverted Energy launches buyback plan for its e-rickshaw
batteries,” October 2020. https://energy.economictimes.indiatimes.com/news/power/inverted-energy-
launches-buyback-plan-for-its-e-rickshaw-batteries/78748669
45 ICICI Bank and CRISIL, “Mining the Golden Opportunity in Retail Loans,” 2019. https://www.icicibank.com/
managed-assets/docs/about-us/2019/Key-highlights-of-the-ICICI-Bank-CRISIL-report.pdf
46 The Climate Group, “2020 EV100 Progress and Insights Annual Report,” 2020. https://www.
theclimategroup.org/2020-ev100-progress-and-insights-annual-report
47 Ministry of Electronics and Information Technology, Government of India, “Open Government Data,”
http://sdtckochi.nic.in/OGD.aspx
48 Oil and Gas Authority, Government of the United Kingdom, “National Data Repository (NDR),” https://
www.ogauthority.co.uk/data-centre/national-data-repository-ndr/
49 NITI Aayog and Rocky Mountain Institute, “Data-driven Mobility: Improving Passenger Transportation
Through Data,” 2018. https://niti.gov.in/sites/default/files/2019-01/Mobility-data.pdf — 42 —
www.niti.gov.in www.rmi.org
A TOOLKIT OF SOLUTIONS TO MITIGATE RISKS AND ADDRESS MARKET BARRIERS
BY NITI AAYOG AND ROCKY MOUNTAIN INSTITUTE, JANUARY 2021
MOBILISING FINANCE
FOR EVs IN INDIA — 2 —
ABOUT THE AUTHORS
ABOUT NITI AAYOG
The National Institution for Transforming India (NITI Aayog) was formed via a resolution of the Union Cabinet
on 1 January 2015. NITI Aayog is the premier policy ‘Think Tank’ of the Government of India, providing
both directional and policy inputs. While designing strategic and long-term policies and programmes for
the Government of India, NITI Aayog also provides relevant technical advice to the Centre and States. The
Government of India, in keeping with its reform agenda, constituted the NITI Aayog to replace the Planning
Commission instituted in 1950. This was done in order to better serve the needs and aspirations of the people
of India. An important evolutionary change from the past, NITI Aayog acts as the quintessential platform of
the Government of India to bring States to act together in national interest, and thereby fosters Cooperative
Federalism.
ABOUT ROCKY MOUNTAIN INSTITUTE (RMI)
Rocky Mountain Institute (RMI)—an independent non-profit founded in 1982—transforms global energy use to
create a clean, prosperous, and secure low-carbon future. It engages businesses, communities, institutions, and
entrepreneurs to accelerate the adoption of market-based solutions that cost-effectively shift from fossil fuels to
efficiency and renewables. RMI has been supporting India’s mobility and energy transformation since 2016. — 3 —
AUTHORS AND ACKNOWLEDGMENTS
AUTHORS
NITI AAYOG
Amitabh Kant
Randheer Singh
ROCKY MOUNTAIN INSTITUTE
Clay Stranger
Ryan Laemel
RMI INDIA
Akshima Ghate
Isha Kulkarni
*Authors listed alphabetically.
CONTACTS
NITI Aayog: Randheer Singh (singh.randheer@gov.in)
Rocky Mountain Institute:
Ryan Laemel (rlaemel@rmi.org)
RMI India: Isha Kulkarni (ikulkarni@rmi.org)
ACKNOWLEDGMENTS
The authors would like to thank the following
organisations and individuals for offering their
insights and perspectives on this work:
• RMI India – Mandar Patil
• Rocky Mountain Institute – Pranav Lakhina,
Radhika Lalit, Ali Rotatori
• Areon Mobility – Abhinav Singh, Aman Singh
• Autovert – Sachin Mehta
• Axis Bank – Sumit Bali
• Council on Energy, Environment and Water –
Vaibhav Pratap Singh, Abhinav Soman
• CDC Group – Veronica Di Bella, Akshara Gopinath
• EVage – Sonali Bagchi, Inderveer Singh
• Micelio – Anand GCP, Vidyashankar M,
Vasudevan Rajesh
• Natural Resources Defense Council – Charu Lata,
Polash Mukerjee, Poonam Sandhu
• RevFin – Sameer Aggarwal
• Tata Motors – Dipanjan Banerjee, Sharan Singh
• World Bank Group – Suvranil Majumdar
SUGGESTED CITATION
NITI Aayog and Rocky Mountain Institute, Mobilising
Finance for EVs in India: A Toolkit of Solutions to
Mitigate Risks and Address Market Barriers, January
2021.
Available at NITI Aayog:
http://www.niti.gov.in/
Available at Rocky Mountain Institute:
https://rmi.org/insight/mobilizing-finance-for-evs-in-
india/
Available at RMI India:
https://rmi-india.org/insight/mobilising-finance-for-
evs-in-india/
Images courtesy of iStock/Shutterstock unless
otherwise noted.
The views and opinions expressed in this document
do not necessarily reflect the positions of the
institutions or the government. While every effort
has been made to verify the data and information
contained in this report, any mistakes or omissions
are attributed solely to the contributors and not to
the organisations they represent. — 4 —
On behalf of NITI Aayog and Rocky Mountain Institute, it is our pleasure to introduce this report, Mobilising Finance
for EVs in India: A Toolkit of Solutions to Mitigate Risks and Address Market Barriers. The report identifies solutions to
direct capital and financing to aid in India’s EV transition.
India has signalled that the future of mobility is electric. The economics of vehicle electrification are improving, with
battery pack prices decreasing from about INR75,000/kWh in 2010 to INR13,000/kWh in 2019. Despite a dip in EV sales
in 2020, due to the economic effects of COVID-19, confidence in India’s EV future will continue to grow as technology
costs decline further, operators gain experience with EVs, and new business models prove their viability.
Yet, many well-documented barriers to EV adoption remain, ranging from technology cost to infrastructure buildout
to consumer behaviour. The public and private sectors are diligently working together on solutions to each of these
barriers. These solutions include:
• Production-Linked Incentive (PLI) Scheme, with an outlay of INR18,100 crore (USD2.4 billion) for the Advanced
Chemistry Cell battery sector
• Faster Adoption and Manufacturing of Electric Vehicles (FAME) India Scheme, Phase II with an outlay of
INR1,000 crore (USD135 million) for the deployment of charging infrastructure
The need of the hour, however, is the mobilisation of capital and finance towards EV assets and infrastructure.
According to this report, the quantum of capital and finance required for India’s EV future is considerable. Between
2020 and 2030, the estimated cumulative capital cost of the country’s EV transition is INR19.7 lakh crore across
vehicles, charging stations, and batteries. The projected size of the annual loan market for EVs is INR3.7 lakh crore
in 2030.
Multistakeholder collaboration and innovative solutions are needed to
access low-cost financing at this scale. Financial institutions, industry
players, government bodies, and civil society must work together to
ensure that the solutions outlined in the report are explored.
Innovations in finance and technology can accelerate the country’s shift
to shared, electric, and connected mobility. Two widely cited photos
illustrate this point. In the first, dated 1900, it is very difficult to locate the
first car on Fifth Avenue in New York City. In the second, dated 1913, it
is more difficult to locate the horse carriage among a sea of cars on the
same street.
What fuelled this rapid transition? Ford reduced the cost of a car by
62 percent in 13 years, and General Motors and DuPont invented auto
loans. We are seeing similar technological and financial innovation at
work today.
We would like to express our gratitude to those who generously
contributed their time and expertise to this report. We look forward to
working together to implement these solutions and others to support
India’s EV goals.
Sincerely,
Shri Amitabh Kant (CEO, NITI Aayog)
and Mr. Clay Stranger (Senior Principal, RMI)
FOREWORD
Both photos are of New York City’s Easter
parade and were taken 10 years apart.
Top (1900) by the National Archives and
Records Administration. Bottom (1913) by
the Library of Congress. — 5 —
EXECUTIVE SUMMARY.....................................................................................................................
INTRODUCTION....................................................................................................................................
INDIA’S VEHICLE FINANCE INDUSTRY......................................................................................
BARRIERS TO SCALING UP FINANCE .......................................................................................
TOOLKIT OF SOLUTIONS TO MOBILISE FINANCE ..............................................................
SIZE OF THE OPPORTUNITY..........................................................................................................
PATH FORWARD..................................................................................................................................
ENDNOTES ............................................................................................................................................
TABLE OF CONTENTS
06
08
13
19
25
35
37
39 — 6 —
The Government of India (GoI) has made an
ambitious commitment to the creation of demand for
EVs through the Faster Adoption and Manufacturing
of (Hybrid and) Electric Vehicles (FAME) India
Scheme. Additionally, the promotion of domestic
manufacturing through the National Mission on
Transformative Mobility and Battery Storage has
supplemented the scheme. As the economics of
electric vehicles (EVs) continue to improve and
new business models gain acceptance, India’s EV
market is poised for significant growth in the coming
decade.
Key barriers related to EV adoption—including
technology cost, infrastructure availability, and
consumer behaviour—must be overcome. Incentives
that reduce the upfront cost of EVs, such as the
FAME II incentive in India or federal tax rebates in
the US, are a critical first-order solution to address.
Although less commonly discussed, financing—in
terms of the cost and quantum of capital—is another
hurdle for India’s electric mobility transition. End-
users currently face a range of challenges. High
interest and insurance rates apply to retail loans,
loan-to-value ratios are low, and specialised finance
options are limited.
According to our analysis of future passenger and
freight vehicle sales, India’s weighted-average EV
sales penetration has the potential to be about
70 percent in 2030. This value is based on
forecasted cost competitiveness and expert
interviews.
The quantum of finance required for this EV
adoption scenario is considerable. Between 2020
and 2030, the estimated cumulative capital cost of
the country’s EV transition will be INR19.7 lakh crore
(USD266 billion)—across vehicles, electric vehicle
supply equipment (EVSE), and batteries (including
replacements). The estimated size of the annual
EV finance market will be INR3.7 lakh crore
(USD50 billion) in 2030.
1
We have identified 10 solutions that financial
institutions (FIs), the EV sector, and the government
can adopt to help mobilise the capital and financing
associated with India’s EV transition. These include
six targeted instruments and four ecosystem
enablers:
TARGETED INSTRUMENTS
1. Priority sector lending (PSL): The Reserve
Bank of India (RBI) requires 40 percent of net
bank credit to be deployed towards priority
sectors. Inclusion of EVs in PSL guidelines would
incentivise banks to increase lending towards
the sector.
2. Interest rate subvention: Subventions act as
a subsidy on commercially offered interest
rates, with the government bearing the balance
through associated banks. Such schemes would
substantially improve the affordability of loans.
They have already been enacted in other sectors
and at a state level for EVs in Delhi.
3. Product guarantees and warranties: Reducing
the uncertainty associated with EV models will
improve their bankability. Original equipment
manufacturers (OEMs) can provide assurances
in the form of guarantees (to FIs) and warranties
(to buyers) on the performance of their products.
4. Risk-sharing mechanism (government and
multilateral-led): Mechanisms and facilities that
partly or entirely cover possible losses associated
with financing EVs (due to their unclear resale
value) can be capitalised at the national or
multilateral level. These would distribute risk and
provide FIs with an opportunity to build their trust
in the sector.
5. Risk-sharing mechanism (fleet operator-led):
Fleet operators and final-mile delivery companies
can leverage their existing FI relationships to
provide partial credit guarantees and utilisation
guarantees to driver-partners. They could share
the risk between stakeholders in case of default
and enhance loan availability for delivery drivers.
EXECUTIVE SUMMARY — 7 —
6. Secondary market development: Industry-led
buyback programmes and battery-repurposing
schemes will help OEMs and the central
government catalyse a secondary market for EVs.
This would improve the residual value of EVs,
providing FIs with an avenue for resale in case of
borrower default.
ECOSYSTEM ENABLERS
• Digital lending: Digital sourcing, underwriting, and
sanctioning can streamline EV loans by helping
overcome the operational and logistical challenges
of vehicle financing.
• Business model innovation: Piloting and
commercialising new business models, combined
with the flow of patient capital, can demonstrate
the potential of the sector. Additionally, they would
help build trust in EVs and normalise them in the
market.
• Fleet and aggregator electrification targets:
The electrification of final-mile delivery, ride-
hailing, and corporate transport fleets can act as
a strong market signal for stakeholders across the
ecosystem, especially OEMs and FIs.
• Open data repository for EVs: FIs need access to
data on EV specifications, real-world drive cycles,
actual charging costs, and operating expenditures.
This will help such institutions accurately assess
risk, determine appropriate interest rates, and
design effective leasing programmes.
Together, these solutions aim to mitigate risks
associated with technology, policy, manufacturers,
resale, utilisation, maintenance, and customers.
They aim to improve the confidence of FIs in
financing EVs for end-users. These solutions will
likely play important roles in India’s economic
recovery following COVID-19 by supporting EV sales,
manufacturing, and business models—all of which
can boost job creation and local value addition.
Engaging Indian FIs in the electric mobility dialogue
will be critical to operationalising these solutions.
Convening stakeholders from the financial industry,
OEMs, fleet operators, government, and others can
help prioritise EV financing. Identifying actionable
steps is key to working towards implementation.
In addition, FIs need help to understand EV
technology and business models, and stay up to
date with the policy landscape. Educational materials
can help lower risk and increase confidence. Finally,
innovative procurement and leasing initiatives that
lead to early deployments at scale can help prove
the techno-economic viability of EVs and increase
supply-chain investments.
Supporting the design of effective financing
solutions can help unlock the capital needed
for India’s EV transition. We look forward to
collaborating with partners across the EV ecosystem
to elevate the role of finance.
EXECUTIVE SUMMARY — 8 —
INDIA’S ELECTRIC MOBILITY OPPORTUNITY
India has made a strong commitment to electric
mobility.
1
The country’s EV transition is gaining
traction due to: 1) demand creation, 2) state
EV policies, and 3) domestic manufacturing.
Simultaneously, the market for electric mobility in
India is growing, enabled by policy, compelling and
improving economics, and the emergence of new
business models and investment opportunities.
1. DEMAND CREATION
In 2015, the Department of Heavy Industry,
Government of India, launched its flagship incentive
programme, the FAME India Scheme, to accelerate
EV adoption.
• FAME I supported 2.8 lakh electric and hybrid
vehicles, with demand incentives totalling about
INR970 crore (USD130 million)—saving nearly
7 crore litres of fuel and abating over 17.2 crore kg
of CO
2
.
2
• FAME II began in April 2019, with an outlay
of INR10,000 crore (USD1.4 billion). It aims to
drive large-scale adoption of EVs and charging
infrastructure and develop a robust domestic
EV ecosystem. EVs eligible under FAME II can
cumulatively save 74 lakh tonnes of carbon dioxide
(MtCO
2
) emissions over their lifetime.
3
At the central level, multiple interventions are
being implemented to support demand creation.
For example, the Goods and Services Tax (GST)
on EVs sold with batteries was reduced from
12 to 5 percent. The Ministry of Road Transport and
Highways exempted EVs from permit requirements
and recommended that states reduce or waive road
taxes for EVs.
4
Additionally, the Ministry of Housing
and Urban Affairs amended the Model Building Bye-
Laws, 2016, to establish charging stations in private
and commercial buildings.
5
2. STATE EV POLICIES
At the subnational level, 10 states have notified EV
policies that are being implemented, while six others
are drafting their EV policies.
INTRODUCTION
EXHIBIT 1: CUMULATIVE LIFETIME OIL AND NET CO
2
SAVINGS OF VEHICLES ELIGIBLE UNDER FAME II
VEHICLES1.56 MN
17.2
7.4
1 MN
3.0
2.6
0.5 MN
7.2
3.2
55,000
2.5
0.1
7,000
4.5
1.5
OIL SAVINGS
(INR ‘000 CRORE)
NET CO
2
EMISSIONS
SAVING (MILLION
METRIC TONNES)
TOTAL
2W 3W 4W BUS — 9 —
3. DOMESTIC MANUFACTURING
Under the FAME II guidelines, incentives are
available only for EVs with a predefined level
of localisation. The goal is to promote domestic
component manufacturing. The industry shows
promise, with OEMs introducing a range of new EV
products over the past year. Several states, such
as Karnataka and Maharashtra, have also made
manufacturing a focal point of their state EV policies,
by offering fiscal benefits to create EV clusters.
In addition, the National Mission on Transformative
Mobility and Battery Storage was approved in
March 2019. Its goal is to increase domestic battery
manufacturing and accelerate the adoption of
e-mobility. Its focus areas include creating roadmaps
for Advanced Chemistry Cell (ACC) battery
manufacturing, formulating phased manufacturing
programmes (PMP) for batteries, developing
Corporate Average Fuel Economy (CAFE) norms, and
leveraging Make in India. The GoI cabinet recently
approved the PLI scheme to encourage ACC
manufacturing with an outlay of INR18,100 crore.
ECONOMICS OF ELECTRIFICATION
The economics of EVs are improving yearly, driven
by a reduction in battery prices and improvements
in vehicle efficiency. Many segments and use cases
are already showing competitiveness with internal
combustion engine (ICE) vehicles based on a total
cost of ownership (TCO).
• Electric two-wheelers: Final-mile delivery is
a promising use case, as significant fuel-cost
reductions are possible. There exist both national
(i.e., INR20,000 under FAME II) and state subsidies
(e.g., INR5,000/kWh under the Delhi EV policy,
plus a top-up of INR7,500/kWh for the first one
lakh EVs registered in Delhi).
However, even without incentives, at the same
interest rate ICE vehicles (ICEVs) receive, electric
two-wheelers for goods delivery could reach TCO
parity (at about INR 2/km) with equivalent petrol
models by the end of 2020.
6
EXHIBIT 2: STATUS OF STATE EV POLICIES AS OF JANUARY 2021
NOTIFIED DRAFT
S.
NO.
STATEDAY MONTH YEAR
TIME
SINCE
(MONTHS)
1
2
3
4
5
6
7
8
9
10
25
th
14
th
8
th
10
th
7
th
16
th
1
st
2
nd
6
th
7
th
2017
2018
2018
2019
2019
2019
2019
2019
2020
2020
39
34
31
21
17
15
14
13
5
5
SEPTEMBER
FEBRUARY
JUNE
MARCH
AUGUST
SEPTEMBER
NOVEMBER
DECEMBER
AUGUST
AUGUST
KARNATAKA
MAHARASHTRA
ANDHRA PRADESH
KERALA
UTTAR PRADESH
TAMIL NADU
MADHYA PRADESH
UTTARAKHAND
TELANGANA
DELHI
NOTIFIED
DRAFT
1
2
3
4
5
6
8
th
14
th
23
rd
15
th
16
th
11
th
2018
2019
2019
2019
2020
2020
28
16
15
14
10
1
SEPTEMBER
JUNE
SEPTEMBER
NOVEMBER
MARCH
DECEMBER
ASSAM
BIHAR
GUJARAT
PUNJAB
GOA
HARYANA
INTRODUCTION — 10 —
• Electric three-wheelers: In the ride-hailing use
case, electric auto-rickshaws are close to cost
parity based on TCO, especially in Tier-2 and
Tier-3 cities, where shorter trip distances require
smaller batteries (i.e., less than 3 kWh).
7
In the
final-mile delivery use case, electric three-wheelers
are already cheaper than their CNG counterparts
on a TCO basis (at about INR2.5/km) in some
geographies such as Delhi. This is primarily due
to national and state incentives, including interest
rate subvention.
8
• Electric four-wheelers: It is generally not yet
economical to electrify private cars. However,
evidence from EV fleets, such as BluSmart,
suggests that electric ride-hailing cars are already
economical in cases where vehicle utilisation is
between 150 and 220 km/day.
9
EXHIBIT 3: RECENT DEVELOPMENTS IN INDIA’S START-UP ELECTRIC MOBILITY ECOSYSTEM.
14,15,16,17
• Electric buses: Analysis suggests that the TCO
of an intra-city electric bus (e-bus) is lower
than an equivalent diesel bus in a bus-to-bus
comparison (at INR47/km for a 12-meter AC bus
with a daily utilization of 200 km).
10
However, for
fleet conversion, this may vary depending on
local costs and service requirements. Studies
have indicated that more than one e-bus may be
required to replace one conventional bus due to
range limitations of early generation electric buses.
However, proper planning and charging strategies
can reduce this replacement ratio.
11,12
INVESTMENT OPPORTUNITIES
Significant venture capital has flown into the
ecosystem. Indian EV start-ups have raised
INR4,490 crore (USD601 million) between 2014
and 2019, highlighting the potential of EV business
models.
13
Industry analysts expect the shared mobility market
to experience rising demand. Ride-hailing and rental
applications could see up to 50 and 100 percent year-on-
year growth through 2025, respectively.
RIDESHARE
Electrification of freight use cases is on the rise. Flipkart
became the first e-commerce marketplace to commit to
100 percent adoption of EVs by 2030, joining The Climate
Group’s EV100 coalition of companies.
DELIVERIES
The International Finance Corporation (IFC) invested
INR60 crore (USD8 million) in Bengaluru-based Lithium
Urban Technologies, an electric commuter services
provider, in April 2018.
COMMUTER
SERVICES
Mitsui invested INR150 crore (USD20 million) in Delhi-based
SmartE, an electric last-mile service provider, in July 2019.
LAST-MILE
CONNECTIVITY
INTRODUCTION — 11 —
BARRIERS TO EV ADOPTION
Despite improving economics and growth across the
ecosystem, many well-documented barriers to EV
adoption in India remain, including:
1. Technology cost: In a few segments, the high
upfront cost of EVs is slowing adoption despite
the potential for lower TCO. There is an ongoing
need to further reduce the upfront cost and TCO
in many use cases through various instruments.
2. Policy implementation: National-level policy can
be complemented with added fiscal incentives at
the state level. Non-fiscal incentives will also be
important in developing a favourable operating
environment and customer confidence for EVs.
3. Manufacturing and supply: Despite growing
product diversity, there is still a need for greater
customized product and model availability,
and more fit-for-purpose models. Further, more
domestic manufacturing of advanced batteries
and cells, battery management systems, electric
motors, motor controllers, and other components
is needed. OEM capital has recently focused on
the migration of ICEVs to Bharat Stage VI (BSVI)
standards, while the industry is experiencing
lower sales due to COVID-19. This is hampering
supply-side investment in EVs.
4. Infrastructure buildout: The introduction of
advanced batteries and longer-range vehicle
modes can address customer concerns about
range. Alongside these developments, electricity
distribution companies (discoms), charging
service providers, and other actors can focus on
building robust charging infrastructure networks.
Using smart technology that communicates with
the electric grid will unlock additional value from
demand-side management.
5. Consumer behaviour: Demand for more
affordable EV products is expected, as
consumers reduce spending in the short
term due to COVID-19. This potential shift in
consumer preferences may affect manufacturers’
investment and production decisions.
EV FINANCE
In addition to these commonly discussed barriers,
access to low-cost finance is still a formidable
barrier that warrants multistakeholder attention
and innovative solutions. EV sales are expected
to slow in the short term due to: 1) the economic
impact of COVID-19 and 2) the recent investment
flow by OEMs towards BSVI standards (April 2020).
Improving access to attractive financing products
can be key to drive EV demand.
19
High financing cost and uncertainty around long-
term economics—including resale value—remain
both real and perceived issues for FIs. There are
risks associated with the nascency of the electric
mobility ecosystem. They have given rise to
problems such as high interest and insurance rates,
low loan-to-value ratio, and limited financing options
for retail customers. This may lead to unsecured
borrowing from the unorganized sector at even
higher rates.
Further, both the vehicle finance and EV sectors
are diverse. Levels of TCO parity and incentive
structures available for each segment, use case,
and stakeholder are different. Private electric two-
wheelers, for example, would have vastly different
parameters to consider in financing compared to
e-buses used for public transport. This creates the
need for government, industry, and FIs to collaborate
on a set of customised EV financing solutions. It also
creates a role for OEM-owned financial companies
to help define the market.
INTRODUCTION — 12 —
PURPOSE OF THIS REPORT
Mobilising Finance for EVs in India: A Toolkit of
Solutions to Mitigate Risks and Address Market
Barriers aims to serve the following purposes:
• Landscape assessment: Take stock of the
structure, stakeholders, and practices in India’s
conventional vehicle finance ecosystem and its
emerging EV finance ecosystem.
• Barrier assessment: Understand current barriers
and risks associated with lending to EVs, and
scaling up the size of the financing market and
diversity of products for EVs.
• Solution identification: Create a toolkit of short-,
medium-, and long-term solutions to help FIs,
government, and other stakeholders enable low-
cost EV financing.
INTRODUCTION — 13 —
CONTEXT AND OVERVIEW
India’s retail vehicle finance industry has evolved
since the 1990s to be worth an estimated INR4.5
lakh crore (USD60 billion) today.
20,21,22
This is
primarily a result of economic liberalisation and
growth in the automotive market.
As of 2020, the flow of finance from the organised
sector (i.e., banks and non-banking financial
companies (NBFCs)) is about:
• 50 percent to four-wheeler passenger vehicles (PVs)
• 40 percent to commercial vehicles (CVs)
• 10 percent to tractors and two-wheelers
Financing penetration—i.e., the share of vehicles
financed through loans by the organised sector—
varies by segment and is expected to be:
• 35 to 50 percent for all two-wheelers
• 80 percent for all four-wheeler PVs
• 95 percent for new light-, medium-, and heavy-
duty CVs
INDIA’S VEHICLE FINANCE INDUSTRY
Financing penetration seems to be associated
with economics and use cases of vehicles. Less
expensive segments and use cases are seeing lower
levels of financing and vice-versa. The unregulated
autorickshaw segment is unique. Here, the
penetration of financing by the organised sector is
very low due to the high-risk nature of borrowers.
Preowned CVs are more affordable for driver-
owners, who may also not be seen as bankable.
This could be one of the reasons for lower
penetration of financing. For all new CVs,
penetration is high. Fleet operators’ prefer to have
loans linked to the vehicles instead of their balance
sheets.
Loan tenures for different segments are generally
similar (about three to four years, except for two-
wheelers, which are shorter). Loan-to-value (LTV)
ratios, i.e., the portion of asset value financed,
vary—from 70 to 75 percent of the vehicle for two-
wheelers to 80 to 90 percent for CVs. Interest rates
are usually floating, rather than fixed, and vary by
lender. — 14 —
EXHIBIT 4: KEY STAKEHOLDERS IN INDIA’S VEHICLE FINANCE INDUSTRY
KEY STAKEHOLDERS
Captive vehicle
financiers
Insurance companies
Non-captive vehicle
financiers
Insurance agents or
brokers
Fintech companies
Bajaj Finance,
Mahindra & Mahindra
Financial Services,
Tata Motors Financial
Services
Bharti AXA, HDFC
Ergo, ICICI Lombard
Cholamandalam
Finance, IndoStar
Capital, Manappuram
Finance, Shriram
Transport Finance
Global-India
Insurance Brokers,
Hero Insurance
Broking, Mahindra
Insurance Brokers
RevFin, Three Wheels
United (TWU)
OEM-owned NBFCs that provide specialised
and subvention-linked products to
customers
State- or privately-owned insurance
providers often allied with banks or non-
captive financiers
Other privately owned NBFCs that provide
smaller pools of finance at higher interest
rates in non-metro areas
Privately owned companies that aggregate
and negotiate insurance offerings, often
allied with captive financiers to provide
specialised products at dealerships
Privately owned companies that lend
through technology and digital platforms
Venture capital funds
National development
banks
Multilateral/ bilateral
development banks
Micelio Fund,
Sequoia Capital
Indian Renewable
Energy Development
Agency (IREDA),
Small Industries
Development Bank of
India (SIDBI)
Asian Development
Bank (ADB),
CDC Group,
World Bank Group
Private investors that provide equity to
mobility startups, early-stage ventures and
fintech
State-owned Indian FIs that provide equity
and/or debt to mobility startups, large fleet
owners, and businesses for sustainable
economic development
Publicly owned international FIs that provide
equity and/or debt to banks, NBFCs, and
businesses for transitioning fleets for
sustainable economic development
NBFCs
LONG-TERM
INVESTORS
MOTOR
INSURANCE
OTHER DEBT/EQUITY CAPITAL
INSURANCE
CATEGORY STAKEHOLDEREXAMPLESDESCRIPTION
BANKS
FINANCING
Public sector
undertaking (PSU)
banks
Private sector banks
Bank of India,
Canara Bank, State
Bank of India (SBI)
Axis Bank, HDFC
Bank, ICICI Bank,
IndusInd Bank
State-owned commercial FIs that provide
longer tenure, lower interest loans
Privately owned FIs that specialise in larger
transactions for institutions, fleets, and
vehicles in urban areas
INDIA’S VEHICLE FINANCE INDUSTRY — 15 —
BANKS AND NBFCs
Initially, NBFCs had the largest market share in the
vehicle finance industry. Later, private and public
banks and OEM-owned captive vehicle financiers
emerged as key players. Recently established
fintech companies have also found a niche in digital
lending for vehicles.
Banks made up 56 percent of the market share
in India in FY19, the rest being NBFCs. Both
these categories specialise in lending to different
customers.
23
Broadly, banks dominate the four-
wheeler passenger vehicles market. Captive NBFCs
are particularly active in lending for two-wheelers,
while non-captive NBFCs are prominent in the
commercial vehicle market.
MOTOR INSURANCE AND LONG-TERM
INVESTORS
The vehicle (‘motor’) insurance industry is diverse
and spurred by investment and support from banks,
NBFCs, and OEMs. It comprises companies and
brokers or agencies that act as aggregators and
negotiators.
Long-term investors, such as development banks,
facilitate infrastructure loans to governments, and
business-level debt or equity for FIs and logistics
companies. Venture capital spurs the mobility
ecosystem through early-stage investment.
THE CURRENT LANDSCAPE OF EV FINANCE
VEHICLE FINANCING
Only recently have specialised EV loans been
introduced. Most segments, other than e-rickshaws,
lack specialised products.
E-RICKSHAW LOANS
With the rapid growth of the e-rickshaw market,
FIs are offering dedicated, collateral-free loans:
• IndusInd Bank partnered with OEM Lohia Auto
Industries (in March 2017). The bank offers retail
vehicle finance for three-wheeler electric models
across 11 Indian states. While interest rates are
floating, loans are offered directly through the
dealer, making the process hassle free.
• Ujjivan Small Finance Bank signed a memorandum
of understanding (MoU) with OEM Green Shuttle
Technology (in July 2019). It offers passenger and
cargo three-wheeler loans at attractive interest
rates.
• Bank of India and Punjab National Bank offer
e-rickshaw financing with LTV ratios of up to
85 percent. The maximum tenure is 48 months.
• Micro Units Development and Refinance
Agency (MUDRA) loans were designed to
support microenterprises in India. MUDRA
provides refinance support to banks, NBFCs
and microfinance institutions in lending up to
INR10 lakh (USD13,500). E-rickshaws are eligible
for MUDRA loans.
24
These recent initiatives require income tax returns
and credit scores, which are often difficult for
e-rickshaw drivers to provide. As a result, financing
penetration remains low.
INDIA’S VEHICLE FINANCE INDUSTRY — 16 —
ELECTRIC FOUR-WHEELER LOANS
The economics of shared mobility services like ride
hailing are compelling. Such services can benefit
significantly from specialised financing solutions for
electric cars.
SBI started the Green Car Loan, the only specialised
product for electric cars, in April 2019. Highlights
include:
• A discount of 20 basis points on existing car loan
interest rates. As of September 23, 2020, SBI’s
mean interest rate for all cars was 9.52 percent,
indicating that on average the SBI Green Loan
would charge an interest rate closer to 9 percent.
• To reduce costs, the processing fees for the first
six months of the scheme was waived.
• The maximum repayment period was increased to
eight years.
• An LTV ratio as high as 90 percent is offered.
BUSINESS MODEL INNOVATION
Innovative business models and procurement
schemes aim to make up for low financing
penetration. Their focus is on reducing upfront costs
and technological risk by leveraging leasing, battery
separation, and economies of scale.
INDIA’S VEHICLE FINANCE INDUSTRY — 17 —
Equity/personal
funds
Retail loans/
vehicle
financing
Demand
aggregation/
bulk
procurement
(in between
purchase and
lease-all)
Debt/corporate
loans
Fleet operators
or owners buy
vehicles through
equity or personal
funds.
Fleet operators
or owners buy
vehicles using
specific vehicle
loans.
A third party
purchases vehicles
in bulk, to leverage
economies of scale.
The vehicles are
sold or subleased
to fleet operators or
drivers.
Fleet operators
or owners buy
vehicles through
company-level debt
or other loans.
• Provides greater
control over
assets
• No dependency
on other
stakeholders
• Loans are linked
to vehicles rather
than the balance
sheet
• Room to raise
debt for other
functions
• Higher volume
reduces
transaction and
unit costs
• Diversified risk
exposure is across
the customer pool
if the technology
is underutilised
• High upfront cost
for the owner
• Subject to high
interest
• Low LTV ratios
• Success is
dependent on
procurement
volume
• Requires
interagency
coordination
• Reduces capacity
to raise debt for
operations or
expansions
• Bangalore-based
Lightning Logistics
purchased its final-mile
delivery fleet entirely
through equity.
• The SBI Green Car
Loan programme
offers financing for
e-4Ws.
26
• EESL leased electric
cars to ride-hailing
company BluSmart.
So far 300 EVs,
procured in bulk from
Mahindra & Mahindra
and Tata Motors, have
been leased.
• In 2017, Energy
Efficiency Services
Ltd. (EESL) issued
green bonds worth
INR640 crore (USD100
million) to support
its environmentally
focused initiatives.
25
Y
Y
Y
Y
BUSINESS
MODEL
PRESENT
IN INDIA
(Y/N)
FINANCING
MECHANISM
DESCRIPTION KEY BENEFITS KEY DRAWBACKS EXAMPLES
PURCHASE
LEASE-ALL
Dry and end-
to-end leases
Wet lease/
operating
expense
(OPEX)
Fleet operators
or owners lease
vehicles from
OEMs. End-to-end
contract options
include repair
and maintenance
services.
The transit authority
or fleet owner
procures the EV
from fleet operators
and pays for service
on a per-kilometre
basis. The authority
or owner keeps
the fare revenue,
handles scheduling,
routing, service
standards. The
operator oversees
operations and
maintenance.
• Spreads
payments over
time
• Longer lease
term payments
comparable to ICE
segments
• The transit
authority or
owners assume
revenue risk
• Operators
assume financial,
technology, and
operational risks
• Require OEMs to
develop financial
and after-sale
service capacities
• Relies on
institutional
capacity and
interagency
coordination
• Requires greater
technical
assistance
• Areon Mobility is a
logistics company
leasing 30–40 e-2Ws
to final-mile delivery
companies. They aim
to grow to hundreds
of units.
• EESL offers a dry
lease model on
electric sedans to
State governments at
INR22,500 a month
for six years.
27
• The Department of
Heavy Industry (DHI)
and NITI Aayog have
recommended the
wet-lease model to
India’s State Transport
Undertakings (STUs).
They propose
deploying 5,595
e-buses under FAME
II via a Gross Cost
Contract (GCC).
Y
Y
EXHIBIT 5: BENEFITS AND DRAWBACKS FOR BUSINESS MODELS USED FOR ELECTRIC VEHICLES
INDIA’S VEHICLE FINANCE INDUSTRY
(CONTINUED) — 18 —
GOVERNMENT INTERVENTIONS
To lower the TCO of EVs, most government
initiatives have provided capital expenditure
(CAPEX) and annual operating expenditure
(OPEX) incentives. Prominent interventions aimed
specifically at financing include:
• DHI has recommended an OPEX-based model by
NITI Aayog to STUs. The model will deploy a total
of 5595 e-buses under FAME II.
• The Delhi EV Policy provides an interest rate
subvention of 5 percent on loans for buying
e-autos and e-carriers. Delhi Finance Corporation
(DFC) and its empanelled Scheduled Banks and
NBFCs are developing a scheme on interest rate
subvention. The Policy aims to bring more traction
to this price-sensitive and financially challenging
segment.
• The Kerala Finance Corporation (KFC) has created
a programme to provide low-cost loans for EVs
in the state.
29
Buyers pay a 20 percent down
payment and avail a 3 percent point interest
rate subsidy, resulting in an interest rate of
7 percent. Loans are capped at INR50 lakh and
have a tenure of up to 5 years. All registered
vehicle forms and both private and commercial
use-cases are eligible. A credit score of 680 or
higher is required, with salary slips to verify that
total deductions from their salary (including the
equated monthly installment of the loan) do not
exceed 80 percent of their gross salary.
BUSINESS
MODEL
PRESENT
IN INDIA
(Y/N)
FINANCING
MECHANISM
DESCRIPTION KEY BENEFITS KEY DRAWBACKS EXAMPLES
Battery
swapping
Pay-as-you-
save® (PAYS®)
28
Battery leasing
Fleet operators give
access to (owned,
leased, or shared)
battery swapping
stations. Affiliated
drivers can
purchase vehicles
without batteries.
Utilities purchase
batteries and
provide charging
infrastructure. Bus
operators repay
them over time at a
PAYS tariff.
A utility, OEM, or
third-party buys
batteries and leases
them to a fleet
owner or operator.
The vehicle is
financed separately.
• Separating the
battery cost to
make EVs less
capital intensive
for the vehicle
owners
• Better battery
management by
involving a battery
provider
• Improves the
potential to
monetise grid
services such as
demand response
• Procure the
battery at
minimum cost
• Leveraging the
utility’s balance
sheet, rate-basing,
and cost-recovery
mechanisms
• Reduce cost for
bus operators
• High upfront
cost for the
infrastructure
provider
• Heavily
dependent on the
financial health of
the utility
• Relies on utility’s
ability to pass on
increased rates
to offset battery
costs
• Limited OEM
battery offerings
• Nascent
legislative
environment
• Policies are still
being formulated
• Ola Electric has set
up battery-swapping
stations for two- and
three-wheelers in
Delhi in partnership
with discoms BSES
Yamuna and BSES
Rajdhani.
• Clean Energy Works
has designed PAYS
schemes for e-buses
in the US and South
America.
• India can achieve the
electrification of public
transport with this
model.
• PAYS for segments
such as two-wheelers
can be piloted through
private discoms.
• Proterra, a US e-bus
manufacturer, offers
a battery-leasing
programme. A city
procures the bus
without the battery
and leases the
battery from Proterra
through fixed-service
payments.
• Bengaluru-based,
Autovert is an IoT-
enabled leasing
firm for personal
mobility e-2Ws. In
addition to full vehicle
subscriptions, it is
setting up a battery
subscription facility.
Y
N
(however,
it is
common in
efficiency
financing)
Y (early
stages)
BATTERY SEPARATION
INDIA’S VEHICLE FINANCE INDUSTRY — 19 —
• ELECTRIC BUSES FOR CITY SERVICES VIA GCC
Debt finance requirements and fees (see Exhibit 6)
make it difficult for operators to purchase e-bus
fleets. Typically operators are required to finance
about 25 percent of the total capital cost as equity,
representing a significant down payment for a fleet
of e-buses.
30
Innovations are transforming the amount and
scale of financing needed, reducing costs and
risks associated with EVs. However, the following
examples illustrate that regardless of business
model and stakeholders involved, finance remains
a bottleneck:
• E-2WS FOR FINAL-MILE DELIVERY
Demonstrating business model viability is a
challenge for fleet operators. Many find it difficult
to access equity or debt to purchase vehicles
that they lease to drivers for deliveries. High
daily utilisation and robust charging networks are
needed for economical electrification.
• E-3WS FOR INTERMEDIATE PUBLIC TRANSPORT
Due to higher capital costs, drivers require
financing to purchase e-rickshaws or e-autos.
However, they lack a credit history to prove their
loan repayment ability. Unavailability of collateral
further limits their financing options.
BARRIERS TO SCALING UP FINANCE
EXHIBIT 6: BARRIERS TO FINANCING ELECTRIC BUSES FOR
CITY SERVICES VIA GCC
DEBT FINANCE
• Requires bank
guarantee
• Requires collateral
• 0.5–1.5 percent of
amount as fee
75%
EQUITY
25% — 20 —
KEY CHALLENGES
HIGH INTEREST RATES
Interest rates for EV loans tend to be higher than
ICE vehicles. For a privately operated electric car
in Delhi, banks charge a marginally higher interest
rate than a conventional vehicle.
31
However, a
commercially operated electric car could be charged
up to 14 to 15 percent, compared to 12 percent for a
diesel car.
32
The difference is more significant for e-2Ws, with
interest rates as high as 20 percent or more.
33
This
increases the equated monthly instalment (EMI) paid
by vehicle owners, adding to ownership costs.
LOW LOAN-TO-VALUE RATIOS
Banks offer loans for EVs with only partial financing
and a low LTV ratio to mitigate risk.
34
The low
LTV ratio ensures that the financier can recover
substantial costs in case of borrower default despite
a potentially low resale value.
Small operators or drivers may not possess the
equity to accommodate the low LTV ratio. They
will be forced to seek unsecured high-interest
supplementary loans from the unorganised sector.
COVID-associated fear of borrower default has
further lowered LTV ratios, worsening the problem.
LIMITED FINANCING OPTIONS
Most FIs in India do not offer specialised products
for EVs, except for the SBI Green Car Loan scheme.
In Norway, China, the UK, Australia, and other
countries, most leading banks offer such products,
contributing to high EV adoption rates. Operators in
India are forced to choose loans with high interest
rates, low LTV ratios, and shorter repayment periods.
Banks and NBFCs need collateral for EV loans in
addition to the vehicle, in cases where the credit
history of the borrower is unavailable or unreliable.
This increases the challenges faced by aspiring
EV operators and owners.
HIGH INSURANCE COSTS
EV owners also pay higher insurance than
conventional models. Since a vehicle’s insurance
cost is based on its CAPEX, the higher the upfront
cost, the higher the insurance premiums. For
example, the cost of insurance for a privately-owned,
commercially registered, self-driven car in Delhi is
INR0.29/km for an EV. However, for an equivalent
diesel ICE vehicle, it is INR0.18/km.
35
In some cases, insurance companies may perceive
higher risks of technology failure and high costs of
repair. As a result, they may ascribe higher rates
due to a lack of historical performance data on EV
products and business models.
BARRIERS TO SCALING UP FINANCE — 21 —
UNDERLYING CAUSES
The underlying factors to the above barriers can be categorised as asset risk and business model risk
(Exhibit 7). Asset risk is directly associated with the vehicle being financed. Business model risk relates to the
bankability of the borrower’s credit profile, expected utilisation, and operational patterns.
EXHIBIT 7: KEY CHALLENGES AND UNDERLYING CAUSES IN EV FINANCE
BARRIERS TO SCALING UP FINANCE
LOW CONFIDENCE
OF FINANCING
KEY CHALLENGES
UNDERLYING CAUSES
HIGH INTEREST RATES
LOW LOAN-TO-VALUE
RATIO
LIMITED FINANCING
OPTIONS
HIGH INSURANCE
RATES
BUSINESS MODEL RISK
UTILISATION RISK
CUSTOMER RISK
OPERATIONS AND
MAINTENANCE RISK
TECHNOLOGY RISK
POLICY RISK
MANUFACTURER
RISK
RESALE RISK
ASSET RISK — 22 —
ASSET RISK
1. TECHNOLOGY RISK
FIs are risk averse due to the lack of reliable data
on EV performance—in terms of range, asset life,
maintenance requirements, load capacity, aand
more—especially in the Indian context.
Insurers are reluctant to insure what may be
considered unproven vehicles and components
due to unknown risks associated with short-
and long-term use. The lack of guarantees or
warranties from manufacturers exacerbates
these issues.
In the past five years, battery technology has
advanced significantly, and EV technology
continues to improve. Some FIs are concerned
that the assets they are financing today could
become obsolete in the future, similar to
smartphone technology.
2. POLICY RISK
Boosting FI confidence will increase lending and
other forms of financing to the EV sector. FIs are
keen to see durable and effective national- and
state-level policies. Clarity and certainty around
policies that support vehicle segments through
TCO parity will help. Lack of awareness on the
details of national- and state-level policies,
and challenges accessing incentives result in
increased risk perception around EV financing.
The geopolitical risk to global EV supply chains
could also contribute, especially in a post-COVID
economy. This may trigger a ‘wait and watch’
approach rather than the proactive financing and
investment needed.
3. MANUFACTURER RISK
While the EV market is growing, only a few EV
OEMs are established and proven. Most OEMs
lack historical data on product performance
and service. Additionally, FIs may not have
onboarded newer OEMs on formal lending
procedures.
OEMs may be selling EVs at low or negative
margins, due to the high capital cost of EVs,
creating a risk associated with their balance
sheets.
36
Cumulatively, this presents FIs with the
risk of lending for an unfamiliar, untrusted asset.
4. RESALE RISK
EVs have a reduced resale value due to the
nascent ecosystem and a lack of a secondary
market. In some segments (e.g., e-rickshaws),
although a secondary market exists, it is
unstructured, and the residual value of vehicles
is still unproven. Financiers are at risk if
borrowers default, as the repossessed vehicle
would be collateral for resale. This directly
contributes to higher interest rates and low LTVs.
Other risks associated with EVs—such as
major policy changes or poor technological
performance—also contribute to FIs fearing even
lower resale values.
BARRIERS TO SCALING UP FINANCE — 23 —
BUSINESS MODEL RISK
UTILISATION RISK
EVs have a high capital cost with low operating
expenses. This is different from ICE vehicles, where
variable costs are high. As a result, EVs are most
viable at high utilisation levels. For commercial
operators, the bankability of an EV is dependent
on the FI’s confidence in projected cash flows.
This requires the establishment of new business
models in India.
For example, public charging infrastructure is
still being built in most cities. For fleet operators,
utilisation depends on drivers being able to use
these charging stations. Charging at home is not
always an option for drivers, given grid reliability
and parking challenges. Such uncertainty and risk
can lower FI confidence in financing fleets for this
use case.
CUSTOMER RISK
Individual drivers need to opt for formal financing
due to the high upfront cost of EVs. Having
previously never borrowed from the organised
sector, they lack credit history that guarantees their
ability to pay back loans. FI criteria, such as personal
and family history, place of residence, or education
level may not be inclusive to first-time borrowers,
increasing the risk they represent.
OPERATIONS AND MAINTENANCE RISK
Operational aspects of EV use—such as battery
replacement, voltage fluctuations, or technical
requirements of charging infrastructure—are yet
to be understood in India. The vehicle’s lifecycle
may be shortened by a lack of awareness around
maintenance requirements and patterns, reducing
bankability. Improper maintenance due to the
absence of trained mechanics is also likely to
reduce an EV’s resale value.
ECOSYSTEM CHALLENGES
OPERATIONAL AND LOGISTICS COSTS
The vehicle financing industry is composed of a
vast number of small FIs run mostly through local
branches across India. They rely on manual labour
to collect documents and award loans. Many FIs,
especially NBFCs, have high OPEX, on account of
door-step collections and sales force payouts.
Changing products and procedures will need to
penetrate to all levels and all geographies within
India. However, reorientating and retraining existing
employees in EV financing will present FIs with
resource and time constraints.
NBFC LIQUIDITY ISSUES
The NBFC sector has been facing a liquidity
crunch since late 2018 following the bankruptcy of
Infrastructure Leasing & Financial Services (IL&FS).
This has tightened funding for vehicle financiers,
prompting a reduction in lending and increased risk
aversion in the sector.
37
New fintech-based EV lending models such as
Delhi-based RevFin and Bengaluru-based Three
Wheels United (TWU) enable access for high-risk
customers. Eventually, they may need access to low-
cost finance from larger banks, lest they fall prey to
the same problems faced by NBFCs today.
SEGMENT AND USE CASE ASSESSMENT
EV segments and use cases present different
considerations. Additionally, varying degrees of
asset and business model risk are associated with
them (see Exhibit 8).
BARRIERS TO SCALING UP FINANCE — 24 —
EXHIBIT 8: ANALYSIS OF BUSINESS MODEL RISK VS. ASSET RISK ACROSS SEGMENTS AND USE CASES
SEGMENT OR USE CASEBUSINESS MODEL RISKASSET RISK
E-2Ws – private
E-2Ws – delivery
E-cars – rideshare
E-cars – commuter services
E-cars – private
E-3W auto-rickshaws –
intermediate public
transport (IPT)
E-3W carriers – delivery
E-buses
Private e-2W customers are likely riskier to lend
to than private e-4Ws customers.
E-2W and e-3W delivery drivers with assured
utilisation contracts contribute to lower business
model risk.
E-buses benefit from a minimum guaranteed
run. However, customer risk is likely to be higher
because of poor credit and repayment histories.
Lack of guaranteed demand and utilisation may
result in high business model risk. IPT drivers
are also comparatively more disaggregated,
increasing the likelihood of default (nearly
30 percent).
E-3Ws lack repair and maintenance networks,
except in North India (Bihar, Delhi, Uttar Pradesh),
adding to the high business model risk.
E-4W commuter services are likely to have a
lower business model risk. Optimised routes
and the ability to meet minimum utilisation help
achieve TCO parity.
For e-4W rideshare, the economics depends
on hitting 200-plus km/day, which might not
be feasible.
38
This increases the risk around
utilisation and profitability.
E-2Ws are a simpler and more mature technology
with compelling economics. They garner strong
policy support and theoretically have a higher-than-
average resale value due to a larger customer pool.
E-2Ws have low asset risk overall.
However, delivery operators have expressed
concerns over reliability, resulting in higher asset risk.
IPT e-3Ws may have higher technology and
manufacturer risk compared to other categories,
including e-3Ws for delivery. Lack of reliable
performance data and technology nascency are
contributing factors.
E-4Ws have the lowest asset risk due to large
established OEMs. However, e-4Ws used for
ridesharing and commuter services have a higher
asset risk. They are utilised more and therefore
have lower resale value.
E-buses are likely to have higher asset risk brought
on by higher cost and uncertain resale value.
HIGH BUSINESS MODEL RISK
LOW BUSINESS MODEL RISK
HIGH ASSET RISKLOW ASSET RISK
BARRIERS TO SCALING UP FINANCE
E-CARS E-2Ws E-3Ws E-BUSES — 25 —
TARGETED INSTRUMENTS
End-user financing for EVs can be mobilised through financial instruments that directly address challenges
and reduce risks in the short, medium, or long term.
TOOLKIT OF SOLUTIONS
TO MOBILISE FINANCE
INSTRUMENT
SHORT TERM
CHALLENGES AND RISKS
ADDRESSED
OUTCOMEKEY STAKEHOLDERS
Central government, FIs
OEMs, FIs
Central and State
governments; FIs; national,
bilateral and multilateral
development banks
Fleet operators, FIs
Central and State
governments, OEMs, FIs
Increased access to
capital
Lowered cost of capital
Lowered cost of capital
and increased access to
capital
Increased access to
capital
Lowered cost of capital
Limited financing options
Technology risk,
manufacturer risk
Technology risk,
manufacturer risk,
utilisation risk, resale risk
Technology risk, customer
risk, utilisation risk
Resale risk, policy risk
Priority sector lending
Product warranties and
guarantees
Government and
multilateral-led
Fleet operator-led
Secondary market
development
Central and State
governments, FIs
Lowered cost of capitalHigh interest ratesInterest rate subvention
MEDIUM TERM
LONG TERM
RISK-SHARING MECHANISMS — 26 —
SHORT TERM
PRIORITY SECTOR LENDING
TOOLKIT OF SOLUTIONS TO MOBILISE FINANCE
SOLUTION 1: PRIORITY SECTOR LENDING
OVERVIEW
BENEFITS
STATUS
KEY CONSIDERATIONS
AND NEXT STEPS
• The Reserve Bank of India’s (RBI) Priority Sector Lending (PSL) requires that banks
deploy 40 percent of net credit in sectors that align with national priorities and
inclusive development.
• PSL certificates are issued when banks write loans to priority sectors. Banks with
surplus loans to priority sectors (i.e., above 40 percent) can sell PSL certificates to
banks with a deficit of the same.
• PSL inclusion needs to be initiated simultaneously with initiatives that focus on
reducing risks associated with EVs—such as product warranties, risk-sharing
mechanisms, and secondary market development. Together, they will increase the
banks’ confidence in offering attractive interest rates.
• The benefits of the intervention can be maximised by creating an EV-specific PSL
target. As with the renewable energy PSL guidelines, internal lending limits for
individual owners and fleets could be introduced. These could depend on the
economic life of the vehicle.
• Since 2015, the priority sector includes renewable energy based on
recommendations from the Internal Working Group. Bank loans for renewable
energy (up to INR30 crore) are eligible for PSL classification. The limit for individual
households is INR10 lakh.
39
• Led by SBI, PSU banks in 2019 requested PSL recognition for retail lending to EVs in
2019. FICCI and NITI Aayog have also advocated for the same.
40,41
• Banks would be incentivised to add EV financing to their PSL portfolios and help
develop a long-term funding source for the sector.
• PSL certificates will also reduce the cost of capital for early movers such as fintech
companies and catalyse non-captive vehicle financiers.
NBFCs
Include EVs under priority sector lending
that directs bank credit towards the sector
Increase share of EVs
financed to meet PSL targets
Increase number of EVs
financed due to on-lending
On-lend PSL
requirements on EVs
Consult for
design of PSL
mandates and
limits
RESERVE BANK
OF INDIA
BANKS
NITI AAYOG
AND CSOs
BORROWERS — 27 —
INTEREST RATE SUBVENTION
SOLUTION 2: INTEREST RATE SUBVENTION
OVERVIEW
BENEFITS
STATUS
KEY CONSIDERATIONS
AND NEXT STEPS
• Interest rate subventions or buydowns improve the affordability of loans.
The government bears the balance interest rate through associated banks.
• Subvention schemes function as subsidies on commercially offered interest rates.
By discounting tens of basis points, they deliver significant savings on compound
interest over the loan’s tenure.
• A popular intervention at the national level, subvention has already been
implemented in the agriculture, education, handlooms, and housing sectors.
At the state level, interest rate subvention is a part of the Delhi EV Policy.
• States implementing or developing EV policies should consider interest rate
subvention.
• To achieve long-term impact on the sector, states can pair subvention with
supporting instruments. For example, pairing it with secondary market development
will help improve the confidence of FIs and reduce perceived risks.
• The Delhi EV Policy’s interest rate subvention scheme is in its early stages.
Implemented through the DFC and other empanelled banks, the scheme buys
down up to 5 percent of the interest rate on e-autos and e-carriers.
• Subvention schemes effectively function as subsidies on commercially offered
interest rates.
TOOLKIT OF SOLUTIONS TO MOBILISE FINANCE
Provide loans with
discounted interest rates
Advise the design
of a subvention
scheme
Reimburses
subvention costs
Creates a mandate
to buy down interest
rates for EVs
BORROWERS
NITI AAYOG
AND CSOs
GOVERNMENT
BANKS — 28 —
SOLUTION 3: PRODUCT GUARANTEES AND WARRANTIES
OVERVIEW
BENEFITS
STATUS
KEY CONSIDERATIONS
AND NEXT STEPS
• Product guarantees create partnerships between OEMs and FIs. OEMs assure the
performance of their vehicles, while FIs create dedicated financing lines for these
products.
• OEMs offer product warranties to buyers. They assure the vehicle’s quality, covering
the costs of repairs and replacements of specific parts for a predetermined period or
utilisation.
• The industry and FIs can consult each other on designing minimum product
guarantees and warranties for various EV segments. Such minimums would increase
buyer and financier confidence.
• Many e-rickshaw models have established guarantees, such as between Lohia Auto
Industries (an OEM) and IndusInd Bank.
• Electric cars that offer warranties include Hyundai Kona (five years, unlimited
kilometres), and Tata Nexon EV (eight years or 1.6 lakh kilometres, whichever is
earlier).
• Guarantees leverage relationships between OEMs and FIs, and an OEM’s balance
sheet. This helps reduce technology and manufacturer risk associated with lending
to EVs.
• Warranties similarly enable attribution of possible product failure to the OEM rather
than the borrower. They also reduce OPEX of EV owners, by covering the cost of
repair and/or replacement.
MEDIUM TERM
PRODUCT GUARANTEES AND WARRANTIES
TOOLKIT OF SOLUTIONS TO MOBILISE FINANCE
EXTERNAL
CONSULTANTS
Provide low-interest, longer tenure loans
for assessed EV products
Assess product offering and
counterparty risk of OEM
Assure product performance
and balance sheet strength
Provide time- or utilisation- defined
warranties for components or entire EVs
OEMs
BORROWERSBANKS
AND
NBFCs — 29 —
RISK-SHARING MECHANISMS (GOVERNMENT AND MULTILATERAL-LED)
SOLUTION 4: RISK-SHARING MECHANISMS (GOVERNMENT AND MULTILATERAL-LED)
OVERVIEW
BENEFITS
STATUS
KEY CONSIDERATIONS
AND NEXT STEPS
• Risk-sharing mechanisms help expand financing by creating guarantees or facilities
that partly or entirely cover loan repayment risk. The loss covered could be from
general default, regardless of the cause, or due to specific risks.
• National and multilateral development banks, and CSOs can design risk-sharing
mechanisms for consideration, at the behest of GoI.
• Andhra Pradesh’s Partial Risk Guarantee Funding for Energy Efficiency scheme will
help FIs (eight banks and three NBFCs) finance energy efficiency in sectors such as
industries, buildings, and agriculture.
42
• The Indian Renewable Energy Development Agency (IREDA) is setting up a ‘green
window’. Through loan-loss reserves and loan guarantees, they seek to improve the
risk-return profile of clean energy projects, including EVs.
43
• The model distributes risk associated with an asset class in the short term. FIs get
an opportunity to build trust in technology, manufacturers, and business models.
Depending on the design of the risk-sharing facility, the model can also mitigate
customer risk.
TOOLKIT OF SOLUTIONS TO MOBILISE FINANCE
BILATERAL AND
MULTILATERAL
DEVELOPMENT
BANKS
PHILANTHROPY
RISK-SHARING FACILITY
Consult on design of
facility, and setting terms
and eligibility criteria
• Creates loan loss
reserves and loan
guarantees
• Covers general
default or loss due
to specific risks
Provide low-interest,
longer tenure loans for EVs
Provide capital,
and/or incubate
facility
Provide capital,
and/or incubate
facility
BORROWERS
NITI AAYOG
AND CSOs
NATIONAL
DEVELOPMENT
BANKS
CENTRAL
GOVERNMENT
BANKS
AND
NBFCs — 30 —
RISK-SHARING MECHANISMS (FLEET OPERATOR-LED)
SOLUTION 5: RISK-SHARING MECHANISMS (FLEET OPERATOR-LED)
OVERVIEW
BENEFITS
STATUS
KEY CONSIDERATIONS
AND NEXT STEPS
• Fleet operators (and asset-light final-mile delivery companies) can share default risk
with FIs by providing partial credit guarantees for full-time driver partners. They can
also offer utilisation guarantees to driver partners.
• The employment duration of drivers should be considered when guaranteeing their
EV loans.
• The GCC model—developed by NITI Aayog and recommended by DHI for e-bus
procurement under FAME II—has a provision in the contract known as ‘minimum
guaranteed run’. The provision provides operators of an e-bus service with a
utilisation guarantee for a predetermined number of kilometres per day, per route,
to help overcome utilisation risk.
• Fleet operators who understand technology and utilisation are better positioned
to assess the bankability of driver partners. Additionally, fleet operator-led risk-
sharing leverages the relationship between drivers and fleet operators, and the fleet
operators’ balance sheet to reduce customer risk proactively.
• Assured vehicle use, through utilisation guarantees, will help achieve TCO parity,
and further reduce risk.
TOOLKIT OF SOLUTIONS TO MOBILISE FINANCE
FLEET
OPERATORS
Provide low-interest,
longer tenure loans for EVs
Provide partial credit
guarantees and utilisation
guarantees for driver partners
Assess bankability and
provide capacity building
on maintenance
BANKS
AND
NBFCs
BORROWERS
(DRIVER
PARTNERS) — 31 —
LONG TERM
SECONDARY MARKET DEVELOPMENT
OVERVIEW
BENEFITS
STATUS
KEY CONSIDERATIONS
AND NEXT STEPS
• EV resale value can be improved by developing and formalising a secondary market.
OEMs can initiate buyback programmes, guaranteeing repossession, refurbishment,
and eventual resale of vehicles. Smartphone buybacks are popular in India.
Manufacturers purchase old phones at predetermined rates in exchange for new
phones. Replicating this model for EV components holds merit.
• Batteries are the most capital intensive component of an EV. Repurposing
programmes can help develop a secondary market for batteries. They can be used
for energy storage in rooftop solar or other similar renewable energy projects.
• Buyback programmes would require OEMs to develop after-sales and financial
capacities. However, tie-ups with FIs could help overcome this hurdle. Collaborations
throughout the value chain would be crucial to realising the potential of a secondary
market for EVs.
• OEMs can join hands to operate a branded and guaranteed second-hand EV market.
• OEM Inverted Energy’s buyback plan provides INR10,000 in exchange for batteries
at the end of their warranty period.
44
• Secondary market development will assure FIs of the salvage value of EVs and help
remove resale risk in case of borrower default. A separate secondary market for
repurposing batteries can be created, opening up opportunities in processing and
urban mining.
• Prospective owners who cannot finance a new EV will benefit from the availability
of a secondary market.
SOLUTION 6: SECONDARY MARKET DEVELOPMENT
TOOLKIT OF SOLUTIONS TO MOBILISE FINANCE
Sell EV through buyback
programmes in case of default
Guarantee repossession,
refurbishment, and resale of EVs
Sell batteries for recycling or
repurposing as energy storage
Provide low-interest,
longer tenure loans for EVs
BORROWERS
GOVERNMENT
BATTERY
PROGRAMMES
OEMs
BANKS
AND
NBFCs — 32 —
EXHIBIT 9: OTHER INTERNATIONAL CASE STUDIES ON EV FINANCE
Finance is gaining recognition as an important lever for the global EV transition. Several countries
have leveraged instruments like the ones identified to support lower-cost financing and greater
access to finance for EVs.
Australia’s green bank, Clean Energy Finance Corporation, has established an Asset Finance
program. They partner with FIs in the country to provide low-cost finance to small-scale assets,
including low-emission vehicles. This has helped several banks distribute risk inherent to EVs and
set up green loan schemes.
Transport Scotland, an agency of the Scottish Government, funds a facility offering interest-free
loans of up to GBP28,000 for an electric car and up to GBP10,000 for an electric motorcycle or
scooter. The loan has a repayment period of up to six years. Used electric vehicles are also eligible,
with lower caps on loan amounts.
Global captive vehicle finance companies Toyota Financial Services (USA) and Hyundai Capital
Services (Korea) have raised green bonds using the green asset-backed security (ABS) model for
EVs. These are being used to provide discounted debt financing to mobility service providers.
Subnational governments can establish state EV authorities to coordinate funding and financing
programs. California State Bill 633 established a state EV authority responsible for developing
incentives, rebates, tax credits, loan guarantees, seed funds, and matching grants to start
early-stage markets. Additionally, the authority was required to lower the cost of capital and
unlock private capital.
RISK-SHARING MECHANISMS
INTEREST RATE-FREE LOANS
USE OF GREEN BONDS
STATE EV AUTHORITIES
TOOLKIT OF SOLUTIONS TO MOBILISE FINANCE — 33 —
ADDITIONAL SOLUTIONS: ECOSYSTEM ENABLERS
In addition to reducing risks, alleviating operational
hurdles and signalling market commitment to
electric mobility could also help FIs build confidence
in the EV ecosystem.
DIGITAL LENDING
Digital lending occurs when loans are sourced,
underwritten, and sanctioned digitally. Technology
and data analytics enhances the efficiency and
efficacy of the lending process. It will provide
unbiased decision-making and help overcome
operational and logistical challenges associated
with conventional vehicle lending in India.
In 2019, digitally executed loans accounted for
5.7 percent of all loans. Of all digitally executed
loans, only 5 percent were for vehicles.
45
Digital
lending is forecasted to increase to 19 percent of all
bank loans and 10 percent of NBFC loans by 2024.
FIs show a willingness to scale digital lending, by
either developing their own capacities or through
collaborations.
Digital lending has already shown promise in
supporting EV deployment in India. Three Wheels
United (TWU), founded in 2014, finances electric
three-wheelers in Karnataka and Tamil Nadu. TWU
leverages technology and partnerships with drivers,
OEMs and final-mile delivery companies. They
club loan collection, asset management, income
generation and behavioural data.
Fintech company RevFin, incorporated in 2018 as
an NBFC, finances and insures e-2Ws and e-3Ws for
individual customers. They use technology to assess
a borrower’s bankability and make the repayment
process simpler through customised tenures and the
elimination of intermediaries.
Digital lending can streamline processes and reduce
dependency on field personnel trainings on EV
technology and policy. This can reduce costs and
make EV finance accessible across geographies.
BUSINESS MODEL INNOVATION
Commercialising innovative business models
at scale, through funding, experimentation, and
commitment can build financing and adoption trust
required for improving the penetration of EVs. For
example, normalising leasing and rental models
can take electric mobility mainstream and build
confidence in the ecosystem.
Pilot projects can provide the proof points required
to iterate electrification and charging infrastructure
business models in India. Patient capital towards
mobility-as-a-service and indigenous manufacturing
are essential for this transition. Venture capital
funding can catalyse the investment potential in
electric mobility, and provide early-stage support to
deploy technology and services faster.
FLEET AND AGGREGATOR ELECTRIFICATION
TARGETS
Electrification of fleets is spurring EV uptake today.
EV demand at scale is being built because of high
utilisation of final-mile delivery and ride-hailing
services, and defined corporate transport routes.
They act as a market signal for new technology,
improved financing, and supportive policy.
The Climate Group’s EV100 coalition is an example
at the forefront of fleet electrification. Together,
EV100 members have committed to deploying
over 20 lakh vehicles globally by 2030. They will
also install charging infrastructure at more than
2,000 workplace and customer parking sites. Eight
of EV100’s 88 member companies are Indian.
46
By ambitiously setting out future EV purchasing
requirements, such initiatives can drive mass EV
roll-out.
OPEN DATA REPOSITORY FOR EVS
Robust data is a critical prerequisite to vehicle
finance. FIs rely on data to design leasing
programmes and determine interest rates and other
financing terms. While FIs have historical data for
ICE vehicles, such data is less commonly available
for EVs. FIs will be better able to accurately assess
risk and allocate financing for EVs using data on
vehicle specifications, real-world drive cycles, actual
charging costs, and other operating expenditures.
TOOLKIT OF SOLUTIONS TO MOBILISE FINANCE — 34 —
Promoting the use of open data will help expand
access to such data for EVs. According to the
National Informatics Centre, “A dataset is said to be
open if anyone is free to use, reuse, and redistribute
it. Open Data shall be machine readable, and it
should also be easily accessible.”
47
The Government
of India hosts open data portals with datasets for
many sectors.
The United Kingdom (UK) launched a National Data
Repository (NDR) on petroleum-related information
and samples. By providing timely and transparent
data access to industry, academia, and the public,
the UK facilitates disclosure, reporting, and
investment.
48
Other compelling examples include
the US cities of Austin and Chicago, which are global
leaders in open data portals. Each host dozens of
publicly available transportation-related datasets.
49
TOOLKIT OF SOLUTIONS TO MOBILISE FINANCE — 35 —
According to our existing analysis of future
passenger- and freight-vehicle sales, India’s
weighted-average EV sales penetration has
the potential to be about 70 percent in 2030
across segments based. The analysis is based
on forecasted cost competitiveness and expert
interviews.
To understand the total capital and financing
requirements for this EV adoption scenario, we
estimated the cumulative capital cost of vehicles,
SIZE OF THE OPPORTUNITY
EXHIBIT 10: CAPITAL COST OF INDIA’S EV TRANSITION FROM 2020 TO 2030
EXHIBIT 11: INDIA’S EV FINANCING MARKET IN 2030
electric vehicle supply equipment (EVSE) hardware,
and batteries (including replacements) between
2020 and 2030. We also estimated the size of
the loan market for EVs in 2030. The estimated
cumulative capital cost of India’s EV transition is
INR19.7 lakh crore (USD266 billion) by 2030 (see
Exhibit 10). The estimated size of the organised EV
finance market is INR3.7 lakh crore (USD50 billion)
in 2030 (see Exhibit 11). The customised solutions
outlined in this report can help mobilise capital and
financing to realise India’s EV ambitions.
CUMULATIVE CAPITAL COST OF INDIA’S EV TRANSITION, 2020–2030: INR19.7 LAKH CRORE (USD266 BILLION)
SIZE OF INDIA’S EV FINANCING MARKET IN 2030: INR3.7 LAKH CRORE (USD50 BILLION)
INR LAKH CRORE
PASSENGERFREIGHT
PASSENGER EVS FREIGHT EVS BATTERY REPLACEMENT EVSE
INR3.7 LAKH
CRORE — 36 —
Our existing passenger and freight transport
decarbonisation models account for the best
available sales data for 2020. They estimate
future vehicle stock by segment and fuel type
based on factors such as historical vehicle stock,
annual utilisation, established relationships
between GDP and demand, and projected EV
sales penetration levels.
SIZE OF THE OPPORTUNITY
EXHIBIT 12: APPROACH TO ESTIMATING CAPITAL COST AND FINANCING MARKET SIZE OF INDIA’S EV TRANSITION
• Capital cost of India’s EV transition: Cumulative cost of vehicles, EVSE hardware, and batteries
(including replacements) between 2020 and 2030 for specified EV sales penetration levels
• EV finance market size: Size of loan market for EVs (not including EVSE) in 2030
• Future vehicle stock for passenger and freight sectors based on our analysis
• EV sales penetration levels in 2030 by segment
• Current capital cost of EVs, EVSE, and batteries based on public data and industry interviews
• Capital cost does not account for subsidies or insurance for EVs or soft costs for EVSE
• Goods and Services Tax (GST) is included and assumed to remain constant at 18 percent for
batteries and 5 percent for EVs
• Vehicle costs for all segments except buses and trucks decline until 2025, due to increases
in battery density and reductions in battery costs, as per BNEF analysis, and achievement of
economies of scale
• After 2025, potential cost reductions are not passed on to the end-user
• Number of chargers required for total EV stock is assumed constant throughout the period of the
analysis and does not account for increasing utilisation
• EVSE hardware costs are assumed to decline as per industry estimates
• Battery replacement requirement is based on 2,000 cycles
• USD-INR conversion rate is 1USD to 74INR
• Project total number of vehicles sold by segment through 2030
• Calculate number of new vehicles sold by segment per annum and apply EV sales penetration
levels (see below)
• Estimate capital cost of vehicles, EVSE hardware, and batteries (including replacements) using
annual EV sales and forecasted ex-showroom costs (based on current top selling EV models),
cost of associated EVSE, and battery pack prices
• Estimate size of financing market using calculated capital cost and forecasted loan-to-value ratios
and financing penetration levels (both based on industry interviews)
DEFINITIONS
KEY ASSUMPTIONS
APPROACH — 37 —
The ecosystem must design solutions to address
barriers across policy, technology, economics, and
behaviour to support the adoption of EVs in India.
Simultaneously, reengineering vehicle finance and
mobilising public and private capital will be critical.
STAKEHOLDER-SPECIFIC SOLUTIONS
Key stakeholders can help unlock the potential of
EV finance in India:
• Central and State governments: Government can
help increase access to low-cost financing at the
central and state levels. At the Centre, RBI can
include PSL mandates for EVs to increase finance
available for them. Also, the central government
or NDBs can capitalise risk-sharing facilities
to provide longer-tenure, lower risk financing.
Governments can create mandates to bring down
the interest rate for EV buyers, at both the central
and state levels, lowering the cost of financing for
end-users.
• OEMs, NBFCs, and private banks: OEMs and
FIs can help provide low-interest, longer-tenure
loans. OEMs can give NBFCs and private banks
confidence to create dedicated financing lines
for EVs by providing product guarantees for the
performance of their EV products. Similarly, OEMs
can assure buyers that they will cover specific
repair and/or replacement costs by giving product
warranties, helping EV owners assume less risk.
To further reduce risk, OEMs and FIs can work
together to create a secondary market for EVs that
improves their resale value.
• Fleet operators: Fleet operators can support the
government, OEM, and FI initiatives in several
ways. They can provide partial credit guarantees
for full-time driver partners to share default risk
with FIs. They can also offer utilisation guarantees
to driver partners to help achieve TCO parity.
They can also continue to improve fleet economics
and further develop the market by focusing on
business model innovation and setting fleet
conversion targets.
• National and multilateral development banks:
State-owned Indian development FIs and publicly
PATH FORWARD
owned international FIs can lower the cost of
financing by capitalising risk-sharing facilities.
They can also offer low-interest loans and other
financing products to start-ups, fintech companies,
and more.
• Start-ups and fintech: Venture capital funding can
catalyse investment in start-ups with innovative
business models and manufacturing. Fintech can
make the EV transition accessible to first-time
drivers without credit history and large domestic
EV markets where financing penetration is low
(i.e., e-2Ws and e-3Ws).
SYSTEM-LEVEL SOLUTIONS
Aligning perspectives, driving common
understanding, and supporting early deployments
can build FI confidence and capacity:
ELECTRIC VEHICLE FINANCE FORUM
• Need: FIs should be engaged in the country’s EV
dialogue, as they add a necessary perspective to
policy frameworks and industry-led solutions.
• Opportunity: Create a convening platform to bring
together stakeholders from the financial industry
(FIs, insurers, and coalition bodies like IRDA),
OEMs and fleet operators with government bodies
like NITI Aayog, Ministry of Finance, and the RBI.
• Next step: Convene key ecosystem players to
discuss the current landscape of EV financing — 38 —
in the country. Identify actionable steps that the
government and industry can take to achieve
an EV financing market of INR3.9 lakh crore
(USD52 billion) in 2030.
EDUCATIONAL MATERIALS FOR FIS
• Need: FIs are looking for educational materials to
understand perceived risks, especially technology
and business model risks, associated with lending
to EV owners and operators.
• Opportunity: Produce and regularly update a
set of reference handbooks for various vehicle
segments and use cases. These books will
provide bankers with the most relevant data and
information on available models, technology
trends and costs, national- and state-level policies,
emerging business models, and more.
• Next step: Create one reference handbook as part
of a pilot for a high priority segment and use case.
A potential use case could be of two-wheelers for
final delivery deliveries.
PROCUREMENT AND FINANCING INITIATIVES
• Need: More early deployments at scale are
required to demonstrate the technological and
economic viability of EVs to FIs.
• Opportunity: Collaborate with FIs and energy
service companies (ESCOs) like EESL to design
and manage procurement and leasing initiatives.
• Next step: Design a demand aggregation, bulk
procurement, and leasing initiative for a market-
ready segment and geography.
These activities and other potential opportunities
will elevate finance’s role in India’s EV transition and
establish a community for exchanging knowledge.
This document intends to serve as a resource to aid
and inspire further action to finance EVs supporting
India’s social, environmental, and public health
goals.
EXHIBIT 13: POTENTIAL TO DRIVE EV FINANCE TO SCALE AT COP26
In the runup to the 26
th
UN Climate Change Conference of the Parties (COP26), the Government of
India has been participating in the COP26 Zero Emission Vehicle Transition Council. Alongside the
world’s largest and most progress automotive markets, they discuss working together to accelerate
the global transition to zero emission vehicles, in line with the goals of the Paris Agreement.
The future size of India’s vehicle market is large and its plans for manufacturing and adoption of
EV and EV components are ambitious. Other nations can benefit from India’s experience designing
and implementing EV policies and programmes, including current work on EV finance. NITI Aayog
has been working on a series of measures to ensure banks and financial institutions offer credit
at affordable rates to EV buyers, as well as greater availability of finance products customized
for EVs. The six financial instruments and four ecosystem enablers outlined in this report can
serve as a foundation for dialogue and solution making among member countries, global auto
manufacturers, development banks, and other financiers at COP26.
DRIVING GLOBAL IMPACT: INDIA AND EV FINANCE AT COP26
PATH FORWARD — 39 —
1 Press Information Bureau, PIB Delhi, “Mobility Solutions get a boost: National Mission on
Transformative Mobility and Battery Storage,” March 2019. https://pib.gov.in/PressReleaseIframePage.
aspx?PRID=1567807
2 Department of Heavy Industry. https://fame2.heavyindustry.gov.in/
3 NITI Aayog and Rocky Mountain Institute (RMI), “India’s Electric Mobility Transformation: Progress to date
and future opportunities,” 2019. https://rmi.org/insight/indias-electric-mobility-transformation/
4 Ministry of Road Transport and Highways (Transport Section), Government of India, “Incentivisation
of Electric Vehicles and Induction of EVs in share mobility and public transport operations,” July 2019.
https://morth.gov.in/sites/default/files/circulars_document/Incentivisation_of_Electric.pdf
5 Town and Country Planning Organization, Ministry of Housing and Urban Affairs, “Model Building Bye-
Laws (MBBL – 2016) for Electric Vehicle Charging Infrastructure,” 2019. http://mohua.gov.in/upload/
whatsnew/5c6e472b20d0aGuidelines%20(EVCI).pdf
6 Dialogue and Development Commission of Delhi and Rocky Mountain Institute, “Deliver Electric Delhi:
Pilot on Electrification of Final-mile Delivery Vehicles in Delhi,” 2020. https://rmi.org/insight/deliver-
electric-delhi/
7 “India Business Guide to EV Adoption,” World Business Council for Sustainable Development, 2019.
https://www.wbcsd.org/Programs/Cities-and-Mobility/Transforming-Mobility/Transforming-Urban-Mobility/
Emobility/Resources/India-Business-Guide-to-EV-Adoption
8 Dialogue and Development Commission of Delhi and Rocky Mountain Institute, “Deliver Electric Delhi:
Pilot on Electrification of Final-mile Delivery Vehicles in Delhi,” 2020. https://rmi.org/insight/deliver-
electric-delhi/
9 World Business Council for Sustainable Development, “Advancing Electrification of Ride-hailing in India:
A BluSmart Case Study,” 2020. https://www.wbcsd.org/Programs/Cities-and-Mobility/Transforming-
Mobility/Transforming-Urban-Mobility/REmobility/Resources/Advancing-electrification-in-ride-hailing-in-
India
10 A. Khandekar, et al., Lawrence Berkeley National Laboratory, “The Case for All New City Buses in India to
be Electric,” 2018. https://escholarship.org/uc/item/7d64m1cd
11 H. Ambrose, et al., “Exploring the Costs of Electrification for California’s Transit Agencies,” University of
California Institute of Transportation Studies, 2017. https://escholarship.org/uc/item/0fn8s2jh
12 Lingzhi Jin, The International Council on Clean Transportation, “Preparing to Succeed: Fleet-Wide
Planning Is Key in the Transition to Electric Buses,” July 2020. https://theicct.org/blog/staff/fleet-wide-
planning-key-to-ebus-transition-jul2020
13 Inc42 Media, “Electric Vehicle Market Outlook Report 2020,” 2020. https://inc42.com/reports/electric-
vehicle-market-outlook-report-2020/
14 P. Hertzke et al., McKinsey & Company, “The Unexpected Trip: The Future of Mobility in India beyond
COVID-19,” July, 2020. https://www.mckinsey.com/industries/automotive-and-assembly/our-insights/the-
unexpected-trip-the-future-of-mobility-in-india-beyond-covid-19
15 Flipkart Stories, Flipkart, “100% Electric Mobility by 2030 - Flipkart Joins The Climate Group’s EV100,”
August, 2020. https://stories.flipkart.com/100-electric-mobility-by-2030-flipkart-drives-towards-
sustainability-with-ev100/
16 Sajan C. Kumar, Financial Express, “Lithium to Raise $8 Million from IFC,” April, 2018. https://www.
financialexpress.com/industry/lithium-to-raise-8-million-from-ifc/1149207/
17 Nabeel A. Khan, The Economic Times, “SmartE Gets Rs 100 Crore Series B Funding from Japan’s Mitsui,”
July 2019. https://economictimes.indiatimes.com/small-biz/startups/newsbuzz/smarte-gets-rs-100-crore-
series-b-funding-from-japans-mitsui/articleshow/70325712.cms
ENDNOTES — 40 —
18 Mandar Patil and Akshima Ghate, Oxford Energy, “The Role of Incentives in Reducing the Total Cost of
Ownership of Electric Vehicles in Delhi, India,” 2020. https://www.oxfordenergy.org/wpcms/wp-content/
uploads/2020/07/OEF122.pdf
19 Pallavi Bhati, India Ratings and Research, “COVID-19: Electric Vehicle Penetration in India Could be
Delayed; PVs to be Worst Affected,” October 2020. https://www.indiaratings.co.in/PressRelease?pressR
eleaseID=52790&title=COVID-19%3A-Electric-Vehicle-Penetration-in-India-Could-be-Delayed%3B-PVs-
tobe-Worst-Affected-
20 EY, “Building a Strategic and Profitable Auto Finance Portfolio in India”, 2016. http://www.somkapoor.
com/India%20automotive%20finance%20POV.pdf
21 Rikin Shah et al., Credit Suisse Equity Research Asia Pacific, “India NBFC Sector: Long and Winding Road
to Recovery,” 2020.
22 Reserve Bank of India, “Sectoral Deployment of Bank Credit,” 2020. https://www.rbi.org.in/Scripts/BS_
PressReleaseDisplay.aspx?prid=49875
23 Tata Capital blog, Tata Capital, “How Different Is The Indian Used Car Loan Industry From Other
Countries?,” July 2019. https://www.tatacapital.com/blog/vehicle-loan/how-different-is-the-indian-used-
car-loan-industry-from-other-countries
24 Pradhan Mantri MUDRA Yojana, MUDRA Offerings, https://www.mudra.org.in/Offerings
25 ET Bureau, The Economic Times, “EESL to Raise $100m Via Green Bonds,” June 2017. https://
economictimes.indiatimes.com/markets/stocks/news/eesl-to-raise-100m-via-green-bonds/
articleshow/59263823.cms
26 State Bank of India, “Green Car Loan: For Electric Cars.” https://www.sbi.co.in/web/personal-banking/
loans/auto-loans/green-car-loan
27 Press Trust of India, ET Auto, “EESL Plans to Set Up EV Charging Stations in Kolkata,” September, 2019.
https://auto.economictimes.indiatimes.com/news/industry/eesl-plans-to-set-up-ev-charging-stations-in-
kolkata/70964366
28 Pay As You Save® (PAYS®) is a registered trademark in the United States of Energy Efficiency Institute
(EEI). Co-Principals Harlan Lachman and Paul A. Cillo created the PAYS system between 1998-1999. The
trademark applies within the U.S. Aspects of EEI’s PAYS system have been applied by Energy Efficiency
Services Ltd. (EESL) in India, to finance energy efficiency upgrades including LED light bulbs, street
lights, fans, and water and sewage pumps.
29 Kerala Finance Corporation, “Electric Vehicles.” https://kfc.org/common-pages/electric-vehicles
30 Expert interviews, NITI Aayog and Rocky Mountain Institute analysis
31 Amit Bhatt and Garima Agrawal, Scroll India, “Electric vehicles could help fight India’s pollution crisis–
but the lack of bank loans is a hurdle,” January 2021. https://scroll.in/article/981572/electric-vehicles-
couldhelp-fight-indias-pollution-crisis-but-the-lack-of-bank-loans-is-a-hurdle
32 Expert interviews, NITI Aayog and Rocky Mountain Institute analysis
33 Ibid
34 Vaibhav Pratap Singh and Labanya Prakash Jena, India Innovation Lab for Green Finance, “Financing
for Low-Carbon Auto Rickshaws,” September 2018. https://www.climatepolicyinitiative.org/wp-content/
uploads/2018/10/Financing-for-Low-Carbon-Auto-Rickshaws_Instrument-Analysis.pdf
35 Mandar Patil and Akshima Ghate, Oxford Energy, “The Role of Incentives in Reducing the Total Cost of
Ownership of Electric Vehicles in Delhi, India,” July 2020. https://www.oxfordenergy.org/wpcms/wp-
content/uploads/2020/07/OEF122.pdf
36 Patrick Hertzke et al., McKinsey & Company, “Expanding Electric-vehicle Adoption Despite Early Growing
Pains,” August 2019. https://www.mckinsey.com/industries/automotive-and-assembly/our-insights/
expanding-electric-vehicle-adoption-despite-early-growing-pains
ENDNOTES — 41 —
ENDNOTES
37 Press Trust of India, The Economic Times, “NBFC Crisis Poses More Bad Loan Risks for Banks: Moody’s,”
December 2019. https://economictimes.indiatimes.com/markets/stocks/news/nbfc-crisis-poses-more-
bad-loan-risks-for-banks-moodys/articleshow/72520496.cms
38 World Business Council for Sustainable Development, “Advancing Electrification of Ride-hailing in India:
A BluSmart Case Study,” 2020. https://www.wbcsd.org/Programs/Cities-and-Mobility/Transforming-
Mobility/Transforming-Urban-Mobility/REmobility/Resources/Advancing-electrification-in-ride-hailing-in-
India
39 Reserve Bank of India, “Master Directions – Priority Sector Lending (PSL) – Targets
and Classification,” September 2020. https://rbidocs.rbi.org.in/rdocs/notification/PDFs/
MDPSL803EE903174E4C85AFA14C335A5B0909.PDF
40 Press Trust of India, News18, “FICCI Urges Govt to Extend FAME-II Scheme Till 2025 to Boost Electric
Vehicle Demand,” July 2020. https://www.news18.com/news/auto/ficci-urges-govt-to-extend-fame-ii-
scheme-till-2025-to-boost-electric-vehicle-demand-2698069.html
41 Moneycontrol News, Moneycontrol, “NITI Aayog Reviews EV-related Policies, Recommends Bringing
Financing Under Priority Sector Lending,” August 2020. https://www.moneycontrol.com/news/
technology/auto/niti-aayog-reviews-ev-related-policies-recommends-bringing-financing-under-priority-
sector-lending-5746531.html
42 Express News Service, “Bankers’ panel formed to facilitate financing for energy-efficient projects,”
November 2020. https://www.newindianexpress.com/states/andhra-pradesh/2020/nov/16/bankers-
panel-formed-to-facilitate-financing-for-energy-efficient-projects-2224105.html
43 Natural Resources Defense Council and Council on Energy, Environment and Water, “Growing Clean
Energy Markets in India with Green Windows,” 2020. https://www.nrdc.org/sites/default/files/growing-
clean-energy-green-windows-202001.pdf
44 Press Trust of India, ET EnergyWorld, “Inverted Energy launches buyback plan for its e-rickshaw
batteries,” October 2020. https://energy.economictimes.indiatimes.com/news/power/inverted-energy-
launches-buyback-plan-for-its-e-rickshaw-batteries/78748669
45 ICICI Bank and CRISIL, “Mining the Golden Opportunity in Retail Loans,” 2019. https://www.icicibank.com/
managed-assets/docs/about-us/2019/Key-highlights-of-the-ICICI-Bank-CRISIL-report.pdf
46 The Climate Group, “2020 EV100 Progress and Insights Annual Report,” 2020. https://www.
theclimategroup.org/2020-ev100-progress-and-insights-annual-report
47 Ministry of Electronics and Information Technology, Government of India, “Open Government Data,”
http://sdtckochi.nic.in/OGD.aspx
48 Oil and Gas Authority, Government of the United Kingdom, “National Data Repository (NDR),” https://
www.ogauthority.co.uk/data-centre/national-data-repository-ndr/
49 NITI Aayog and Rocky Mountain Institute, “Data-driven Mobility: Improving Passenger Transportation
Through Data,” 2018. https://niti.gov.in/sites/default/files/2019-01/Mobility-data.pdf — 42 —
www.niti.gov.in www.rmi.org