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June 2022
DRIVING AFFORDABLE FINANCING
FOR ELECTRIC VEHICLES IN INDIA Authors &
Acknowledgements
The authors would like to thank Mr. Amitabh Kant, CEO, NITI Aayog
for their support that made this report possible.
The views and opinions expressed in this document are those of the authors and do not
necessarily reflect the positions of the institutions or governments. While every effort has been
made to verify the data and information contained in this report, any mistakes and omissions
are attributed solely to the authors and not to the organization they represent.
This publication was produced as a part of TA 6726-IND: Promoting Clean Energy Usage
Through Enhanced Adoption of Electric Vehicles and Grid Integration of Battery Storage System,
co-financed on a grant basis by the Asian Clean Energy Fund, established by Government of
Japan, under the Clean Energy Financing Partnership Facility and administered by ADB.
Boston Consulting Group
Natarajan Sankar
Sushma Vasudevan
Rajat Modwel
Aditya Khandelia
Sunil Narendra Albal
Anchita Bagga
Krishna Ayapilla
Asian Development Bank
Sabyasachi Mitra
Jiwan Sharma Acharya
Keerthi Kumar Challa
NITI Aayog
Sudhendu Jyoti Sinha
Joseph Teja
Abhishek Kumar Saxena
Acknowledgements
Authors Disclaimer
The views expressed in this publication are those of the authors and do not necessarily
reflect the views and policies of the Asian Development Bank (ADB) or its Board of
Governors or the governments they represent. ADB does not guarantee the accuracy of
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This document has been specifically created for Asian Development Bank (Client). The
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BCG does not provide fairness opinions or valuations of market transactions, and this
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the financial evaluations, projected market and financial information, and conclusions
contained in this document are based on standard valuation methodologies, are not
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BCG has not independently verified all the data and assumptions used in these analyses.
Changes in the underlying data or operative assumptions will clearly impact the analyses
and conclusions.
This report has been prepared with facts and figures basis existing market conditions as
of June 2022.
This document is fact based and is not intended to make or influence any
recommendation and should not be construed as such by the reader or any other entity. Table of
Contents
EXECUTIVE SUMMARY
01 INTRODUCTION 14
1.1 Approach & methodology 18
02 KEY CHALLENGES IN EV FINANCING IN INDIA 20
2.1 Current financing landscape for EVs 22
2.2 Key challenges & risks associated with
EV financing 27
03 REVIEW OF INNOVATIVE SOLUTIONS
PRESENT ACROSS THE INDUSTRY 30
04 POTENTIAL SOLUTIONS TO DRIVE
AFFORDABLE FINANCING FOR EV s 50
4.1 Conclusion and Way Forward 64
References 71 Executive
Summary Across the globe, electric mobility is gaining traction as consumers increasingly adopt Electric
Vehicles (EVs). This accelerated growth in EV adoption is the culmination of a host of factors
including governments’ environmental commitments, commensurate policy support, and
the improving economics of EVs. Further, with battery prices likely to reduce in the long run,
upfront purchase price of EVs is also expected to come down, thereby giving a further fillip to EV
adoption. However, some key challenges in the widescale adoption of EVs continue to persist.
India is one of the top 5 markets for automobiles and has already made a strong commitment
towards driving EV adoption in the country. A host of policy measures, regulations, and
interventions have already been made in that direction which broadly fall into regulatory
norms (e.g., Corporate Average Fuel Efficiency or CAFÉ norms regulating CO
2
emissions by auto
manufacturers), incentives for demand creation & charging infrastructure set up (purchase
subsidy under FAME-2, lower GST) and promotion of local manufacturing (ACC PLI, Auto & Auto
Components PLI). While these measures will help in bringing the overall total cost of ownership
of EVs at par with ICE, the absence of a holistic EV financing ecosystem acts as a significant
hurdle to the large-scale adoption of EVs in the country. With growing EV adoption, we estimate
around INR 45-55 thousand crore will be required to finance EV purchases by 2026. In order to
truly harness this potential, it is imperative to comprehensively address the financing challenges
in the ecosystem and unlock the capital required to drive India’s green transformation.
From a consumer’s perspective, currently the financing options available in the market are
limited along with unfavorable terms. They have limited access to funding with fewer bank
and NBFC options lending for EVs vs ICE. For the options available, loan terms are starkly
unfavorable. LTVs can be 10%-30% lower depending on vehicle category resulting in higher
initial down payment. In addition to this, the EMI burden is higher due to 1-9% higher interest
rates & 6-18 months shorter tenor offered vs ICE. Additionally, for higher usage applications,
there is an added recurring capex of battery replacement every 4-5 years with low financing
options. On the other hand, financiers are unable to offer competitive products due to real and
perceived risks, given the nascency of the technology and the market.
Overall, the challenges faced by the EV ecosystem are rooted in 6 major risks surrounding EVs:
Resale value of the battery is unestablished as second life use cases or a secondary
recycling market are yet-to-be established and there is lack of traceability of battery
health due to lack of certification standards.
Resale value of vehicle without the battery is unknown. Further a secondary market for
used EVs has not been established yet.
Significant skepticism regarding product performance and technology given its nascency
and lack of historic data to gauge durability of product for different applications.
Uncertainty in savings and earnings since higher EMI and higher down payment are
needed against an income which is contingent on running & usage of EVs
Inherently different capex structure due to battery replacement required every 4-5 years
(in 3W).
Ticket size barriers on loans and EMI precluding a large number of people from owning EVs
personally.
1
2
3
4
5
6
8 | Financing for EVs in India To address the challenges detailed above, multiple entities in India and across the world like
governments, OEMs, financiers, and startups have come up with a variety of solutions. These
can be categorized into 5 broad levers:
Absorption of additional risk in EV financing by the broader ecosystem to bring down the
cost of borrowing for end customer.
Restructuring of financial products to help mitigate challenges such as higher down
payment or higher EMI through innovative models to improve cash flows for end customer.
Reducing the risk of battery technology by addressing the uncertainty around battery
performance and developing a secondary market for used batteries.
Reducing the risk of product resale by developing a used vehicle market.
Creation of a platform to enable collaboration between different stakeholders and
channelize capital for EV financing.
Based on a comprehensive understanding of the challenges faced in EV financing and an
extensive review of solutions across these 5 pillars, a 10-point action agenda is proposed below
(Actions 1-10) to address the different risks prevailing in India’s EV ecosystem.
1
2
3
4
5
Financing for EVs in India | 9
Thrust Area 1: Enable the broader ecosystem to absorb the additional risk in EV
financing to bring down the cost of borrowing for end customers
Due to concerns around technology and long-term economics (including resale value), FIs
perceive that financing an EV vehicle has additional risks over ICE. Thus, as a mechanism to
limit their exposure, FIs pass this risk to end-consumers which ultimately results in higher cost
of borrowing. Some mechanisms through which the broader ecosystem can absorb some of
the inherent risk or provide FIs with access to low-cost capital are proposed below:
Ensuring affordable financing for EVs
Enable collaboration between different stakeholders & channelize capital towards EV financing
Absorption of additional
risk by broader
ecosystem
Set up low-cost funds
with risk sharing
mechanisms / FLDG
Promote green bonds
and asset-backed
securities
Include commercial EV
loans for driver owners
under priority sector
lending with loan
limits by segment
Enable de-coupling
of battery and vehicle
to facilitate leasing /
swapping / pay per use
models
Establish battery
safety standards
& performance
certification framework
Promote secondary
market for used
EVs OEM buyback
programs, through
purchase subsidies, etc.
Develop framework for
circular economy for
battery
Support scaling of
business models like
fleet ownership, reverse
leasing, flex loans etc.
Reduce EMI through
interest subvention,
income tax exemption
beyond FY23 & re-
introduction of
accelerated depreciation
Restructure products
to improve cash flow
profile
Reduce risk of battery
technology
Reduce risk of product
resale
Build industry-wide platform to ideate, promote and fund innovative financing models & raise technology awareness. 10
1479
8
2
5
3
6 #1 – Establish low-cost funds with risk sharing mechanisms / first loss default guarantee
Access to low-cost capital can be facilitated through the creation of a risk-sharing facility like
a loan loss reserve that can cover general default or loss due to specific risks, for e.g., product
failure. This reserve can be created at the behest of the government and structured to include
multiple stakeholders across the EV ecosystem through funding mechanisms like grants, risk
underwriting, debt, equity, debt and equity with first loss guarantee, etc. The government,
along with FIs and MDBs can explore some of these structures to mobilize significant amount of
nascent institutional capital to accelerate financing for EVs in India.
#2 - Promote green bonds and asset-backed securities
Green bonds have emerged as an innovative financial instrument in the last decade to
mobilize significant amount of nascent institutional capital, distribute risk over a larger base
through asset backed securities and bring down the cost of capital. However, additional
government and regulatory support is required for the proliferation of green bonds as a
financing instrument in India. Creation of a coherent and comprehensive taxonomy and
definitions along with establishment of proper standards is essential to build investor
confidence and increase participation in this instrument. Additionally, support in the form of
tax incentives for retail investors, inclusion of green mobility funds for CSR investments, and/
or coverage of additional issuance costs (green certification) for issuers can also be provided.
Separately, MDBs can also support green bonds through the identification/creation of funds
with a green portfolio to cover concentration risk.
#3 - Include commercial EV loans under priority sector lending
A targeted priority sector lending policy to support specific EV segments and use cases could
be beneficial for the sector. For example, the inclusion of EV loans under priority sector lending
with internal lending limits for Driver cum Owner commercial applications/fleets can be
considered. This will help in increasing financing options for the end customer and reduce the
cost of borrowing with entry of banks in the segment.
Thrust Area 2: Restructure financial products to help mitigate challenges such
as higher down payment or EMIs through innovative models that can potentially
improve cash flows for end customers
Purchasing an EV currently has higher financing costs than traditional ICE vehicles. Depending
on the vehicle segment, the down payment can increase by up to 20% while EMIs can reach up
to 1.5-1.8x of those for comparable ICE vehicles (albeit for shorter tenor loans). Hence, innovative
financial products that can mitigate some of the challenges faced by both financiers as well as
customers are required to improve cash flows for customers.
#4 Facilitate de-coupling of battery and vehicle to enable leasing / swapping/ pay per use
models
De-coupling the battery from the vehicle allows the financiers to factor risks for vehicle and
battery separately and create standalone products for vehicle without battery and the battery
itself. This reduces loan amount on the vehicle (hence reducing down payment & EMIs) &
gives customers an opportunity to incur expenses for the battery as per usage – essentially
making the cost profile similar to ICE vehicles wherein fuel costs are directly proportional to the
usage of the vehicle. To enable this, support will be required from the government in terms of
policies which will help sale of vehicles and batteries separately. This could be done through
multiple initiatives like detailing vehicle registration procedures at the RTO and state transport
departments, detailing subsidies for vehicles without batteries and designing incentives for
battery manufacturers and BSS operators either under an existing framework (for e.g., FAME-2)
or a new policy, which will also help in stimulating demand.
#5 Reduce EMI burden for customers through subvention schemes and tax exemptions
Subvention schemes can be designed to offset a portion of the customer’s interest burden
by enabling other players in the ecosystem to absorb a part of the interest burden. The
Financing for EVs in India | 1110 | Financing for EVs in India government can offer direct interest subvention schemes paired with conditions on extended
warranty / buyback guarantees by OEMs. This can also be led by MDBs or other 3rd parties
where the MDBs partner with banks / NBFCs to provide EV loans mandating certain subvention
vs ICE loans. In addition to interest subvention, the government can also look at extending
income tax benefits provided to individual owners under Section 80EEB for loans sanctioned
beyond FY23. Accelerated depreciation for EVs can also be reintroduced for EV purchases by
organizations using loans, to help offset interest cost burden for commercial applications.
#6 Provide support for the scaling of business models like fleet ownership, reverse leasing,
flexible loan structures, etc.
Banks, MDBs, and other DFIs can help mobilize low-cost funding for any existing or upcoming
financial entity, for e.g., startups, fintechs etc. providing innovative solutions (for e.g., fleet
ownership, reverse leading, flexible loan structures, etc.) by setting an asset financing structure
which is front ended by the financial entity itself. The financial entity will be responsible for
operationalizing the asset finance company, disseminating funds, and absorbing the credit
risk. Banking and financial institutions, on the other hand, can act only as investors thereby
safeguarding their returns.
Thrust Area 3 – Reduce the risk of battery technology by addressing the uncertainty
around battery performance and developing a secondary market for used batteries
Since batteries can comprise 30%-40% of the total vehicle cost, battery life and degradation
are a major concern for financiers. Given the nascency of the technology, FIs have limited
understanding on how battery health and consequently vehicle performance will change
during the product lifecycle. These concerns can be assuaged through a targeted battery
policy as proposed below.
#7 Establish battery safety standards and performance certification framework
A holistic battery technology roadmap/policy is needed to address the risks associated with
battery technology through collaboration between EV OEMs, players along battery value chain,
and 3rd party testing agencies. The objective is to create a certification mechanism that will
boost financier confidence on battery performance and traceability. This framework needs
to cover key areas including classification guidelines for EV batteries, battery labeling and
information requirements along with unique ID for traceability and regulation for EV batteries
to contain a smart BMS with guidelines around data capturing and sharing, to enable proper
certification of batteries. The framework should also focus on rigorous enforcement of the
AIS-156 and AIS-038 (Rev 2) safety standards. In addition to this, standards also need to be
developed for performance and ageing testing for EV batteries.
#8 Develop framework for circular economy for battery
Development of a secondary economy is essential to establish a floor price or a salvage value
for second life of batteries / end-of-life scrappage which will help financiers in assessment
of value they can recover from the asset in case of default. To facilitate a circular economy
for batteries, battery recycling and end-of-life regulations are required, laying down the
roadmap across target recovery rates at material level, recycling efficiency, target rates for use
of recycled content in new batteries, standards on 2nd life use cases, etc. A comprehensive
long-term roadmap (8-10 years) is needed to guide the R&D efforts for recycling and second
life usage which will attract interest of private players to invest and facilitate development
of innovative solutions. Additionally this will also help in mobilizing the capital needed for
commercialization of these solutions and creating a robust secondary ecosystem for batteries.
Thrust Area 4 – Reduce risk of product resale by developing a used vehicle market
Most EVs sold to date have not gone through the entire product lifecycle to enter the used
vehicle market till now. Hence, the secondary market for EVs currently remains very nascent
in India. Governments globally have helped kickstart this market through purchase subsidies
while OEMs are also facilitating sales through models like leasing. A similar push in India can
help initiate market development for used EVs.
Financing for EVs in India | 1110 | Financing for EVs in India #9 Promote the secondary market for used EVs through purchase subsidies, OEM buyback
programs, etc.
Purchase incentives for used EVs in the form of one-time grants, tax breaks, etc., can be
considered. Conditions for disbursing incentives can be placed to ensure a minimum
performance of the vehicle, for e.g., minimum battery capacity and range, maximum
kilometers driven before resale, etc. OEMs can also facilitate secondary market development
through buy-back programs with back-to-back arrangements with financiers.
Thrust Area 5 - Create platforms to enable collaboration between different
stakeholders and channelize capital for EV financing
While there are multiple startups providing affordable solutions for EVs, their reach is
currently limited, and they require access to capital to scale up their solutions. On the other
hand, financiers still consider EV as a risky sector due to the knowledge gap and limited
understanding around technology. It is essential to bridge this information asymmetry through
collaboration between OEMs, industry bodies and other players in the EV ecosystem.
#10 Build industry-wide platform to ideate, promote innovative financing models & raise
awareness on technology
A unified platform can be created that brings multiple stakeholders like EV OEMs, battery
manufacturers, legacy banks and NBFCs, fintechs, MDBs, DFIs, etc., along with representatives
from relevant government ministries. The platform will help with following objectives:
• Ideate, design, and promote innovative financing models.
• Undertake projects in this space to incubate, roll out and scale these initiatives.
• Help channel private capital and identify regulatory challenges.
• Facilitate knowledge exchange between multiple stakeholders.
12 | Financing for EVs in India Financing for EVs in India | 13
Given the complexity of challenges faced throughout the ecosystem, it is crucial to have
a multi-pronged approach with integrated solutions to address barriers across policy,
technology, vehicle economics, and customer behavior. This requires the government, financial
institutions, OEMs and various industry players to collaborate and create holistic solutions to
promote affordable financing for EVs. Effective execution of the actions proposed below can
help accelerate the penetration of EV financing in India. Introduction
01 Electric mobility has witnessed exponential growth globally, driven by environmental
commitments and sustained policy support by various governments along with improving
economics of EVs. Additionally, with battery prices likely to rationalize over the long term, we
expect the scales to further tip in favor of EVs. Inarguably, India is one of the top 5 markets for
automobile sales globally and its strong commitment to driving EV adoption in the country
augurs well for the growth of the EV industry.
However, some key challenges in the widescale adoption of EVs continue to persist. These
include consumer anxieties regarding the vehicle, the relatively higher cost of establishing a
charging infrastructure, unencumbered access to technology, and the cost of the technology
itself. The Government of India (GoI) has been proactively working on resolving some of these
issues through various regulations and interventions in an effort to drive demand creation and
promotion of local manufacturing in this sector.
Some of the key regulatory interventions include:
• CAFÉ or Corporate Average Fuel Efficiency / Economy
1
regulations, which came into force in
India in April 2017. Under this regulation, the average corporate CO
2
emissions basis sales-
volume weighted average for every auto manufacturer must be less than 130 g/km by 2022
and below 113 g/km, thereafter. The aim of the regulation is to drive auto manufacturers to
move to electric or hybrid car manufacturing in the long run.
Demand creation & charging infrastructure set up:
• The GoI has already set the stage for the adoption of EVs in India through multiple schemes
that are aimed at stimulating demand including purchase incentives, road tax waivers,
scrapping, and retrofit incentives.
The Faster Adoption and Manufacturing of Electric Vehicles or FAME-2 scheme
2
, started in
April 2019, has an outlay of INR10,000 crore and aims to support 1.56 million EVs. The policy
is focused on providing demand incentives in the form of purchase subsidy given basis
battery size of vehicle. The FAME-2 policy also lays out capital subsidy of up to 100% of
equipment cost for setting up EV charging stations.
• In addition to this, GST on EVs has also been reduced to 5% starting from April 2019 while
GST for ICE vehicles remain 18% or more depending on the vehicle. GST cess for EVs has also
been removed. In the Draft Battery Swapping Policy, NITI Aayog has also proposed cutting
the GST on EV batteries from 18% currently to 5%.
• Several states, for e.g., Delhi, Maharashtra, etc., have also introduced individual policies
3
supporting the central government’s initiative. For example, the Maharashtra government
has introduced a scheme that offers an INR 5,000 subsidy per kWh of battery capacity
(maximum subsidy of INR 10,000) for electric 2W and electric 4W (maximum subsidy of INR
1,50,000).
Promotion of local manufacturing:
• In addition to demand creation incentives, the government has also focused on creating a
supply chain for EVs in India. Examples include the Advanced Chemistry Cell PLI
4
scheme,
Auto and auto component
5
PLI with a combined budgetary outlay of INR 18,100 crore and
INR 26,000 crore respectively, targeting cell production, other auto and EV components
production and vehicle assembly.
• A Phased Manufacturing Program
6
has been introduced for EV components as guidelines
for OEMs for receiving FAME-2 subsidy to enforce local content requirement
• Several states like Karnataka, Tamil Nadu, Maharashtra, etc., too have supported these
initiatives by making EV manufacturing a focus sector and offering state specific incentives
and schemes
7
to promote manufacturing.
With extensive policy support from the government at the central and state level, overall EV
volumes are expected to grow to 30-35 lakh units by 2026 (excluding e-rickshaws) driven by
different levels of adoption across vehicle categories. The 2W segment is expected to be the
primary driver with 13-15% adoption, followed by 3W and 4W segments with 18-20% and 3-5%
adoption respectively.
While these measures will help in bringing the overall Total Cost of Ownership (TCO) of EVs
at par with ICE (Internal Combustion Engine) in many cases and facilitate the large-scale
Financing for EVs in India | 1716 | Financing for EVs in India adoption of EVs, it is essential for affordable financing options to be available to customers to
further drive adoption.
Currently, ~50% 2W, ~90% 3W and ~80-90% 4W are financed in India
8
. Given the higher upfront
cost of EVs, it is even more important to have low-cost financing solutions for EVs to make them
an affordable substitute for ICE vehicles for the average Indian consumer.
Today, financing an EV remains a challenge with limited options available in the market along
with unfavorable loan terms. Financiers too face challenges in providing competitive products
due to real and perceived risks, given the nascency of the technology and the market. With
growing EV adoption, the EV financing market is expected to grow to INR 45-55 thousand crore
by 2026. It is essential to understand and address the challenges being faced across the EV
financing ecosystem to unlock the capital required to drive India’s green transformation.
This report is focused on understanding comprehensively the challenges faced in EV financing
today and also present initiatives for different stakeholders in the EV ecosystem that can
act as potential solutions. The second chapter details the challenges faced by customers
across vehicle categories along with the perspectives of financiers to understand the root
causes for lack of affordable financing options for EVs, currently. In chapter three, an extensive
benchmarking of best practices in India and across the globe has been carried out to capture
innovative solutions. The last chapter, i.e., chapter four, proposes a holistic, multi-pronged
agenda to accelerate the penetration of financing in the EV market to support adoption.
2W
EV
Penetration
EV Market
Volume
EV Market Size
(Rs. Cr.)
Financing Market
Size (Rs. Cr.)
3W
1
Cars
LCV
Bus
13-15%
2800-
3200k
35-40k 13-15k
18-20%85-95k3.5-4k2.5-3k
3-5%
170-
230k
28-36k20-27k
45-55k
3-5%18-22k1.9-3.2k1.5-2.5k
8-9%15-20k10-12k8-10k
FY26 (E)
Total11-13% 3000-3600k 75-95k
Exhibit 1.1: EV financing opportunity in India
1. Only e-autos considered; e-rickshaws are excluded
Financing for EVs in India | 1716 | Financing for EVs in India 1.1 Approach & methodology
To understand the challenges in the EV financing market in depth across vehicle categories
and use cases, we have split each vehicle category by usage and further by types of vehicles
available within each category:
Electric 2Ws have been split into personal and commercial based on usage.
Both low-speed EVs (maximum speed of 25 km/h) and high-speed EVs have
been covered under each.
• Personal: Individual buyers purchasing vehicle for personal usage
• Commercial: 2W purchased for commercial usage across passenger
(bike taxi / rental) & goods transportation (parcel delivery, food & grocery
delivery)
Electric 3W L5 category has been covered for the following segments. L5
vehicles defined as 3W with maximum speed exceeding 25 km/h and motor
power exceeding 0.25kW
• Passenger: Vehicles used for transportation of passengers from one point
to another
• Cargo: Vehicles used for goods, parcel, and grocery delivery
Electric 4W category has been split into personal and commercial based on
usage
• Personal: Individual buyers purchasing car for personal usage
• Commercial: Fleet operators providing services targeted for corporate
customers (for e.g., CarsOnRent, EcoCars) and passenger segment / ride
hailing services (for e.g., Ola, Uber, Meru)
18 | Financing for EVs in India
Note:
1. Low-speed 2W categorized as vehicles with maximum speed of 25 km/h; vehicles with maximum speed >25km/h
considered as high-speed
2. L5 vehicles defined as 3W with maximum speed exceeding 25 km/h and motor power exceeding 0.25kW
In order to build a holistic view on the challenges in EV financing in India and to identify
financing related pain points across vehicle categories, a comprehensive study was conducted
with inputs from primary and secondary research and 60+ discussions across the ecosystem.
This included discussions with dealers of 2W, 3W and 4W categories across cities and with
financiers across banks, NBFCs and startups. Considering the well-established financing market for ICE vehicles, the EV financing landscape
was benchmarked against ICE across vehicle categories to capture customer pain points and
financier challenges.
To understand challenges faced by customers, 3 key parameters were evaluated:
• Availability of loan options: An evaluation of the number of financing options available
across banks, NBFCs, and captive financiers and whether these financiers have
representatives to educate customers at dealerships was done, to assess the depth of the
EV financing market.
• Ease of availing finance: Factors such as the eligibility criteria, documentation required,
steps involved in the credit underwriting process, and the turn-around time for disbursal
were evaluated to understand if financial institutions have any additional checks for EV
loans vs ICE.
• Loan terms: Terms and conditions set forth for the borrower by the lender were assessed
across 3 key factors - the interest rates charged, maximum Loan-to-Value (LTV) ratios, and
tenure options available.
Financing for EVs in India | 19
From a financier’s perspective, challenges were detailed out to understand the reason for
pain points faced by customers. Potential support required by financiers to offer competitive
products for EV financing vs ICE were also captured. Some of the key questions discussed with
financiers are listed below:
Why are financiers skeptical when lending to EVs?
How do the two inherent risks in auto financing – asset risk and credit risk, differ for EV vs
ICE vehicles?
What are the root causes for additional risks in EV financing across these parameters?
What are some innovative solutions which the financing ecosystem across startups &
legacy players have come up with to solve for these root causes?
What support is required from other players like OEMs, government and other members
of the ecosystem to provide affordable financing to EV customers in India?
Using the above-mentioned approach, a comprehensive view of current challenges was
formed both from the customer and financier perspective. Details of specific challenges
faced in each vehicle category are captured in the next section.
1
2
3
4
5 Key Challenges
in EV Financing
in India
02 2.1 Current financing landscape for EVs
Personal use-case | Financing gaps for EVs identified in 2W but not in 4W
Vehicle financing is driven by two primary underlying risks – asset risk and credit risk.
• Asset risk captures the risk associated with vehicle performance, maintenance, and resale
value.
• Credit risk, on the other hand is driven by creditworthiness of the customer and his capacity
and intent to repay.
The 3 parameters mentioned earlier, which are availability of financing, ease of financing
and loan terms are driven by financier’s confidence across both these risks. The current EV
financing landscape, assessed across these 3 parameters, has been captured below in detail
for all vehicle categories for personal and commercial segments.
2.1.1 Personal
In the personal segment there are 2 vehicle categories, 2Ws and 4Ws. Creditworthiness of
customers in this segment has been observed to be good given the relatively stable income
profile (for e.g., salaried or business owner, net monthly income post-tax, etc.). Hence, the key
risk that financiers consider in this segment is the underlying asset risk.
Exhibit 2.1: Loan terms in personal segment
Low-speed EVHigh speed EVICEEVICE
Banks
NBFCs
1-4%higher interest rates charged vs ICE
1.5-3% higher rates vs ICE typically; difference
can be higher for low-speed vehicles
--
Typically similar interest rates;
20-25 bps lower rates available
under green loans
Interest
Rate
Differential
18-24 24-36
1
4836-120
2
36-84
Tenure
(months)
65-75% 75-80%
3
Up to 95% 80-90% 80-90%LTV
2W4W
1. 60-month tenure option available with Hero Fincorp; 36 months available only for top OEMs 2. Up to 10-year options available
for green loans 3. Select banks offering LTV up to 90% for top OEMs
Source: Expert interviews; Dealer visits; BCG Analysis
Financing for EVs in India | 2322 | Financing for EVs in India In the 2W category, it has been observed that EVs are
generally bought by customers whose credit profile is similar
or marginally better than those of ICE, given the higher price
of EVs compared to ICE. However, due to higher asset risk
associated with EVs, especially for low-speed vehicles, there
are limited options available currently and the loan terms are
unfavorable compared to ICE for both low-speed and high-
speed EVs.
• For low-speed vehicles, there are limited bank & NBFC
options since the vehicles are unregistered. On the other
hand, for high-speed vehicles, NBFCs are the primary
lenders, with number of options available at dealerships
being similar to ICE. Few banks, who are willing to lend, do
so only to select OEMs offering high speed vehicles.
• NBFCs typically have stronger credit requirements for low-
speed vehicles (e.g., salary slips/bank statements for a
longer period; 6 months vs 3 months typically) while there
is no difference between credit checks for high-speed
EVs vs ICE. For high-speed EVs, banks however maintain a
stricter credit assessment vs ICE loans.
• Loan terms offered are starkly unfavorable for both low-
speed and high-speed vehicles.
• Low Speed: Interest rates charged by banks are 1-4%
higher vs ICE, while delta for NBFCs can be even higher.
LTV offered is 20-30% lower while tenor available is also
much lower (18-24 months vs 48 months for ICE).
• High Speed - An interest differential of 1-4% vs ICE
exists for banks while 1.5-3% for NBFCs. These are
coupled with 15-20% lower LTV and lower tenor (24-36
months vs 48 months for ICE).
—Branch manager,
a national bank,
Bangalore
We have never given
out an E2W loan in our
branch, and hence
not aware of green
loans, you need to
speak directly to our
representative at
dealership for more
details
—Multiple EV
dealerships
Financiers prefer to
not be present in EV
dealerships because
of low sales volumes,
they prefer connecting
over call or provide
brochure for reference
From a customer perspective, thus, there are limited financing options for EVs. In addition, the
options available require higher down payment because of low LTV; and higher EMI because of
high interest rates and lower tenors. Hence, affordability is a key concern for most customers in
the personal space as higher financing costs can upset monthly budgets.
From a financier’s perspective, the key risk that drives unfavorable loan terms is the asset risk,
some of the reasons for which are mentioned below:
• There is uncertainty around life of the battery given the nascency of the technology.
• There is presence of multiple small OEMs with limited track record and inadequate service
network. These smaller OEMs assemble imported kits with limited quality checks, raising
concerns over product quality. In addition, the future of the OEMs itself is uncertain.
• The resale/salvage value of the batteries and the products is unknown.
Financiers, hence, design their loan terms to mitigate these risks. To limit their capital at risk,
lower LTVs are offered, while higher interest rate is offered to cater to the concerns around OEM
credibility, product quality & resale value. Uncertainty of battery life is managed by matching
the loan tenures with the warranty offered on the battery, resulting in lower tenors for 2W loans.
When it comes to the personal 4W category, however, financing is usually much easier. EVs are
offered similar options and financing terms compared to ICE.
• Banks, the primary lenders in the personal ICE 4W space, are willing to lend for EV models
and hence number of options are similar to ICE.
• There is no difference in eligibility, documentation, or turnaround time for approval for EV
loans vs ICE.
Financing for EVs in India | 2322 | Financing for EVs in India 1. Rates higher for passenger fleets (ride hailing) vs corporate fleets 2. Typically, 3 years for passenger fleets; 4-5 years for
corporate fleets
Source: Expert interviews; Dealer visits; BCG Analysis
• Loan terms in the personal EV and ICE segment too remain similar. In fact, as a support to
the government’s effort to promote EVs, there are green loans available with some banks
like State Bank of India and Union Bank, which offer a 20-25 bps discount along with higher
tenor of up to 10 years.
Even though availability, ease and loan terms are comparable to ICE, information asymmetry
does exist, with dealers and financier representatives unaware of green loan offerings by
banks.
The comparable financing options for EV and ICE are driven by the fact that from a financier’s
perspective, both credit risk and the asset risk of 4W EVs is comparable to ICE. Given higher
price for EVs, it has been observed that customers usually purchase this vehicle as a second
car for intra-city use. Hence, financiers are typically confident of the customer credit profiles,
lowering the associated credit risk. The asset risk associated is also lower than 2W, since only
large OEMs like Tata, Mahindra, MG, Hyundai etc. have offerings in this segment. This provides
financiers comfort on product quality and serviceability of the product even though the
technology still remains unproven.
2.1.2 Commercial
In the commercial space, across 2W, 3W and 4W vehicle categories, asset is typically financed
basis earnings from the vehicle. Hence, creditworthiness of the customer is dependent on asset
utilization and business viability, thus adding more complexity in assessing the credit risk. Asset
usage is also much higher than personal segment, resulting in additional concerns around the
asset risk as well.
Exhibit 2.2: Loan terms in commercial segment
Low-
speed EV
High-
speed EV
ICEICEICEICEEVEVEV
Banks
NBFCs
1-9% higher vs ICE
12-24
75-80%
2-3% higher vs ICE; difference
more pronounced in case of
low-speed EVs
12-18
65-70%
12-24
75-85%
1-7% higher vs ICE
24-42
70-90%
-
-
--
-
24-60
85-
100+%
2-2.5% higher vs ICE
1-8% higher vs ICE
24-42
70-90%
24-60
85-
100+%
0.5-2%
1
higher vs ICE
36-60
2
60-70%
48-60
80-90%
Interest
Rate
Differential
Tenure
(months)
LTV
2W 3W - PASSENGER 3W - CARGO 4W
Commercial use-case | Financing gaps for EVs identified across all segments
Financing for EVs in India | 2524 | Financing for EVs in India —Leading
Electric 2W OEM
dealership, Delhi
Loans are currently
not being given
out on company
names since subsidy
is only available
on the name of
an individual;
we recommend
companies to buy
multiple vehicles on
the proprietor’s name
Electric 2Ws are mainly used by e-commerce players for food
and parcel delivery. These vehicles are typically purchased
by startups or aggregators rather than individual buyers and
hence assessing creditworthiness of the firm and viability of
business model plays an important role in determining credit
risk. Current landscape for EV financing in this segment is as
follows:
• Overall options are generally limited. Very few NBFCs and
even fewer banks are willing to finance commercial loans
across EVs (high speed or low speed) and ICE
• In terms of eligibility for loans, selective practices have
been observed, for e.g., some NBFCs are unwilling to lend
to proprietary firms or firms with >3 partners. Further, for
loans on an individual rider’s name, NBFCs typically lend
only if the company is an established 3rd party logistics
(3PL) provider or the end-client for the 3PL is a large
e-commerce player.
• Loan terms for EVs are unfavorable vs ICE, especially for
low-speed vehicles
• For low-speed vehicles, interest rates are 2-3% higher
vs ICE, combined with 10-15% lower LTV and lower
tenor (12-18 months vs 12-24 months for ICE).
• Interest rates are 1-9% higher for high-speed vehicles
as well, along with 5-10% lower LTV. Tenor, however,
remains same as ICE since the warranty offered on
battery is similar to the maximum tenor offered for ICE
loans (24 months).
Unlike 2Ws, electric 3Ws are purchased by both driver cum
owners as well as fleet operators in the passenger and
cargo segments. Since the customer profile in this segment
usually belongs to the low-income group for both EV and
ICE, individual creditworthiness plays and important role in
assessing credit risk and eligibility for loans.
• NBFCs have been the primary lenders in ICE and continue
to be the primary lenders in EVs with number of options
available being similar across EV and ICE. Further, there
are also various local, unregistered individual lenders
ready to finance EVs at high interest rates. Banks rarely
lend to 3W EVs across passenger and cargo segments.
• In terms of eligibility, home ownership or a guarantor
is required in the case of cargo EV, while no such
requirement is present in case of ICE or passenger EVs.
Further, while similar documents are required across EV
and ICE, several dealerships request for multiple blank
post-dated cheques as collateral for financing EVs.
• NBFCs typically charge 1-7% higher interest rates for
passenger EVs vs ICE and 1-8% higher rate for cargo EVs
vs ICE, combined with 10-15% lower LTV and lower tenor
(24-42 months vs 24-60 months for ICE). Local individual
lenders are also a source of financing for this segment,
charge a steep 25-27% fixed interest rate p.a. for both ICE
and EVs.
—Leading EV OEM,
Kanpur
Banks are unwilling to
lend to EV segment
due to historically
higher NPA problems,
poor resale value of
damaged battery,
along with an
underdeveloped
secondary market
Financing for EVs in India | 2524 | Financing for EVs in India Electric 4Ws are used primarily in 2 commercial applications, corporate fleets and passenger
services (OLA, Uber, etc.). Loan eligibility and loan terms are determined basis cash flow profiles
of these 2 businesses.
• When it comes to the commercial EV space, all banks & NBFCs lending to 4W ICE customers
are willing to lend for EV models.
• However, banks selectively lend to companies with an existing fleet greater than 50 or
those servicing corporate customers given higher stability of cashflow vs fleets targeted
for passenger services. Businesses falling outside this segment are generally financed by
NBFCs.
• Interest rates are around 0.5%-2% higher for EVs vs ICE. The delta in interest rates is more
pronounced for fleets used for passenger services. LTV offered for commercial EV loans is
10-20% lower while tenor is lower only for passenger fleets (3 years vs 4-5 years for ICE and
corporate EV fleets).
From a customer perspective in the commercial category, lending practices remain selective
along with stricter credit assessment for both EVs and ICE. However, for EVs, customers have to
pay higher down payments because of lower LTVs and higher EMIs due to higher interest rates
and lower tenors. In case of 3Ws, they have to bear an additional recurring capex for battery
replacement every 4-5 years as well. Financing options for this recurring capex are currently
very limited.
—National Bank
We have stopped
financing E3W due
to high NPA problem
that arises due to the
customer segment
that is unable to find
a constant source
of income due to
uncertainty of work.
—SVP EV Business,
large NBFC
We prefer financing
only established
logistics partners
of successful
E-commerce
companies like
Amazon, Flipkart. For
new startups, EV loans
even for high-speed
vehicles, will not be
offered with similar
terms vs ICE
For the financier, both the asset risk and the credit risk is
higher in the commercial segment vs the personal segment.
Asset risk is usually high for the commercial category given
the high utilization requirement, but for EVs it is further
amplified given the following:
• There is uncertainty around life of battery and
performance, especially due to heavy usage.
• In the 2W and 3W category, there are multiple small
OEMs catering to this segment with limited track record
and inadequate service network, making it challenging
for financiers to judge their product quality and vehicle
uptime.
• There is uncertainty around the value that can be
recovered in case of default. This is due to nascent
secondary market for used EVs and batteries.
• Traceability of battery is low, especially for vehicles with
detachable batteries
Financiers also face a higher credit risk in this segment. Given
the higher cost of vehicle and the current loan options, higher
down payment and higher EMI are a certainty for customers
in this category. However, the customer’s ability to service
these financing costs through higher income (due to savings
in fuel and maintenance) is dependent on number of kms
run daily and number of deliveries made each day. Not only
is this higher income variable, but these also exist concerns
on the ability to earn this higher income due to challenges
around operational ecosystem like range, charging
infrastructure, electricity cost, etc.
This adds to the overall risk of the financier and as seen in the
personal segment, financiers compensate for this additional
risk through varying loan terms to limit their exposure.
Financing for EVs in India | 2726 | Financing for EVs in India In the previous section, key challenges observed in availability of financing, ease of financing
and loan terms offered across vehicle categories were discussed in detail. Basis these
observations, below is a summary of some of the key pain points customers currently face
when they look for financing EVs:
Higher initial down payment - Upfront purchase price for EVs is typically higher than
comparable ICE models. In addition to this, LTVs offered by financiers are also 10-30%
lower depending on vehicle category resulting in significantly higher down-payment
requirement.
Higher EMI burden due to shorter loan tenor - One of the key reasons for increased EMI is
shorter tenor offered for EV loans. Tenor is usually anywhere between 6-18 months lower
depending on the vehicle category, with maximum difference seen for low-speed electric
2Ws.
Higher interest rate adding to EMI burden – In addition to shorter tenors, interest rates are
also 1%-7% higher for EVs vs ICE. In the commercial segment, across 2W, 3W (passenger
and cargo), and 4W segments, interest rates are 1-4% higher. Maximum difference,
however, was observed in the 2W space with a 2-7% difference in NBFCs lending for EV vs
ICE
Recurring capex with low financing options – For electric 3Ws, battery replacement
after 4-5 years acts as additional capex burden for the buyer with limited availability of
financing options for the same.
Limited access to funding – Limited financing options are available to customers for
EVs. In addition, there are no dedicated financiers to educate customers and sales
representatives usually have very limited understanding of how the financial product
works.
It is important to note that many of the pain points that are witnessed by customers primarily
stem from challenges faced by lenders. Each of the pain points listed above is linked to one or
more challenges faced by the financiers such as:
Resale market is unestablished – EV is a nascent sector and most products have not
undergone a complete lifecycle yet. As a result, financiers are uncertain of the capital they
will be able to recover from the asset in case of default.
No assurance of product quality – Financiers perceive a high risk of product failure for EVs
especially in the absence of any certification framework guaranteeing performance. In
addition to this there is a long tail of OEMs in the 2W and 3W markets offering EV products
making it exceedingly difficult for financiers to establish credibility of each product.
Battery life not known – The life of the battery remains a key uncertainty for financiers.
Loan tenors are typically matched to the warranty of the battery to minimize risk.
Battery technology unknown – EV batteries are a nascent technology in India and
financiers have limited understanding of the technology to be able to judge what product
specifications, materials, etc. will lead to better performance
Increased customer risk – While the customer profile purchasing EVs remains similar
to ICE, the higher down-payment and higher EMIs lead to an additional customer risk as
it adds to monthly burden when purchased for personal use and there is uncertainty in
higher earnings when purchased for commercial use given the operational challenges
which exist today.
2.2 Key challenges & risks associated with
EV financing
1
2
3
4
5
1
2
3
4
5
Financing for EVs in India | 2726 | Financing for EVs in India Customer Pain Points Financier Challenges
Higher initial down payment
• 10-30% lower LTV for EV vs ICE
depending on vehicle category
Resale market is unestablished
• Difficult for financiers to
underwrite loans
Higher EMI burden due to shorter loan
tenor
• Tenor 6-18 months shorter
compared to ICE
No assurance of product quality
• High risk of product failure, long tail
of OEMs offering EVs
Recurring capex with low
financing options
• Battery replacement cost post 4-5
years (3W)
Battery technology unknown
• Nascent technology, limited
knowledge on performance
Higher interest rate adding to
EMI burden
• Interest rate 1%-7% higher for EV vs
ICE depending on vehicle category
Battery life not known
• Loan tenures typically matched to
battery warranty to minimize risk
Limited access to funding
• Only 1-2 options offered in
dealerships
• Information asymmetry due to
absence of dedicated financiers in
EV dealerships
Increased customer risk
• Customer profile similar to ICE,
however, doubt over same
customers being able to service
higher EMIs
Exhibit 2.3: Customer pain points for EV financing stemming from challenges faced by lenders
2.2.1 Root causes of the challenges faced in EV financing
Overall, challenges faced in EV financing are rooted in 6 major risks currently surrounding EVs.
These include:
Resale value of the battery is unestablished
• The value of battery at the end of life is unknown, as use cases for second life or a
secondary recycling market are yet to-be established.
• Absence of information on usage and state of health (SOH) of battery further
accentuates this problem. This is driven by unclear standards for batteries currently,
for e.g., no clear mandate on BMS requirements, lack of data sharing regulations, etc.
Resale value of the vehicle is unknown
• The value of the vehicle without a battery is unknown as there is limited understanding
of the intrinsic value of the vehicle once the battery is used.
• Secondary market for vehicles has not been established yet nor has understanding
been developed on re-usability of a vehicle with a new battery.
Unproven technology and product performance
• Given the nascency of the sector and the technology, there is significant skepticism
regarding product performance and durability for various applications.
• Absence of historic data on product performance under various loads, temperatures,
or usage conditions further amplifies the above challenge.
• In addition to this, there are a vast number of manufacturers in the electric 2W and
3W segments. Given the lack of certification and enforcement of safety standards,
financiers are uncertain of the credibility of these OEMs since many of them are new to
the market and are only assembling imported EV kits.
Uncertainty in savings and earnings
• Consumers are uncertain on quantum of savings or net higher income they stand
to earn from owning and operating EVs, while higher down payment and EMI is a
certainty.
1
2
3
4
Financing for EVs in India | 2928 | Financing for EVs in India • Realization of higher savings for EVs is contingent on sufficient running and utilization
of the vehicle. Given the operational challenges of range, charging network etc.
savings or higher income potential is currently uncertain.
At present, it has been observed that, given sufficient utilization, there is a 1.2-1.5x
increase in income, which comfortably offsets the 1.5- 1.8x increase in EMI burden.
E.g.: An electric 3W cargo owner can earn almost INR 9,000-11,000 higher income
due to savings in fuel and maintenance against an increase of INR 5,000-7,000 in
EMI.
Additional capex during life of vehicle
• EVs, especially 3Ws, inherently have a different capex structure. The battery needs to
be replaced after 4-5 years of running. Given batteries make up 40-60% of the vehicle
cost, this is a significant investment required during the life of the vehicle.
• This adds to the capex burden of the buyer, especially because financing of this capex
is currently unclear.
Ticket size barriers
• Larger down-payments and higher EMIs preclude a large number of people from
owning EVs personally. Borrowers are hesitant of taking up a higher EMI burden beyond
a certain percentage of income, lest it disturbs the monthly budgets.
• Financiers are also hesitant on giving loan amounts beyond a range to reduce capital
at risk.
The root causes mentioned above are not homogenous across vehicle categories given
different markets are at different stages of development and adoption in India. The
applicability and degree of intensity as a challenge across the vehicle categories varies for
different root causes.
5
6
Low applicability of challenge High applicability of challenge
Key challenges Cargo Personal Personal Commercial Commercial Passenger
2W3W4W
Value of battery and at
end of life unknown, use
cases for second life not
established
Unproven technology,
product performance
& durability for various
applications unclear
Inherently different capex
structure for EV across
product lifetime
Ticket size barriers on loans
and EMI, especially for
borrowers for personal use
Value of vehicle without
battery unknown
Higher down payment
and higher EMI a certainty
against savings or higher
income contingent on
running & usage of EV
The next section of the report focuses on what are the potential levers to tackle these inherent
risks faced across EV categories.
Financing for EVs in India | 2928 | Financing for EVs in India Review of Innovative
Solutions Present
Across the Industry
03 To address the challenges detailed in the previous section, multiple entities across the world
including governments, OEMs, financiers and startups have come up with a variety of solutions.
The solutions evidenced can be categorized into 5 broad levers:
Absorption of additional risk in EV financing by the broader ecosystem to bring down the
cost of borrowing for end customer
Restructuring of financial products to help mitigate challenges such as higher down
payment or higher EMI through innovative models to improve cash flows for end customer
Reducing the risk of battery technology by addressing the uncertainty around battery
performance and developing a secondary market for used batteries
Reducing the risk of product resale by developing secondary market ecosystem for used
EVs
Creation of platforms to enable collaboration between different stakeholders and
channelize capital for EV financing
The 5 levers address different risks surrounding EVs. Each lever targets specific risks out
of those mentioned in the previous section. The first lever, absorption of additional risk by
broader ecosystem, aims to solve for additional risk added to EV loans due to all challenges
surrounding EV ecosystem today. The lever comprises of various funding mechanisms which
3
rd
parties can use to provide low-cost funds for EVs. These funding mechanisms include
grants, guarantees, green bonds & asset backed securities, debt, debt with first loss guarantee,
equity and equity with first loss guarantee. The second to fourth levers, however, solve for
different risks through different levers like creation of a secondary ecosystem for batteries
and vehicles, reducing EMI burden of customers through flexible loan structures, etc. The fifth
lever aims at creation of overarching platforms by the government specific to EV financing,
Exhibit 3.1: 5 thrust areas to drive penetration of EV financing
Enable collaboration between different stakeholders & channelize capital towards EV financing
Ensuring Affordable Financing for EVs in India
Absorption of
additional risk by
broader ecosystem
Restructure
products to
improve cash
flow profile
Reduce risk of
battery technology
Reduce risk
of product
resale
1
2
3
4
5
32 | Financing for EVs in India to facilitate collaboration across stakeholders. These platforms will serve as a think tank to
dissipate information, drive ideation, incubate and scale innovative financial models and
channel capital to EV financing
In the exhibit below, key challenges addressed by each lever are detailed. While the first lever,
covers additional risk added by all the challenges, other levers target to address specific root
causes.
In the subsequent parts of this section, an extensive benchmarking has been done to detail
select examples that have attempted to innovate in the space of EV financing by using one or
more of the above-mentioned levers.
Exhibit 3.2: Root causes targeted by 5 key thrust areas
Value of battery and at
end of life unknown, use
cases for second life not
established
Key challenges
Value of vehicle without
battery unknown
Unproven technology,
product performance
& durability for various
applications unclear
Inherently different
capex structure for EV
across product lifetime
Higher down payment
and higher EMI a
certainty against
savings or higher
income contingent on
running & usage of EV
Ticket size barriers
on loans and EMI,
especially for borrowers
for personal use
Absorption of
additional risk by
broader ecosystem
Restructure
products to improve
cash flow profile
Reduce risk of
battery technology
Reduce risk of
product resale
Enabled by collaboration of stakeholders & channelizing capital
Financing for EVs in India | 33 1. Access to low-cost funding through equity with first loss guarantee for creating an
E-Mobility financing platform
The Green Climate Fund
9
was established within the United Nations Framework Council on
Climate Change (UNFCCC) to assist developing countries in reducing their CO
2
emissions
through investment in green technologies. It is funded by 49 sovereign member states. The
Fund has accredited Macquarie’s asset management arm to propose climate projects to GCF
that would access the Fund’s financial reserves. In this proposal
10
the Macquarie group asked
GCF for $200 million in equity investment, to create an ‘E-mobility platform’ with an objective
to promote EV financing in India through financing the e-mobility space. The project has been
approved in May 2022 and implementation is currently underway.
The platform in the first phase will be funded through equity funding. $200 million will be
invested by GCF, which will act as a first loss guarantee fund, and the remaining $205 million
will be invested by other commercial investors like venture capitals, private equity investors,
FIs., etc. to be identified and onboarded by Macquarie. The platform will operate as an NBFC
and provide both equity (through project financing structures) and debt financing (through
low interest loans along with other modes like leasing) primarily to B2B players (fleet operators,
OEMs, government entities, infrastructure players). The initial target sectors are electric buses,
shared / corporate 4W fleets and electric vehicle charging infrastructure projects. Macquarie
aims to raise another $1.1 billion from local and international debt markets in the second stage
for expansion of the platform to B2C lending to reach a wider audience. The proposed model
for the fund is illustrated below. On the back of this structure the platform aims to attract other
commercial capital that would otherwise be hesitant to invest in this nascent sector.
Exhibit 3.3: Illustrative model for GCF funding for E-Mobility financing platform
EV financing
Debt financing
across eco-system
A
B
Commercial investors (equity)
Commercial lenders (debt)
Sovereign funding
Macquarie
Group
Green Climate
Fund
B2B preliminary focus
E-bus
(govt. entities/other pvt. players)
E4W fleets
(ride hailing, corporates)
B2C to be explored when mature
OEMs
Capacity expansion projects
Financing solutions for captive financing arms
Charging infra players
Swapping stations
Public charging stations
Other players in supply chain (if needed)
Fund utilizationFund structure
A
B
B
B
A
$1100Mn
$200Mn
Stage 2 Debt funding from
other commercial lenders
Stage 1 Equity funding from
other commercial investors
Stage 1 Equity
funding by GCF
$205Mn
E-mobility
platform
RBI
Green Climate Fund, Macquarie Group
Entities
Involved
IndiaGeography
Absorption of additional risk by broader ecosystem
Levers
Addressed
Financing for EVs in India | 3534 | Financing for EVs in India As mentioned in example 1, the Green Climate Fund assists developing countries in reducing
CO
2
emissions by investing in green technologies. In this instance, GCF invested in the Climate
Finance Facility created by DBSA
11
, a development financial institution (DFI) owned by the
Government of South Africa. The Climate Finance Facility Program (CFF) is a division set up
within DBSA to finance local sustainable projects with difficulty in raising funding through pvt.
players due to high risk / low clarity on project. The CFF will prioritize investment opportunities
basis the needs of target countries (South Africa, Lesotho, Namibia, Eswatini) and priorities
identified in the Paris Agreement to meet the United Nations Sustainable Development Goals.
The CFF raised $110 million initially through DBSA and GCF as the primary investors
12
. DBSA
contributed $55 million as a 15-year loan and GCF contributed $55 million through DBSA as
an accredited entity of GCF. In addition to the loans, both organizations also contributed $0.6
million grants each for set-up costs. Convergence, a grant provider for proof-of-concept
stage innovative financing instruments, also supported the program as a design partner and
provided $0.33 million funding.
The CFF will offer an investment of $5 - $10 million using two key financial instruments –
subordinated debt / first-loss guarantee and credit enhancement (e.g., tenor extension) for
projects in 3 sectors solar, water and clean mobility (EV fleet financing). Both these financial
instruments will increase confidence of private investors to co-lend to these projects.
2. Funding by Green Climate Fund, DBSA and Convergence through a mix of debts
and grants with first loss guarantee
Exhibit 3.4: Funding structure for the Climate Finance Facility
Fund Structure
$ 55 Mn
GCF DBSA
Other
commercial
investors; grant
by Convergence
(proof of concept
funder)
Grants +
Subordinate Debt
$ 59 Mn$ 330 K$ 610 K$ 55 Mn
Subordinate debt Grants
$ 610 K
Development
Bank of
Southern Africa
Convergence
Climate Finance
Facility Programme
Local projects
Other Commercial
lenders
Other
Commercial
lenders
Green Climate
Fund
Green Climate Fund, Development Bank of
Southern Africa (DBSA), Convergence
Entities
Involved
South Africa, Lesotho, Namibia, EswatiniGeography
Absorption of additional risk by broader ecosystem
Levers
Addressed
Financing for EVs in India | 3534 | Financing for EVs in India BYD, TF Securities, Didi
Entities
Involved
ChinaGeography
Absorption of additional risk by broader ecosystem,
Restructure products to improve cash flow profile
Levers
Addressed
BYD, one of China’s largest auto manufacturing companies, issued the first EV leasing
backed ABS in the Chinese market in 2018. The RMB 366 million deal was backed by 24 EV
leasing claims related to 17 different lessees
13
. The originator of the bonds was Shenzhen BYD
International Financing Leasing, a subsidiary of BYD and the issuer was Tianfeng Securities, an
investment management company. Most of the lessees were affiliated to Didi, a company that
provides app-based transportation services, including private car-hailing, social ride sharing,
bike sharing and on-demand delivery services. The proceeds of the issuance were allocated to
finance both of their direct-leasing and their sales-and-leaseback operations. Future leasing
revenue generated from the customers acted as security for investors in the green bonds to
receive returns.
This issuance helped BYD raise capital from private market against EV leases. Private investors
traditionally viewed investing in such individual leases as too small and too risky, thus
increasing the cost of capital. Aggregating small leases into a securitized pool of assets helped
create an adequate deal size, reduced risk and improved credit rating thus providing investors
higher confidence for investing at lower cost. It also helped distribute the underlying risk of EV
leases over a larger base of investors.
Since 2018, many EV leasing companies have opted to go for financing through securitizing
their bundles of leasing claims. Given the characteristics of EV leases, they offer relatively
stable and consistent cash flow stream to the ABS originator to cover interest and repayment.
The green bonds market is regulated by CSRC, primary regulator of security industries in China.
Exhibit 3.5: Illustrative model for leased asset backed green bonds
3. Leased asset backed green bonds by BYD and Didi
EV seller
Originator EV Leasing
Company
EV leasing
lessee 1
EV leasing
lessee 2
EV leasing
lessee 3
EV leasing
lessee 4
SPV/ Trust
Regulatory
Body
Investors
EV leasing company
provides leasing services
Future leasing
receivables
ABS
Proceeds
Car Payment
Proceeds Asset sales
EV
Financing for EVs in India | 3736 | Financing for EVs in India 6
Hyundai Card, Hyundai, Kia motors, Societe Generale,
Sustainalytics
Entities
Involved
South KoreaGeography
Absorption of additional risk by broader ecosystem
Levers
Addressed
Hyundai Card’s KRW 350 billion sustainability asset backed securities (ABS) is a pioneering
approach to securitization
14
. Hyundai Card is a credit card company and the captive financing
arm of Hyundai, the parent company of South Korea’s leading EV OEMs Hyundai Motors and
Kia Motors. The company issued sustainability bonds, through an arrangement by Societe
Generale (a global financial institute), to finance purchase of zero emission vehicles of Hyundai
and KIA, particularly by low-middle income segment Hyundai card holders and to support
them by providing them access to financial services. The ABS issuance combined both green
and social criteria and was pursuant to Hyundai Card’s Sustainability Financing Framework.
To maintain transparency, Hyundai will also report on the use of proceeds from this ABS in an
annual sustainability report from the investor.
Societe Generale acted as the Sole Lender and Sole Sustainability Coordinator on the
transaction, which was also the bank’s first sustainability ABS globally. Sustainalytics, a leading
ESG research, ratings and data firm, provided an independent opinion on alignment of Hyundai
Card’s Sustainability Financing Framework with Sustainability Bond Guidelines 2021, Green
Bond Principles 2021, Social Bond Principles 2021, Green Loan Principles 2021, and Social Loan
Principles 2021.
Loans to middle income segments are generally considered risky and hence the cost of
raising capital for such loans is generally higher. By combining EV loans and receivables from
financial services provided to card holders, the overall risk of default and other credit risks were
minimized to a fraction of the underlying assets. This reduced the cost of capital, distributed
risk of loans and provided Hyundai Card access to funding which could be used to issue more
loans to help grow the EV market.
Exhibit 3.6: ABS mechanism for Hyundai Card
4. Green Bonds for low-cost financing
Financial
services provider
Institutional
investors
Originator
(Captive Financier)
EV OEMs
4
5
1
2
EV Customers
ESG Rating
agency
Verification of adherence
to ESG guidelines
1
2
3
5
6
Debt Repayment
Lease/
Low-cost finance
Disbursal transferred
4Capital raised through
green bond sales
Coupon payment as per schedule
Publication of reports on fund
usage
Transactions enabled by an FI
3
Financing for EVs in India | 3736 | Financing for EVs in India Prest Loans, Eqaro Guarantees, Terra Motors
Entities
Involved
IndiaGeography
Absorption of additional risk by broader ecosystem
Levers
Addressed
5. Guarantor model to cover risk and boost credit by Eqaro Guarantees
Prest Loans, a Delhi-based digital lending company forayed into financing EVs last year
through a guarantor model. The company has collaborated with Terra Motors, a leading
Japanese EV manufacturer, and Mumbai-based Eqaro Guarantees
15
.
Prest Loans will finance approximately 70-80% of the value of EVs. For credit assessment,
they have a risk-based scoring mechanism called ‘Prest Score’ to analyze borrowers using
non-financial metrics. Under the three-way agreement, Eqaro Guarantees extends credit
default guarantees underwriting the customer risk and boosting confidence for Prest Loans
and enabling them to offer better loan terms. The loans are currently offered for vehicles
produced by Terra Motors including E-rickshaws, E-carts, loaders, delivery vehicles, etc. to both
individuals as well as corporate buyers. Terra Motors offers product quality assurance and
buyback guarantee for repossessed vehicles in case of default under the agreement.
By providing a guarantee in case of credit default and a buy-back agreement with the OEM,
Eqaro is willing to share the underlying asset risk and the credit risk of the customer with Prest
Loans. These measures help distribute the underlying risks for Prest loans and gives them
comfort to provide better loan terms to customers. In addition, presence of guarantors and
counter guarantors helps improve the credit rating of Prest loans, thus reducing their cost of
capital and increasing their ability to raise debt.
Exhibit 3.7: Guarantor model employed by Prest Loans
1
1
2
2
3
3
4
4
Customers
Financier
Internal credit scoring to define loan terms; better
terms due to guarantor confidence
Payment in case of customer default
Funds transferred for eligible customerCredit underwriting premium
GuarantorsCounter Guarantors
Guarantor backed by
global counter guarantors
OEM
Vehicle repossessed
in case of default
Buy-back option for
repossessed vehicles
Financing for EVs in India | 3938 | Financing for EVs in India CEFC Australia, Multiple retail banking institutions,
for e.g., Bank of Queensland, ANZ, Firstmac, etc.
Entities
Involved
AustraliaGeography
Absorption of additional risk by broader ecosystem,
Restructure products to improve cash flow profile
Levers
Addressed
6. Interest subvention through an on-lending asset finance program by CEFC
The Clean Energy Finance Corporation (CEFC) is a Green Bank, wholly owned by the Australian
Government, created in 2012 facilitate financing the clean energy sector by investing AUD
10 Bn on behalf of the Australian government. Through its asset finance program, CEFC has
formed multiple partnerships with retail banks to provide financing for EV projects (including
fleet procurement and charging infrastructure). The partnerships are structured through an
on-lending model where CEFC provides capital to banks who disburse these funds to the
customers
16
. CEFC provides the capital as wholesale financing to the banks and is not exposed
to any of the credit risk from the customer or asset. Hence, the funding is provided at a lower
cost to the banks who in turn use these funds to provide benefits like 70 bps subvention vs ICE
vehicle financing, longer tenures, etc.
A total of AUD 800 Mn has been disbursed through CEFC’s aggregation of partnerships till 2019-
20 and >5,000 low and zero emission vehicles have been financed. An average investment
of AUD 73,000 has been done per project with some project receiving loans as low as AUD
2,000. CEFC has been able to achieve a return of 1% over the Australian Government Bond rate
through this program (target return – 3-4% over Australian government Bond rate)
17
. CEFC also
works with banks to securitize debt, pool granular assets, and attract capital from large scale
investors, e.g., issuance of certified green bonds.
• Attractive lower cost financing – 70 bps
discount on standard finance rate, longer
tenure (varies by bank)
• Application follows bank’s credit approval
process
• Loan underwriting, risk of borrower rests
with bank
• CEFC itself is not involved in loan
administration.
CEFC
1
12
2
Commercial Banks
1
Borrowers
• Concessional debt provided to
commercial bank for lending
• Direct risk with bank and not with
underlying borrowers
Exhibit 3.8: Illustrative model for CEFC asset finance program
Financing for EVs in India | 3938 | Financing for EVs in India 3
rd
party logistics providers, for e.g., Shadowfax,
Zyngo
Entities
Involved
IndiaGeography
Absorption of additional risk by broader ecosystem
Levers
Addressed
7. Guarantor model employed by demand aggregators and fleet owners
Customers in the 3W segment who purchase vehicles for commercial applications usually
belong to the low-income segment with limited or no credit history and are hence seen as
high-risk customers by financiers. In addition, the asset risk of EVs in terms of life and battery
performance and the need for high utilization to offset higher EMI burden, further exacerbates
the challenges to offer affordable financing solutions.
3
rd
party logistics providers like Shadowfax, Zyngo, etc. are employing a guarantor model where
the fleet aggregators act as a partial credit guarantor for full time driver partners, thus sharing
default risk with the financier. They in turn offer fixed monthly payments / utilization guarantees
to their driver partners, ensuring drivers can service their EMIs. These fleet operators have a
better understanding of the technology, have better visibility on utilization levels possible with
E-commerce / industry partners and hence are in better position to assess and guarantee
individual driver partners.
Below are some salient features of the model:
Credit Assessment and loan terms: Fleet aggregators usually tie up with financiers to provide
loans to their drivers. The financier conducts credit assessment of the aggregator’s business
model, instead of the driver’s credit history and provides loans basis aggregator’s balance
sheet. This helps financiers reduce customer risk and provide loans at attractive terms.
Loan disbursement and repayment: While the loan is disbursed on the driver’s name; the
EMI is paid to the financier by the fleet aggregator, who deducts the EMI from the driver’s
monthly salary. The driver’s salary could be structured on pay-per-order or as a fixed monthly
income, depending on the business model, and he receives a net salary post EMI. Some fleet
aggregators also cover the down payment required to purchase the vehicle. In case the
driver discontinues employment with the fleet aggregator during the loan tenure, the fleet
aggregator usually re-possesses the vehicle and finds another driver for the vehicle.
Other expenses: It has been observed that at times, fleet owners have tie-ups with battery
swapping or charging networks and AMCs with OEMs, thus helping drivers further in achieving
TCO parity and reducing risk of defaults.
As an extension to the above model, large fleet owners are also exploring setting up an asset
company for EVs, wherein the vehicles are purchased in bulk and sold or subleased to drivers.
40 | Financing for EVs in India Sun Mobility
Entities
Involved
IndiaGeography
Restructure products to improve cash flow profile
Levers
Addressed
The battery swapping stations are located primarily in petrol pumps through partnership
with petrol chains for wider network footprint. The company also offers additional services like
software app for customers to track battery health, enable digital payments and GPS system
ensuring traceability of battery for financier
18
. The business model is enabled by a host of
partnerships:
• OEMs – Piaggio, Omega Seiki, Hero Electric
• Fleet Owners – Zyngo, Uber, Zypp Electric
• Real estate provider – Indian Oil Corporation Limited
• Energy provider – Tata Power
• Software provider – Microsoft
• Other strategic partners – Bosch, Vitol
8. Sun Mobility: Segregation of battery and vehicle financing
Sun Mobility, an energy infrastructure and services provider, has recently introduced the
concept of Energy-as-a-service provider by launching battery swapping operations for E2W,
E3W, and E-buses. They enable OEMs to sell swappable battery models so customers can
purchase vehicles without batteries, while they provide batteries and charging infrastructure
bundled as a pay per use model. Customers are billed per swap of battery at the battery
swapping station. 3 battery swaps cost ~Rs. 160 with approximate travel around 120 km.
The model has many benefits in terms of financing:
• Reducing the upfront cost by ~25% (approximately Rs. 75-80k) and down payment by Rs.
15-20k
• As loan amount reduces, EMI also reduced by ~20% with total monthly costs (including fuel,
maintenance, and EMI) lower by 10% vs fixed battery EVs
Exhibit 3.9: Sun Mobility business model
OEM
FinancierUsers
Swap used batteries for charged ones at swapping stations
Provide battery for vehicle
OEM & swapping tie-up
Pay for vehicle
w/o battery
Provide loan
for vehicle w/o
battery
EMI for vehicle w/o battery
Sells vehicle (w/o battery)
Financing for EVs in India | 41 Exhibit 3.10: Illustrative business model for Three Wheels United
9. Three Wheels United: Funding innovative models through focused fund
Three Wheels United is a microfinance institute in India that offers up to 100% debt financing
for auto-rickshaws, without any collateral, at similar interest rates, but longer tenures (48
months as compared to 24-36 months) and no charge for late repayments for a set period.
This reduces down payment by 25-30% and EMI burden by 15-20%. They are able to offer
these terms by harnessing technology and using innovative credit assessment and collection
mechanism. From a business model perspective, the company channels low-cost funding
through a mix of debt, equity, and concessional capital (in the form of partial credit guarantee
or impact capital) to disburse 3W loans. The company has gone through multiple rounds
of funding securing both equity investments from VCs and foreign and local debt. Securing
impact capital has been a key differentiator for the company to reduce its overall cost of
borrowing
19
.
Some of the key features of the business model are as follows:
• Innovative loan appraisal: The driver is introduced to the instrument via other community
members. To be eligible for financing, the driver is first asked to save a certain amount of
money in a pre-decided number of days. If the driver can save the requisite amount in that
period, he is then assessed basis parameters like number of rooms in the house, earning
members, etc to judge repayment capacity. The credit assessment process goes beyond
traditional factors like income statements, credit score, etc
20
.
• Community based model for collections: Drivers or borrowers are put in teams which
compete against each other. The teams have to ensure all members service their
complete monthly EMI on time each month to earn points. Cash discounts are also offered
as incentive for repayment
20
. Adding the element of social recognition in the collection
mechanism has allowed the company to keep its NPAs at less than 1% currently.
• App based collection to realize operational efficiencies: Through online payments, the
company is able to reduce its collection costs. It allows the company to keep a track of the
existing loan terms / features, the payment due, etc. It also optimizes workflow for the field
collection agents, helping them prioritize drivers who require more attention.
OEM
partners
Debt
NBFC
Market
maker
Auto-
rickshaw
Drivers
Equity
Other
Capital Sources
Foreign (through SPV)
Local
Debt
Non-Profit arm to
identify targets
Holding company
Direct investment
Guarantor Impact
Impact
capital
Equity
Loan
Repayment
Loan portfolio guaraantee
Commission
per vehicle
Driver
pipeline
Three Wheels United, Debt, Equity &
Impact Investors
Entities
Involved
IndiaGeography
Absorption of additional risk by broader ecosystem,
Restructure products to improve cash flow profile
Levers
Addressed
Financing for EVs in India | 4342 | Financing for EVs in India Vidyut Tech, Lohum, NBFC investors
Entities
Involved
IndiaGeography
Absorption of additional risk by broader ecosystem,
Restructure products to improve cash flow profile,
Reduce risk of battery technology
Levers
Addressed
Exhibit 3.11: Illustrative model for Vidyut Tech (1)
ii. Split loans for battery and EV: Loans for battery and vehicle without the battery are sold as
a bundled product. While the vehicle is financed through loans, the battery is leased out
to the customer. The battery lease is structured to receive payments on a per km basis
from the customer. Details on usage of the battery are received from the telematics data
from BMS, for which VidyutTech has tied up with OEMs for access to this information. The
decoupling of battery and vehicle reduces both upfront down payment and EMI burden
for customers making economics of owning EV similar to that of ICE. Vidyut Tech is also
exploring the options of securitizing the proceeds from battery leasing, helping them
manage the cash flows better and scale the model.
10. Vidyut Tech: Decoupled financing for battery and vehicle along with interest free
2
nd
loan with tie-ups for battery recycling
Vidyut Tech is a Fintech offering end-to-end solutions for wEV purchase, financing and resale
with 2 unique product options - interest free loans and split loans for battery & EV
21
.
i. Interest-free loans on 2
nd
battery: Battery replacement after 4-5 years is a major capex for
3W drivers. Through back-to-back tie ups with NBFCs, they have created a first loss default
guarantee structure that provides comfort to NBFCs and allows VidyutTech to extend
unique financial products. The loan offering includes an interest-free loan on 2
nd
battery
which is included with the initial purchase of vehicle. The company also re-possesses the
old battery of the vehicle which it then sells to Lohum, a battery recycling agency with
whom VidyuTech has a tie-up. Lohum provides a fixed price for used batteries to them
assuring a floor price of battery.
NBFC
Funding
Loss
guarantee
Payment for
old battery
Old Battery
Interest-free loan
EMI
New Vehicle
Old Vehicle
Loan
Old Battery
Repayment
Exhibit 3.12: Illustrative model for Vidyut Tech (2)
NBFC
Telematics
Data
Vehicle w/o battery
EMI for vehicle
w/o battery
Customer
OEM
Funding
Loss
guarantee
Pay-per-km Model
Financing for EVs in India | 4342 | Financing for EVs in India 12. Battery certification & traceability of battery health through Unique ID
Spring Free EV
Entities
Involved
USAGeography
Restructure products to improve cash flow profile
Levers
Addressed
Global Battery Alliance, Underwriters Laboratory, IEC
Entities
Involved
EuropeGeography
Reduce risk of battery technology
Levers
Addressed
11. Pay per mile subscription model by Spring Free EV
Spring Free EV is a financial technology company with the objective of driving adoption of EVs
through innovative financing solutions. The company provides solutions for both individual
drivers targeting commercial applications and fleet owners. The aim for both these products is
to remove the upfront cost barrier for EV adoption and transform the high capex into a usage
based opex model.
For ridesharing and delivery drivers, the company has launched a financial product called Free
EV
36
which offers EVs at zero down payment and no EMIs. Customers are only charged on a
pay-per-mile basis with charges starting as low as 30 cents per mile
To enable this model, Spring Free EV has partnered with OEMs and offers this product on
the 2022 Nissan Leaf S and 2019 Hyundai Kona EVs. Customers are required to submit a
refundable of security deposit of $1,000 and a registration fee of $250. Subscription is offered
for a maximum duration of 3 years, with a minimum commitment of 1,000 miles per month.
If the driver drives under the minimum commitment, they are still charged for the minimum
mileage specified in the agreement. For EV fleets the company offers another pay-per-mile
financing product, EV InstaFleet
36
. The company charges a base monthly fee plus a fee per mile
driven from fleet owners. Fleet owners are required to keep the vehicle for at least a year and a
minimum number of miles.
i. Battery certification
Battery certification procedures and mandates in Europe are made at a country specific level.
For example, in Germany, Underwriters Laboratory (UL) accredited by KBA, Transport Ministry
of Germany, to certify battery safety for OEMs
22
. Battery safety standards are mandated basis
ISO, UL, ECE standards in Germany. The R136 standard refers to testing for safety requirements
across multiple mechanical, electrical, and thermal metrics. Testing is done across multiple
metrics - battery robustness for vibration, thermal shock and cycling, mechanical shock and
integrity, fire resistance, external short-circuit protection, overcharge and over discharge
protection, over temperature protection. UL also conducts performs & ageing tests for EV
batteries under the IEC 62660-1:2018 standard
23
. The tests include the following:
Financing for EVs in India | 4544 | Financing for EVs in India • Ageing testing: Storage test (charge retention and storage life), cycle life, no-load SOC,
SOC loss at storage
• Performance testing: energy density and capacity at different temperatures and discharge
rates, power density and internal resistance, energy efficiency, cranking power at low and
high temperatures, etc.
ii. Battery recycling and second life use case
The EU Proposal for Waste Battery Regulation 2020
24
lays down regulations on second life of
batteries, recycled content requirement and target recovery rates for raw materials.
• For second life of batteries, the regulation proposes that repurposed or remanufactured
batteries need to comply with EU Battery Directive 2006 excluding requirements on carbon
footprint, recycled content requirements, performance and durability, supply chain due
diligence if repurposed/ remanufactured battery was placed for 1st Life onto market prior
to effectiveness of the respective regulations. The regulation views 2nd life applications
neutrally and puts no obligations on these batteries.
• In terms of recycled content requirement, targets proposed for Cobalt are, 12% recycled
content needed by 2030 and 20% by 2035; for Nickel, the respective targets are 4% and 12%
while for Lithium they are 4% and 10%. OEMs will need to document, and report recycled
content of these materials starting 2027.
• Targets on recovery rates and recycling efficiency are also proposed which will apply to all
waste batteries. Recycling efficiency targets are set at 65% of average battery weight from
2025 and 70% of average battery weight from 2030. The target recovery rates on materials
and effective dates are detailed below:
Date
1/2026
1/2030
CobaltLithiumNickelCopper
1/202690%
1/202695%
1/202635%
1/202670%
1/202690%
1/202695%
1/202690%
1/202695%
iii. Battery Passport initiative in Europe
The Global Battery Alliance (GBA) is public-private collaboration platform founded at the World
Economic Forum to help establish a sustainable battery value chain by 2030. The overarching
goal of the alliance is to establish a circular battery value chain and develop mechanisms
necessary for the same.
Battery passport
25
is one initiative under the GBA which proposes a unique ID for each
battery. The unique ID will act as a digital signature containing data about ESG performance,
manufacturing history and usage pattern. The battery passport platform will allow
stakeholders to share information about battery and its history to trace battery health and
end-use applicability. Its key features include recommendations to users based on up-to-
date information to extend first-life of battery, project the future life of the battery along with
continuous battery quality assessment, and incorporate patented intrusion detection devices
to hinder people from manipulating data.
Financing for EVs in India | 4544 | Financing for EVs in India The proposal for Waste Battery Regulations in 2020
24
includes making Battery Passport or
similar unique identifier essential for all EV batteries. The Passport will be a centralized data
system open to 3rd party use set up by European Commission. The Economic Operator
placing batteries on market (e.g., OEMs) responsible for accuracy, completeness and up-
to-date data included in the Passport and updating status in case of repair or re-purposing.
The proposal also includes a directive on mandating BMS for all EV batteries with data on
relevant parameters for determining state of health and expected lifetime. Access to data to
be provided to person who purchased battery and any third party acting on their behalf to
assess residual value, capability for future use, facilitate reuse, repurpose or remanufacturing
of battery.
These initiatives (i-iii) in conjunction are aimed at reducing uncertainty surrounding EV
battery technology and facilitating creation of a circular economy for batteries in Europe.
Battery certification is aimed at creating a framework for ensuring safety and guaranteeing
a minimum level of performance while recycling and second life use cases help in estimating
the salvage value of batteries. Both these initiatives are enabled by the Battery Passport that
facilitates data sharing to track battery health and ensures traceability.
Exhibit 3.13: Battery passport network providing end-to-end information on the battery
1. Cluster of cells = Module, Cluster of Modules = Pack; 2. Battery Value Guarantee = Mechanism for a battery within EV to have
a guaranteed end-of-life value, ensuring minimum depreciated value for the vehicle
Source: EU Policy, GFI, Academic Research
Battery Passport
Battery related data: Structure,
materials, UID, Mfg Info, Origin, et
Value-chain related data: Value
chain actor (name, function,
location), Material, sustainability
& circularity properties, etc.
Battery Health Certificate
Inputs: Data at cell/module/
pack level1
Outputs: State of Health, State
of Charge, Depth of Discharge,
Remaining Useful life for end-of-
first life actors & information for
second-life of battery, etc.
Battery Value Guarantee
2
Circularity performance:
Resource efficiency (of raw
materials), raw material losses,
share of secondary material, etc.
Product design: Battery module,
product designs, disassembly
instructions, etc.
Government
Government
Government
Certification Agencies
Data Providers
OEMs
General Public
Stakeholders
Data Providers
OEMs
Battery Manufacturers
Suppliers
Testing Agencies
General Public
Battery
Information
Diagnostics &
Performance
Battery Passport
Value Chain
Information
Circularity &
Sustainability
Battery Value
Guarantee
Recyclers/
2
nd
Life
Data Providers
Battery
Manufacturers
Product Design
Circularity
Properties
Maintenance
Record
Performance
Delivered
Battery Health
Certificate
Financing for EVs in India | 4746 | Financing for EVs in India Reduce risk of product resale
Levers
Addressed
In the Europe and USA, to kickstart creation of a secondary market for used EVs governments
are offering subsidies in the form of one-time grants or rebates. Used EVs offer an affordable
way for customers to shift to EVs and hence governments are providing incentives to stimulate
demand for used EVs along with subsidies on new vehicles. Select examples of government
programs
26,27
are presented in the exhibit below:
Governments across Europe, USA
Entities
Involved
Europe, USAGeography
13. CREATION OF SECONDARY MARKET FOR USED EV s
Exhibit 3.14: Used EV subsidy in Europe and USA
Select OEMs have also taken the initiative to build a secondary market for EVs. One such
example is Renault
28
. In 2018, Renault launched a long-term leasing arrangement for second-
hand Renault ZOE in France with rates starting at 59 euros per month and additional 29 euros
for battery rental. The cost of installing charging stations at the buyer’s home (up to €500)
was also covered by Renault Occasions. To build confidence in the used EV market, all cars
had to meet Renault Occasions Garantie Z.E. certification label, passing a 76-point inspection.
Additionally, warranty was provided up to 36 months including a free inspection after 1,000 km,
along with a road test. Renault also posted a suggested retail price for other dealers selling
second-hand EVs - €8,900 for a 3-year-old ZOE Life, 22 kWh battery and <30,000 km on the
odometer.
CountrySubsidy for used EVs
In US, rebates are given by state governments. In California, depending on area of
residence, rebates between $1,500-$4,000 available for used EVs. For e.g., LADWP offers
up to $1,500 for 2-8 years old EVs
Subsidy of €2,000 available for used BEVs with an original price between € 12,000 -
€45,000 and at least 120 km range
Subsidy of €6,000 for BEV, €4,500 for PHEV, not older than 1 year and driven less than
15,000 km. Minimum holding period for the car is 6 months
€1,000 one-time grant for private individuals for BEVs and fuel cell electric vehicles, at
least 2 years old. The car must be kept for minimum 2 years by new owner
Financing for EVs in India | 4746 | Financing for EVs in India The Green Finance Institute
29
in the UK was established in 2019 as a direct response to a
key policy recommendation made by the industry-led Green Finance Taskforce to the UK
Government in March 2018. It is an independent and commercially focused organisation
backed by government and led by bankers, focused on public and private sector collaboration
in green finance. The institute is envisaged to design, develop, and launch portfolios of
financial solutions that accelerate sector specific transition to low-carbon future. The coalitions
comprise practitioners from the industry, finance, government, academia, and the non-
profit sectors who understand the market failures and investment gaps and can co-design
innovative financial products.
Green Finance Institute undertakes projects around systematic transitions that need to be
financed in the economy, such as energy efficient retrofitting of buildings and decarbonization
of road transport. It also undertakes raising of capital to help fund initiatives. One example
of a project undertaken by Green Finance Institute is the Local Climate Bond campaign
30
.
The campaign was launched in coalition with Abundance Investment, an online investment
platform. LCBs are debt instruments issued by Local Authorities to raise money directly from the
public. They are regulated investment products launched by Councils to access cost-effective
funding for specific de-carbonization projects, offering local people an opportunity to invest in
their area in a way similar to crowdfunding and to make a return from doing so. Green Finance
Institute helped in raising awareness and support participating councils through the process of
releasing their Local Climate Bonds.
Within decarbonization of road transport the key focus areas for the institute are
Purchase and leasing - Co-design new and enhance existing financing solutions to
encourage increased EV adoption.
Charging infrastructure - Link public and private finance to unblock barriers to the creation
of a strategic vehicle charging network
Battery Technology - Unlock the required capital across the battery technology ecosystem
at scale and speed.
The institute has undertaken multiple projects in this space such as EV loan securitization,
bundled finance solutions, battery health certificate, battery value guarantee to name a few.
Further, it also regularly publishes thought leadership reports in collaboration with various
academias to highlight the various gaps in the investment sector and potential solutions for
the same.
As detailed above, there are various stakeholders in the EV ecosystem that are making
individual efforts to solve for challenges faced for EV financing today. In the next section, based
on learnings from best practices observed across the globe, a detailed set of initiatives is
proposed under the 5 key thrust areas that will help further the penetration of EV financing in
India.
14. GREEN FINANCE INSTITUTE: PLATFORM FOR PUBLIC-PRIVATE COLLABORATION AND
MOBILIZATION OF CAPITAL FOR SUSTAINABLE TECHNOLOGIES
Green Finance Institute
Entities
Involved
UKGeography
Enable collaboration between different stakeholders
and channelize capital towards EV financing
Levers
Addressed
1
2
3
48 | Financing for EVs in India Exhibit 3.15: Thought leadership by Green Finance Institute
Financing for EVs in India | 49 Potential solutions
to drive affordable
financing for EV
04 Based on exhaustive analysis of the challenges faced in financing EVs, and understanding
some of the levers used to overcome these challenges with innovative solutions, we have
identified 5 key thrust areas to target. These 5 thrust areas have been further detailed into 10
action items (or initiatives) with each item covering the scope and the activity required for
the initiative. The key stakeholders critical for success of each of the initiatives, have also been
identified.
I. Context
Currently, EV financing faces multiple challenges across vehicle categories given the nascency
of the electric mobility ecosystem in India. Further, due to concerns around technology and
long-term economics (including resale value), FIs perceive that financing an EV vehicle has
additional risks over ICE. Thus, to limit their exposure, FIs pass this risk to end-consumers which
ultimately results in higher cost of borrowing. This challenge could be potentially addressed by
structuring mechanisms that can enable the larger ecosystem to absorb some of the inherent
risk and/or provide FIs access to lower cost capital (below their usual rate of borrowing)
specifically for lending in the EV sector. Some mechanisms through which this can be done
have been proposed below.
Thrust Area 1 - Enable the broader ecosystem to absorb the additional risk in EV
financing to bring down the cost of borrowing for end customers
Exhibit 4.1: 10-point action agenda to ensure affordable financing for EVs in India
Ensuring affordable financing for EVs
Enable collaboration between different stakeholders & channelize capital towards EV financing
Absorption of additional
risk by broader
ecosystem
Set up low-cost funds
with risk sharing
mechanisms / FLDG
Promote green bonds
and asset-backed
securities
Include commercial EV
loans for driver owners
under priority sector
lending with loan
limits by segment
Enable de-coupling
of battery and vehicle
to facilitate leasing /
swapping / pay per use
models
Establish battery
safety standards
& performance
certification framework
Promote secondary
market for used EVs
through OEM buyback
programs, purchase
subsidies, etc.
Develop framework for
circular economy for
battery
Support scaling of
business models like
fleet ownership, reverse
leasing, flex loans etc.
Reduce EMI through
interest subvention,
income tax exemption
beyond FY23 & re-
introduction of
accelerated depreciation
Restructure products
to improve cash flow
profile
Reduce risk of battery
technology
Reduce risk of product
resale
Build industry-wide platform to ideate, promote and fund innovative financing models & raise technology awareness. 10
1479
8
2
5
3
6
52 | Financing for EVs in India II. Proposed initiatives (Action 1 to 3)
#1 – Establish low-cost funds with risk sharing mechanisms / first loss default
guarantee
Access to low-cost capital can be facilitated through creation of a risk-sharing facility like a
loan loss reserve to cover general default or loss due to specific risks, for e.g., product failure.
The reserve can be created at the behest of the government and structured to include multiple
stakeholders across the EV ecosystem.
There are multiple ways such a risk sharing mechanism can be structured with multiple
options for providing funding. These include grants, risk underwriting, debt, equity, debt and
equity with first loss guarantee, and fund innovative start-ups through a funding platform.
Some possible structures basis example seen in the last chapter could be:
i. Financing through equity with first loss default guarantee (FLDG)
• MDBs/funds/private partners can come together as equity participants either directly or
through pooled SPV to create a platform incubated by a Government entity (eg. IREDA,
NABARD etc) or an SPV, which will in turn lend out for EV purchases.
• Post proof of concept, this SPV could raise additional capital from lenders (national/
international banks) to create a large pool of capital to lend out to market.
• The MDBs can become the first loss guarantors with a particular threshold of their equity
contribution earmarked for NPAs, while the lenders earn a pre-agreed rate of return.
ii. Financing through a debt structure consisting of subordinate debt and credit enhancing
terms such as longer tenures
• MDBs / government backed funds / FIs can come together to form a platform of
subordinate lenders with higher returns, who can absorb NPAs (up to a particular
threshold)
• This mechanism can help mobilize and scale financing products initially.
• Post scale, additional capital can be raised from local/ international banks, who become
senior lenders with assured lower returns.
In addition to the above examples a mix of grants with equity and debt can also be used
to create a risk sharing mechanism. An FI or the government can also take up the role of a
guarantor for some NBFCs with innovative financing solutions, thereby improving the credit
rating of the NBFC and helping raise more capital at lower cost.
An illustrative mechanism of how the structuring of low-cost funding with risk-sharing
mechanisms can work is shown in Exhibit 4.2. A funding platform can be incubated by a
government entity or national bank to provide low-cost funding with risk-sharing facility to
banks and NBFCs lending in the EV space. The platform can be funded through a mix of equity,
debt and grant through different types of investors like multilaterals, bilaterals, green funds,
impact investment funds and philanthropic funds. The risk-sharing facility on the other hand
can be funded through equity, grants and/or subordinate debt from these investors.
Stakeholders involved: Financial Institutions Government OEMs
Financing for EVs in India | 53 The government, along with FIs and MDBs can explore some of these structures to mobilize
significant amount of nascent institutional capital to accelerate financing for EVs in India. To be
able to achieve this, NITI Aayog can assist in defining key objectives of the fund, identifying the
funding institutes, government agencies and lending partners and providing inputs on funding
structure an governance mechanisms.
#2 - Promote green bonds and asset-backed securities
Green bonds have emerged as an innovative financial instrument in the last decade. In
May 2017, India issued the Disclosure Requirements for Issuance and Listing of Green Debt
Securities31 drafted by the Securities Exchange Board of India (SEBI). The regulation includes
a list of broad project and asset categories for eligible use of proceeds. However, additional
government support is required for proliferation of green bonds as a financing instrument in
India.
Taxonomy and definitions: Regulatory support is required to create a coherent and
comprehensive taxonomy and definitions for green bonds. This is essential to remove
inconsistencies in the interpretation of what constitutes a green bond and prevent
greenwashing of projects. Further, the establishment of proper standards can enhance the
comparability of bonds. Based on taxonomies defined internationally like the EU Taxonomy and
EU Green Bond Standards (EUGBS), Climate Bond Standards (CBS) issued by the Climate Bond
Initiative, a holistic taxonomy needs to be created for India covering the following:
i. Complete list of sectors under each category specified by SEBI
ii. Detailed technical criteria for eligibility for classification of project as ‘green’ for each sector
listed above. The criteria need to be set specific to Indian context, considering the maturity
of the sector in the country.
Exhibit 4.2: Proposed mechanism for risk-sharing facility
Stakeholders involved: Financial Institutions Government OEMs
Low interest and/
or longer tenure
loans
Technical assistance
on facility
design, funding
mechanism, etc.
Identification of entities
& setting contract terms
Multilateral
Development
Banks
Bilateral
Development
Banks
Green Funds
Impact
Investment
Funds
Philanthropic
Funds
Loss reserve /
first loss
guarantee
Low-cost
funding with loss
reserve
Potential role
for government
Optional role
in structure
Provide debt capital once
platform is up & running
Capital
starting at
proof-of-
concept
stage
Credit
default
guarantee
Commercial
lenders
Types of organizations
involved
Risk-sharing
facility
NITI AayogBorrower
Platform
(Incubated by govt.
entity / national bank)
Sources of
capital for
risk sharing
Equity
(directly/SPV)
Subordinate
debt
Grants
Guarantor
Banks/
NBFCs
Financing for EVs in India | 5554 | Financing for EVs in India iii. Definition of overarching environmental objectives. For a project to be eligible, it should
contribute to one or more of these objectives and do no significant harm to any other
objective. For e.g., The EU Taxonomy lays out 6 objectives which include climate change
mitigation, climate change adaptation, the sustainable use and protection of water and
marine resources, transition to a circular economy, pollution prevention and control and
protection & restoration of biodiversity and ecosystem.
Governance: A governance mechanism also needs to be set up to conduct stringent periodic
assessments to ensure ‘green bonds’ criteria is being fulfilled, thereby improving legitimacy.
While current measures set norms for disclosing allocation of proceeds from green bonds
along with assessing environmental impact of the projects, it is essential to ensure external
review of the projects, pre-issuance and post-issuance, to provide added credence to the
instruments being traded. In the pre-issuance stage, all prospective issues must be verified
by a 3rd party to ascertain whether the bonds meet required green credentials. Post-issuance
as well, projects undertaken by the issuer, allocation of proceeds for these projects, and
holistic assessment of environmental impact should be carried out by a 3rd party reviewer like
Climate Bonds Initiative. To ensure transparency and accountability, the 3rd party reviewers’
market also needs to be regulated by SEBI. Only registered reviewers who are under ongoing
supervision by SEBI can be allowed to review and certify green bonds in India. In addition,
penalties can also be levied for noncompliance with the green use of proceeds to ensure
the issuance of green bonds remains invested in green projects throughout the life of the
investment.
Reducing cost of bonds: Cost of financing has been high due to structural issues like poor
financial health of issuers, currency fluctuation due to volatility of rupee and perceived risks
due to lack of governance, standards, and certifications. To bring down the cost of borrowing,
standards and certifications detailed above are essential which will help in reducing the
issuance cost that gets priced into the bond. Another potential intervention could be provision
of competitive credit enhancement products to drive down risk associated with green bonds
and improve credit rating. National banks and financial institutions like IREDA can develop
credit enhancement products like credit guarantees and partial credit enhancements. FIs can
also help in reducing the foreign exchange hedging costs through development of low-cost
currency hedging products. Funding for these credit enhancement and hedging products can
be secured through international DFIs like Green Climate Fund. The Reserve Bank of India (RBI)
can also facilitate external commercial borrowing through rupee denominated bonds to help
reduce cost of borrowing for green bonds.
Incentives: In addition to this, government support can also be given in the form of tax
incentives for retail investors, inclusion of green mobility fund for CSR investments, and/or
coverage of additional issuance costs (green certification) for issuers. Currently, a blanket
tax deduction of up to Rs. 20,000/- per year under Section 80CCF of the Income Tax Act 1961
for certain notified long-term infrastructure bonds is available. However, in most cases, the
tax incentive has been provided to GB issuances only by Municipal Bodies, Development
Finance Institutions or Public Sector Undertakings. To open up retail investor participation, tax
deductions can be introduced for corporate green bonds as well. Tax incentives can also be
given in the form of the following instruments:
i. Tax credits / Direct subsidy bonds – Bond investors receive tax credits / cash rebates
instead of interest payments on green bond issuance (e.g., Clean Renewable Energy Bonds
(CREBs) and Qualified Energy Conservation Bonds (QECBs) program in the US, where 70% of
the coupon from the municipal is provided as tax credit or subsidy to the bondholder)
ii. Tax-exempt bonds – Bondholders are exempted from income tax on interest from the
green bonds. Example of such bonds can be seen in Brazil where bond issuance for
financing wind projects is exempt from taxes.
On the other hand, a green bond grants scheme like Singapore can also be adopted to
incentivize issuers. For instance, Singapore provides a grant of $100,000 or 100% of the eligible
expense per qualifying issuance and covers costs incurred in respect of the independent
external review or rating done pre-issuance & post-issuance up to 3 years or tenure of bond,
whichever is earlier.
Financing for EVs in India | 5554 | Financing for EVs in India MDBs can also support green bonds through identification/creation of funds with a green
portfolio consisting of multiple green objectives like solar, wind etc in addition to EV financing.
This will help cover concentration risk. The portfolio can have e-mobility allocation or
“greenium” for e-mobility target funds. The overall economic cost of raising green bonds can
be evaluated further basis rating of the issuer, tenure, and type of bond, secured or unsecured,
and larger macro-economic conditions like inflation/ interest rates.
#3 - Include commercial EV loans under priority sector lending
Priority sector lending has traditionally been an instrument to enable better credit penetration
in credit deficient areas. The aim is to improve lending to the low-income sections as well
as allied sectors that need credit boost, which otherwise have difficulty in availing credit.
Inarguably, EVs require a similar type of support for specific segments and use cases and
hence, a targeted priority sector lending policy could be beneficial.
The inclusion of EV loans under priority sector lending with internal lending limits for Driver cum
Owner commercial applications/fleets can be considered. Stipulations can also be detailed for
various parameters, for e.g.,
A proposed structure of how green bonds will work in the context of India is presented below.
The green bond or asset backed securities issuer will need to work with multiple stakeholders
across the system, like SEBI, 3rd party reviewers and credit rating agencies as underwriters to
finance a portfolio of green projects across sectors. The government’s role will be to support
the system through providing adequate standards and certification and incentivizing investors
& issuers to help in proliferation of green bonds.
Stakeholders involved: Financial InstitutionsGovernment OEMs
Exhibit 4.3: Illustrative model for green bonds in India
Tax incentives
Draft policy for
incentives for issuer
& investors
Provide funding
at lower costs
Propose green bond classification
framework & taxonomy
Subsidized
issuance
costs
NITI Aayog
Institutional investors
Retail investors
Borrowers
Financiers
• Banks, NBFCs, SPV
Corporates
(CSR funding)
Government
(e.g., Department of
Financial Services)
Green Bond / ABS issuer
• Corporate
• FIs
Sources of capital
Regulator
Green bond
certifier
1
Underwriters
2
Credit guarantee/
Partial credit enhancement
(National Banks / IREDA)
EV financing need not be the
sole purpose of green bonds;
a pre-determined proportion
of capital to be earmarked for
financiers
Financing for EVs in India | 5756 | Financing for EVs in India • Loan sizes can be defined by segment and applications
• Lending limits can be defined for individual owners vs fleet operators
• Eligibility criteria for the loans can be laid out basis income / demographic markers
A priority sector lending mandate will help in increasing financing options for the end customer
and reduce the cost of borrowing due to the entry of banks in the segment through 3 different
models, direct lending to EV customers, co-lending with NBFCs and on-lending model with
NBFCs, as shown below:
Exhibit 4.4: Illustrative model for priority sector lending for EVs
To ensure maximum impact of this initiative, PSL can be introduced along with other initiatives
which reduce product risk, such as extended product warranties. This will help increase the
bank’s confidence in EVs and help them offer attractive loan terms.
Thrust Area 2 - Restructure financial products to help mitigate challenges such
as higher down payment or EMIs through innovative models that can potentially
improve cash flows for end customers
I. Context
Loan terms for EVs are starkly unfavorable, especially in the 2W and 3W categories, which make
up a majority of the EV market in the country today. Lower LTV and tenure paired with higher
rates of interest have increased both the upfront capex required for purchasing EVs and the
EMI to be serviced by the customers. Depending on the vehicle segment, the down payment
can increase by up to 20% while EMIs can reach up to 1.5-1.8x of those for comparable ICE
vehicles. The potential for higher income vs these rising costs, however, remains contingent on
the usage of vehicle and supporting operational ecosystem like access to charging stations.
In addition to this, in the 3W category, EVs also have a recurring capex structure across
the vehicle’s lifecycle due to the need for battery replacement every 4-5 years. This further
increases the financial burden on the customers. Hence, innovative financial products that can
mitigate some of the challenges faced by both financiers as well as customers are required.
1
2
3
Consult for design of
PSL mandates, eligible
sectors and limits
Mandate to include EVs under PSL that
directs bank credit towards the sector
On-lend PSL requirements on EVs
Provision of loans through co-lending model
Banks directly providing
loan to EV customers
Increase number of EVs
financed due to on-lending
NITI Aayog
Reserve Bank
of India
Borrower
BanksNBFCs
Financing for EVs in India | 5756 | Financing for EVs in India However, support will be required from the government to facilitate sale of vehicle and battery
separately. Additional initiatives that can potentially be explored are as follows:
• Detailing of Regional Transport Office (RTO) procedures at state level to facilitate easy
registration
• Financial support for purchase subsidies for vehicles sold without battery to stimulate
demand, either under an existing framework (for e.g., FAME-2) or a new policy
• Detailing of financial incentives for battery manufacturers and battery swapping station
(BSS) operators (for e.g., quantum of subsidies and multiplier effect (as BSS have higher
battery to EV ratio))
#5 Reduce EMI burden for customers through subvention schemes and tax
exemptions
Subvention schemes can be designed to offset a portion of the customer’s interest burden
by enabling other players in the ecosystem to absorb a part of the interest burden. A
well-designed scheme paired with extended warranties and product buy-backs can be
II. Proposed initiatives (Action 4 to 6)
#4 Facilitate de-coupling of battery and vehicle to enable leasing / swapping/ pay
per use models
Currently, the battery cost comprises majority of the cost of the vehicle and is, therefore, one
of the key drivers for higher down payment and higher EMIs. De-coupling the battery from the
vehicle provides financiers an opportunity to factor risks for battery and vehicle separately
and the customers an opportunity to incur expenses for the battery as per usage – essentially
making the cost profile similar to ICE vehicles wherein fuel costs are directly proportional to
the usage of the vehicle. In addition, models like battery leasing can be made possible thus
transferring the risk of maintenance of the battery from the owner to the lessor. An example
of how the business model works for de-coupled battery and vehicle financing in the case of
battery swapping is shown below.
Stakeholders involved: Financial InstitutionsGovernment OEMs
Stakeholders involved: Financial Institutions Government OEMs
Exhibit 4.5: Illustrative model for de-coupling vehicle & battery financing
OEM
Battery
Swapping Player
FinancierUsers
Swap used batteries for charged ones at swapping stations
Provide battery for vehicle
OEM & swapping tie-up
Pay for vehicle
w/o battery
Provide loan
for vehicle w/o
battery
EMI for vehicle w/o battery
Sells vehicle (w/o battery)
Financing for EVs in India | 5958 | Financing for EVs in India instrumental in helping build confidence on the product in the financing ecosystem and
contributing to the growth of the EV industry.
The government can offer direct interest subvention schemes to EV customers. The scheme
can be operationalized through a common platform, run by a government entity, for e.g.,
Convergence Energy service Ltd (CESL). The platform will serve as an intermediary for all
stakeholders - OEMs, financiers and customers. Registered models from OEMs which are
leigible for subvention will be present on the platform along with quotes for loans from
empaneled banks and NBFCs on each loan. Customers can access the platform to place
an order for eligible EVs and receive loans at the lowest interest rate basis their profile. The
subvention will be provided by the government directly to the financiers. The incentives can
also be paired with conditions on extended warranty / buyback guarantees by OEMs, for e.g.,
interest subvention to be offered only on EVs with warranty greater than 5 years or a buyback
guarantee of at least a set minimum % of upfront price of vehicle after specified number of
years.
Exhibit 4.6: Illustrative model for government-led interest subvention scheme
Subvention provided to be tied to warranty, buy-back option etc of OEMs; framework
to be designed by intermediary
Loan amount to be
repaid directly to FI;
disbursal directly into
customer account
Policy to buy down
interest rates for
registered EVs
Pass leads
for loan
requirement
Reimburses
subvention costs
OEMs to register on
the platform; warranty
period & buy-back
agreements to be
outlined
• Identify source(s) of
funding from subvention
scheme
• Draft policy detailing
quantum of subvention&
disbursal mechanism
• Identify partner for
operationalizing
intermediary marketplace
FIs to register
with centralized
platform
Transfer vehicle
requirements
from customer
Eligible customers provided
with letter of intent
Sale of vehicle
CustomerGovt.
FIs
NITI Aayog
OEM
Intermediary
platform
Interest subvention schemes can also be led by MDBs or other 3
rd
parties. MDBs can partner
with banks / NBFCs to provide EV loans mandating certain subvention vs ICE loans similar to
CEFC’s partnerships in Australia. OEM led subvention schemes can also be designed wherein
the OEMS help offer subvention schemes through dealers coupled with a loss fund to cover for
NPAs / product losses. However, such schemes will have to be initiated by the OEMs rather than
being pushed through regulatory measures.
The government can also look at reducing EMI burden through tax exemptions by extending
the current tax benefits under 80EEB to loans sanctioned beyond FY23
33
. A tiered exemption
structure could be provided by battery capacity or vehicle price. In addition, the government
could reintroduce accelerated depreciation for EVs purchased by an organization for
commercial purposes, using loans from financial institutions. This would help offset the interest
cost burden for EVs in commercial applications and provide further impetus for adoption.
Financing for EVs in India | 5958 | Financing for EVs in India #6 Provide support for the scaling of business models like fleet ownership, reverse
leasing, flexible loan structures, etc.
Financial entities, especially startups, providing innovative solutions like fleet ownership,
reverse leasing, flexible loan structures, etc., for EV financing require access to capital to scale
up operations and reach a wider audience. Banks, MDBs, and other DFIs can help mobilize
low-cost funding for such entities by setting an asset financing structure which is front-ended
by the financial entity themselves. The financial entity will be responsible for operationalizing
the asset finance company, disseminating funds, and absorbing the credit risk. Banking and
financial institutions, on the other hand, can act only as investors and will have no exposure to
the credit risk, thereby helping them protect their returns.
Thrust Area 3 – Reduce the risk of battery technology by addressing the uncertainty
around battery performance and developing a secondary market for used batteries
I. Context:
Batteries can comprise 30-40% of the overall vehicle cost in EVs. Along with the high financial
value, the battery is also the key component on which vehicle performance is dependent. A
major concern for FIs considering EV loans is battery degradation during the loan tenure. Given
the nascency of the technology, FIs currently have no mechanism to understand how battery
health and consequently vehicle performance will change during the product lifecycle. This
has direct impact on the customer’s ability to pay, especially in the commercial sector where
the vehicle serves as the key source of income for customers. In addition to this, the secondary
market for used batteries is also currently not developed, thereby raising concerns around the
salvage value of the asset in case of NPAs.
II. Proposed initiatives (Action 7 and 8)
#7 Establish battery safety standards and performance certification framework
A holistic battery technology roadmap/policy is needed to address risks associated with
battery technology. The objective is to create a certification mechanism that will boost
financier confidence on battery performance and traceability. To build this framework,
collaboration is required between EV OEMs, players along battery value chain, and 3
rd
party
testing agencies to cover all aspects related to certification, traceability and data sharing.
Some of the key topics the framework should cover include:
• Classification guidelines for EV batteries
• Battery labelling and information requirements along with unique ID for traceability
• Regulation for EV batteries to contain a smart BMS along with a framework for storing and
sharing the information and data needed to determine the state of health and expected
lifetime of batteries
• Guidelines around a centralized data system and data sharing norms capturing:
• Which data to be captured by whom throughout the life of the battery
• Access to data to assess residual value, capability for future use, facilitate reuse,
repurpose or remanufacturing of battery
Stakeholders involved: Financial InstitutionsGovernment OEMs
Stakeholders involved: Financial Institutions Government OEMs
60 | Financing for EVs in India For battery certification, the framework needs to focus on rigorous enforcement of standards
such as AIS-156
34
and AIS-038 (Rev 2)
35
. Enforcement of these norms is needed to ensure
compliance by OEMs since at present, OEMs still have a choice to adhere to the previous
AIS-048 standard. In addition, the AIS-156 standard does not cover battery swapping. The
standard will have to take into account that swappable batteries will have to be swapped a
few thousand times, and that a testing procedure should be established for this.
Standards also need to be developed for testing performance and ageing of batteries (for e.g.,
testing procedures laid out in IEC 62660-1:2018
23
). These can be implemented as a certification
requirement for OEMs to help build a national standard guaranteeing minimum levels of
performance.
#8 Develop framework for circular economy for battery
Development of a circular economy for batteries will help establish a floor price or a salvage
value for batteries for their second life/end-of-life scrappage value. This will help financiers
estimate the value they can recover from the asset in case of default. To facilitate a circular
economy for batteries, battery recycling and end-of-life regulations are required laying down
the roadmap across the following parameters for:
• Target recovery rates at material level
• Recycling efficiency
• Target rates for usage of recycled content in new batteries
• Reporting mechanism for battery manufacturers on recycled content used
• Standards on 2
nd
life use cases
A comprehensive roadmap is needed for the next 8-10 years to act as a guiding direction
for R&D efforts for recycling and second life usage and for mobilizing capital needed for
commercialization of these solutions. Such a framework will help in increased interest by
players in this space leading to the development of a market which can support the resale of
batteries, thereby bringing down overall financing costs.
Initiatives #7 and #8 will work in conjunction with each other to form a holistic structure for EV
batteries similar to the EU example in Chapter 3 (shown below for reference).
Stakeholders involved: Financial InstitutionsGovernment OEMs
Financing for EVs in India | 61 Thrust Area 4 - Reduce the risk of product resale by developing a used vehicle market
I. Context
EV adoption has picked up only recently in India. Most vehicles sold to date have not gone
through the product lifecycle to enter the used market till now. Hence, the secondary market
for EVs currently remains very nascent in India. Globally as well, there are very few markets
where used EVs have started to attract customers, for e.g., in the US, EVs comprised ~3% of
the used car market sales in 2021. In markets like the US and Europe, multiple stakeholders
are working together to facilitate the creation of a secondary market for EVs. Governments in
the Netherlands, France, and Germany in Europe and many states in USA are giving purchase
subsidies on used EVs while OEMs are also facilitating sales through different models like
leasing. A similar push in India could kickstart the creation of a secondary market for EVs in the
country.
II. Proposed initiatives
#9 Promote the secondary market for used EVs through purchase subsidies, OEM
buyback programs, etc.
Purchase incentives for used EVs in the form of one-time grants, tax breaks, etc., can be
considered. The subsidies can be provided as an extension to existing policies like FAME-2 or
state-level EV subsidies. Based on global benchmarks, conditions for disbursing incentives can
be placed on the following to ensure a minimum performance of the vehicle:
Exhibit 4.7: Battery passport network providing end-to-end information on the battery
1. Cluster of cells = Module, Cluster of Modules = Pack; 2. Battery Value Guarantee = Mechanism for a battery within EV to have
a guaranteed end-of-life value, ensuring minimum depreciated value for the vehicle
Source: EU Policy, GFI, Academic Research
Battery Passport
Battery related data: Structure,
materials, UID, Mfg Info, Origin, et
Value-chain related data: Value
chain actor (name, function,
location), Material, sustainability
& circularity properties, etc.
Battery Health Certificate
Inputs: Data at cell/module/
pack level1
Outputs: State of Health, State
of Charge, Depth of Discharge,
Remaining Useful life for end-of-
first life actors & information for
second-life of battery, etc.
Battery Value Guarantee
2
Circularity performance:
Resource efficiency (of raw
materials), raw material losses,
share of secondary material, etc.
Product design: Battery module,
product designs, disassembly
instructions, etc.
Government
Government
Government
Certification Agencies
Data Providers
OEMs
General Public
Stakeholders
Data Providers
OEMs
Battery Manufacturers
Suppliers
Testing Agencies
General Public
Battery
Information
Diagnostics &
Performance
Battery Passport
Value Chain
Information
Circularity &
Sustainability
Battery Value
Guarantee
Recyclers/
2
nd
Life
Data Providers
Battery
Manufacturers
Product Design
Circularity
Properties
Maintenance
Record
Performance
Delivered
Battery Health
Certificate
Stakeholders involved: Financial InstitutionsGovernment OEMs
Financing for EVs in India | 6362 | Financing for EVs in India • Minimum battery capacity
• Minimum range
• Minimum and maximum year for vehicle manufacturing
• Maximum number of kilometers driven before resale
OEMs on the other hand can be encouraged to design buy-back programs for their own
products with back-to-back arrangements with financiers. However, such schemes will have to
be initiated by the OEMs rather than being pushed through regulatory measures
Thrust Area 5 - Create a platform to enable collaboration between different
stakeholders and channelize capital for EV financing
I. Context
The startup ecosystem has been significant for driving innovations in the EV sector. There are
multiple startups in the financing space as well that are providing affordable solutions for
EVs. However, due to their limited reach these solutions are only available to a few targeted
customers. To enable startups to scale up their solutions, they require access to capital and
additional support for operationalization, regulatory changes, etc. On the other hand, financiers
still consider EV as a risky sector due to the knowledge gap and limited understanding around
technology. It is essential to bridge this information asymmetry through collaboration between
OEMs, industry bodies and other players in the EV ecosystem.
II. Proposed initiatives
#10 Build industry-wide platform to ideate, promote innovative financing models &
raise awareness on technology
Creation of a platform for EVs in India can help facilitate flow of knowledge and capital among
various players in the EV ecosystem. The platform can draw inspiration from the Green Finance
Institute in the UK which acts as a think-tank for EV financing and brings multiple stakeholders
like EV OEMs, battery manufacturers, legacy banks and NBFCs, fintechs, MDBs, DFIs, etc., along
with representatives from relevant government ministries together under one common
umbrella. A similar platform in India, backed by the government, will help in achieving the
following objectives:
• Ideate, design, and promote innovative financial models along with relevant stakeholders
and undertake projects in this space
• Incubate, roll out, and scale these projects till a certain momentum is achieved
• Help channel private capital across EV ecosystem, especially for EV startups
• Help identify regulatory/process challenges, if any, while implementing projects which need
to be addressed
• Leverage the platform to facilitate knowledge exchange between OEMs and financiers
on EV technology through initiatives like the creation of a battery technology handbook,
collaborations with industry bodies like SIAM to hold conferences, etc.
The proposed initiatives (Actions 1-10) address different risks surrounding the EV ecosystem
today. Given the complexity of challenges faced throughout the ecosystem, it is crucial to
have a multi-pronged approach with integrated solutions to address barriers across policy,
technology, vehicle economics and customer behavior. This requires the government, financial
institutions, OEMs and various industry players to collaborate and create holistic solutions to
promote affordable financing for EVs. Effective execution of the actions proposed across the 5
key thrust areas can help accelerate penetration of EV financing in India.
Stakeholders involved: Financial Institutions Government OEMs
Financing for EVs in India | 6362 | Financing for EVs in India 4.1 Conclusion and Way Forward
While the previous section detailed out the key thrust areas and the proposed initiatives, the
ensuing paragraphs summarize the key activities that need to be focused on to make each of
the 5 thrust areas a success.
Thrust Area 1: Enable the broader ecosystem to absorb the additional risk in EV
financing to bring down the cost of borrowing for end customers
In order to accelerate adoption of financing in EV’s it is vital to structure mechanisms which
enable the larger eco-system to absorb some of the inherent risks and enable FIs to extend
better loan terms to the customers. The right multilaterals / bilaterals / green funds / impact
funds need to be identified through a targeted outreach program showcasing the opportunity
in India. The right fund structure needs to be designed along with identified partner(s) to
address their risk reward considerations while meeting the intended objectives. Other partners
in the structure – government agencies, lenders, equity partners, etc. also need to be identified
and onboarded. A mechanism so designed with appropriate risk sharing amongst partners,
should be launched for financing EV products in India
Apart from risk sharing mechanisms, mobilizing significant amount of nascent institutional
capital into electrification of India’s road transport sector is important and can be done
through debt instruments like green bonds and asset backed securities. To help in proliferation
of these debt instruments for financing EV projects, regulatory support is essential. The current
framework for bonds should be benchmarked with other legislations across the globe. Key
gaps should be identified (for e.g., in taxonomy, governance etc.) and a holistic framework
should be addressed to address these. In addition, if needed, incentive structure can also be
designed & rolled out to encourage participation by private investors as well. FIs can also help
in proliferation of green bonds through creation of a fund with a green portfolio. Objectives, key
focus areas, funding mechanism and type of entities eligible for funding will need to be defined
to set up the fund. The project assessment process & other enabling factors like organization
structure, governance mechanisms, etc. will also need to be designed along with identifying
sources of funding. The right structure for funding will need to be identified to operationalize the
fund & initiate disbursement of capital.
It is equally important to improve credit penetration to increase accessibility to financing and
help distribute risk over a larger base. Hence, the government can set up an internal working
group with Reserve Bank of India (RBI) and other relevant government agencies to consider
addition of commercial EV loans in priority sector lending. Eligibility criteria basis income levels,
demographic markers and lending limits defined by vehicle segments can be drafted. This will
ensure PSL remains an instrument to enable better credit penetration to intended sections of
society.
64 | Financing for EVs in India Short Term (4-6) months
Set up low-cost funds with risk sharing mechanisms / FLDG
Identify and prioritize multilaterals/bilaterals/green funds for
investing in India, intiate outreach to showcase India opportunity
Work with relevant govt agencies to establish the fund
Design fund structure, define objectives and financing
instruments and onboard (Government / local/ international)
partners relevant to the structure
Month
3
Month
4
Month
2
Month
1
Government,
FIs
Set up committee comprising all relevant ministries & regulatory
bodies (e.g., Ministry of Finance, SEBI, RBI)
Initiate creation of fund with a green portfolio
Baseline current Indian regulations & draft a coherent and
comprehensive taxonomy for Green bonds
Design project assesment process, organization structure,
governance mechanisms, etc.
Operationalize fund and initialize disbursement of funds
Design incentive structure to promote Green bonds (e.g., Tax
incentives)
Roll out new green bond norms and incentives
Establish periodic review mechanism to ensure adherence to
green bonds criteria
Identify sources of funding and funding structure
Benchmark Green Bonds framework and legislation across the
globe
Define objectives, key focus sectors, funding mechanism and
type of entities to be funded
Government
Fls
Promote green bonds and asset-backed securities
Include commercial EV loans for driver owners under priority sector lending, eligibility and internal lending
limits can be defined by segments
Set up internal working group with RBI and other relevant
government agencies to draft PSL regulations
Roll-out PSL policy
Define stipulations like internal lending limits, elegibility of
borrowers & vehicle categories, etc.
Government
Financing for EVs in India | 65 Thrust Area 2: Restructure financial products to help mitigate challenges such
as higher down payment or EMIs through innovative models that can potentially
improve cash flows for end customers
De-coupling vehicle and battery is critical to help financiers factor risks for product and battery
separately. This helps financiers structure innovative models such as battery swapping, pay
per use, battery leasing, etc. which can reduce upfront down-payment and/or EMI payouts.
To facilitate sale of vehicle & battery separately, a coordinated effort is required at the central
level to detail registration mechanism for vehicle sold without batteries at state RTO level and
ease the process for customers. In addition, incentive structure and disbursal mechanism
need to be designed and implemented for vehicles sold without battery, for battery
manufacturers and Battery Swapping Station (BSS) operators either under FAME subsidy or a
new policy.
Direct interest subvention schemes, by the government or 3rd parties like multilaterals, can
also help reduce the EMI burden for customers. To operationalize this through the government,
all ongoing schemes in various states should be studied and a holistic scheme should be
designed with inputs from other stakeholders like OEMs and FIs. Conditions coupling subvention
with extended warranties and buy back schemes can also be included in the scheme. A
government agency (like CESL) should be identified and onboarded to create a platform
for operationalizing the scheme. Financial institutions like multilateral banks can also offer
subvention schemes through partner banks / NBFCs. The right partner banks and/or NBFCs
need to be identified and onboarded for the partnership. Funding structure for the partnership
and risk-sharing mechanism needs to be designed to roll out the subvention scheme.
Tax breaks too can be considered to help reduce EMI burden of customers. While the
government offers tax breaks under 80EEB to individuals who have purchased EVs using loans
from financial institutions, the government can look into extending the scheme beyond FY’23.
In addition, slabs based on battery capacity or price of the vehicle can be introduced to help
targeted segments. While 80EEB helps individual buyers, providing accelerated depreciation
for organizations purchasing EVs for commercial purposes using loans from FIs can be
considered. Relevant ministries (e.g., Ministry of Finance) need to design the tax breaks and roll
them out as part of the budget.
Apart from the above, there are multiple financial entities (new and existing) today
experimenting with innovative business models and financial solutions like fleet ownership,
flex loans, reverse leasing etc. who need support to scale. Multilaterals / bilaterals / funds
should be identified to set up a platform to provide such entities access to capital. The funding
structure, governance and process to identify and onboard financial entities should be defined.
The entities thus onboarded can operationalize and scale the business idea.
66 | Financing for EVs in India Roll out of subvention schemes
Incorporate inputs, finalize new norms and roll out as part of
budget
Work with relevant ministries (e.g., Ministry of Finance) to
design tax exemption and accelerated depriciation offerings
Reduce EMI burden for customers through subvention schemes and tax exemptions
Baseline current subvention schemes offered by state
governments
Identify & onboard patner (government agency, e.g., CESL)
repsonsible for operationalization
Set up digital platform for disbursal of incentive
Identify and onboard OEM partners & financial institutions to be
part of scheme
Work with state govt, agencies and private players to design
offering - extent of subsidy by vehicle category, paired with
warranty / buy-back
Mid Term (6-12) months
Qtr
3
Qtr
4
Qtr
2
Qtr
1
Government
Enable de-coupling of battery and vehicle to facilitate leasing / swapping / pay per use models
Coordinate efforts at central level for operationalizing state RTO
procedures, purchase subsidies on vehicle without battery and
incentives for battery manufactures & BSS operators
Draft incentive structure for demand side, battery OEMs and BSS
operators
Operationalize relevant procedures and incentive policy
Initiate detailing of procedures in collaboration with relevant
state governemnt departments
Government
Identify multilaterals / bilaterals for setting up a funding platform
to support startups offering products in the EV financing space
Initiate outreach to identified organisations & onboard
interested parties
Design process to onboard financial entities (for e.g., startups)
and operationalise
Define funding structure for the platform, governance and
reporting mechanisms
FIs
Support scaling of business models like fleet ownership, reverse leasing, flex loans etc.
Reduce EMI burden for customers through subvention schemes and tax exemptions
Identify partner banks & NBFCs lending in EV sector
Desing funding structure and risk-sharing mechanism
Roll out subvention schemes through partner banks / NBFCs
Initiate outreach & negotiate details of partnership (e.g., eligible
vehicles, eligible buyers, loan terms offered)
FIs
Financing for EVs in India | 67 Set up working group comprising of industry players
across battery value chain, EV OEMs, battery startups, govt.
representatives, industry bodies
Define elements of policy like target recovery rates, recylcing
efficiency, standards applicable for 2
nd
life, etc.
Roll out battery recycling and end of life regulations framework
Conduct a comprehensive study of battery recylcing
regulations adopted by countries globally
Government
Long Term (>1 yr)
Develop framework for circular economy for battery
Establish battery safety standards & performance certification framework
Set up working group comprising of industry players across
battery value chain, EV OEMs, govt. representatives, testing
agencies, industry bodies
Identify gaps vs global policies & regulations and identify
changes / additions required in current system
Design data capturing, data sharing and reporting mechanism
Detail new framework and define roles for each stakeholder to
address the gaps and enable testing, performance certification
and tracking
Baseline current battery standards and performance
certifications in India
H1’23H2’23H2’22H1’22
Government
Thrust Area 3 – Reduce the risk of battery technology by addressing the uncertainty
around battery performance and developing a secondary market for used batteries
To reduce the risk associated with battery performance and boost financier confidence,
battery safety standards and a performance certification framework need to be established.
To create the framework, a working group comprising industry players across the battery value
chain, EV OEMs, representatives from relevant ministries (e.g., Ministry of Heavy Industries),
testing agencies, industry bodies, etc. needs to be set up. The working group should baseline
existing regulations & standards in India, benchmark with global policies & identify key gaps.
The group should form a view on changes required to current policy framework and identify
new parameters/topics that the regulation should cover. In addition to this, data capturing,
data sharing and reporting mechanism also need to be laid out in this framework. Role of each
stakeholder needs to be detailed to address the gaps and enable battery certification and
tracking.
In addition to this, to facilitate development of a circular economy for batteries and establish
a floor price/ salvage value, a comprehensive policy needs to be created for battery recycling
and second life use cases. The working group comprising of industry and government
representatives can also address issues around circular economy. Elements of the policy
like target recovery rates, recycling efficiency, standards applicable for second life, use of
recycled material in new batteries need to be detailed in line with global benchmarks. The
circular economy framework can be a part of the battery safety and performance certification
initiatives through a holistic overarching policy for EV batteries.
Financing for EVs in India | 6968 | Financing for EVs in India Mid Term (6-12 months)
Promote secondary market for used EVs OEM buyback programs, through purchase subsidies, etc.
Work with state govt, agencies and industry to design incentive
structure, conditions for eligibility of model & disbursal method
Define Central vs State roles and identify platform where NBFCs
can access models registered by OEMs for buy backs
Onboard dealer network for used Evs and roll out buy back
scheme
Roll out & operationalize incentive scheme
Create buyback scheme - identify eligible models, method of
collection, support for dealers for selling second-hand Evs
Design conditions for OEM (e.g., buyback guarantees, warranty,
etc.) for eligibility for scheme
Qtr
3
Qtr
4
Qtr
2
Qtr
1
Government
OEM
Thrust Area 4 – Reduce risk of product resale by developing a used vehicle market
Developing a secondary market for used EVs can help assuage a key concern for financiers –
value that can be recovered from the asset in case of a default. To help kickstart the demand
for used EVs, the government can offer purchase subsidies with schemes on similar lines as
those offered for new EVs. Incentive structure and quantum of incentive to be given will need
to be designed in tandem with state governments and industry players. Additionally, criteria
for eligible vehicles will also need to be detailed (for e.g., conditions on OEM like buyback
guarantees, etc. and conditions on models like minimum range, battery capacity, etc.). An
existing platform (like CESL) can be leveraged, or a new platform can be created for FIs to be
able to access models registered by OEMs for buybacks.
OEMs can also help in developing this secondary ecosystem through targeted buyback
schemes for EVs. To operationalize this scheme, OEMs will have to first identify eligible models
and then detail the entire process from collection of vehicles to resale. Support to dealers for
resale will also need to be detailed. OEMs should then onboard the dealer network for used EVs
and roll out the proposed scheme.
Thrust Area 5 - Create platforms to enable collaboration between different
stakeholders and channelize capital for EV financing
Current innovation in the EV system is happening in pockets leading to limited capital inflow
and exchange of information between stakeholders in the ecosystem. To channelize capital
towards EV financing and reduce information asymmetry, industry-wide platforms need
to be created with stakeholders across industry, government, and academia. To set up the
platforms, the right partners need to be identified and onboarded to create an initial working
group with the founding members. The group should then focus on outlining the platform
structures, roles, sectoral objectives, key focus areas and outcomes to be achieved. Review
mechanisms to assess performance against set objectives also need to be designed. To
launch the platforms, key lighthouse projects need to be identified. In addition, processes to
develop future project pipeline also need to be established.
Financing for EVs in India | 6968 | Financing for EVs in India Build industry-wide platform to ideate, promote and fund innovative financing models & raise technology
awareness.
Identify partners consisting of govt agencies, financial services,
academia and industry to set up a collaborative platform
Outline platform strucuture, roles, sectoral objectives, key focus
areas and outcomes to achieve
Design a review mechanism to assess performance against set
objectives
Onboard initial founding members for the platform across all
stakeholders and set up working group
Identify key lighthouse projects for the platfrom and establish
process for developing future project pipeline
Launch platform with key lighthouse projects
H1’23H2’23H2’22H1’22
Government
Government,
FIs
Long Term (>1 yr)
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about-cafe-regulations/article28022174.ece
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auto-sector-list-of-applications-approved-under-champion-oem-incentive-scheme/
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cn_2020_sotm_04h_1.pdf
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ev-financing-segment-collaborates-with-eqaro-guarantees-and-terra-motors/84088074
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Carbon-Auto-Rickshaws_Instrument-Analysis.pdf
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(EU) No 2019/1020
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electric-vehicles/
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29. https://www.greenfinanceinstitute.co.uk/what-we-do/
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Local%20Climate%20Bonds,money%20directly%20from%20the%20public.
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and-listing-of-green-debt-securities_34988.html
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deduction%20for%20interest%20payments,paid%20on%20the%20vehicle%20loan.
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72 | Financing for EVs in India Financing for EVs in India | 73 74 | Financing for EVs in India Financing for EVs in India | 75
DRIVING AFFORDABLE FINANCING
FOR ELECTRIC VEHICLES IN INDIA Authors &
Acknowledgements
The authors would like to thank Mr. Amitabh Kant, CEO, NITI Aayog
for their support that made this report possible.
The views and opinions expressed in this document are those of the authors and do not
necessarily reflect the positions of the institutions or governments. While every effort has been
made to verify the data and information contained in this report, any mistakes and omissions
are attributed solely to the authors and not to the organization they represent.
This publication was produced as a part of TA 6726-IND: Promoting Clean Energy Usage
Through Enhanced Adoption of Electric Vehicles and Grid Integration of Battery Storage System,
co-financed on a grant basis by the Asian Clean Energy Fund, established by Government of
Japan, under the Clean Energy Financing Partnership Facility and administered by ADB.
Boston Consulting Group
Natarajan Sankar
Sushma Vasudevan
Rajat Modwel
Aditya Khandelia
Sunil Narendra Albal
Anchita Bagga
Krishna Ayapilla
Asian Development Bank
Sabyasachi Mitra
Jiwan Sharma Acharya
Keerthi Kumar Challa
NITI Aayog
Sudhendu Jyoti Sinha
Joseph Teja
Abhishek Kumar Saxena
Acknowledgements
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recommendation and should not be construed as such by the reader or any other entity. Table of
Contents
EXECUTIVE SUMMARY
01 INTRODUCTION 14
1.1 Approach & methodology 18
02 KEY CHALLENGES IN EV FINANCING IN INDIA 20
2.1 Current financing landscape for EVs 22
2.2 Key challenges & risks associated with
EV financing 27
03 REVIEW OF INNOVATIVE SOLUTIONS
PRESENT ACROSS THE INDUSTRY 30
04 POTENTIAL SOLUTIONS TO DRIVE
AFFORDABLE FINANCING FOR EV s 50
4.1 Conclusion and Way Forward 64
References 71 Executive
Summary Across the globe, electric mobility is gaining traction as consumers increasingly adopt Electric
Vehicles (EVs). This accelerated growth in EV adoption is the culmination of a host of factors
including governments’ environmental commitments, commensurate policy support, and
the improving economics of EVs. Further, with battery prices likely to reduce in the long run,
upfront purchase price of EVs is also expected to come down, thereby giving a further fillip to EV
adoption. However, some key challenges in the widescale adoption of EVs continue to persist.
India is one of the top 5 markets for automobiles and has already made a strong commitment
towards driving EV adoption in the country. A host of policy measures, regulations, and
interventions have already been made in that direction which broadly fall into regulatory
norms (e.g., Corporate Average Fuel Efficiency or CAFÉ norms regulating CO
2
emissions by auto
manufacturers), incentives for demand creation & charging infrastructure set up (purchase
subsidy under FAME-2, lower GST) and promotion of local manufacturing (ACC PLI, Auto & Auto
Components PLI). While these measures will help in bringing the overall total cost of ownership
of EVs at par with ICE, the absence of a holistic EV financing ecosystem acts as a significant
hurdle to the large-scale adoption of EVs in the country. With growing EV adoption, we estimate
around INR 45-55 thousand crore will be required to finance EV purchases by 2026. In order to
truly harness this potential, it is imperative to comprehensively address the financing challenges
in the ecosystem and unlock the capital required to drive India’s green transformation.
From a consumer’s perspective, currently the financing options available in the market are
limited along with unfavorable terms. They have limited access to funding with fewer bank
and NBFC options lending for EVs vs ICE. For the options available, loan terms are starkly
unfavorable. LTVs can be 10%-30% lower depending on vehicle category resulting in higher
initial down payment. In addition to this, the EMI burden is higher due to 1-9% higher interest
rates & 6-18 months shorter tenor offered vs ICE. Additionally, for higher usage applications,
there is an added recurring capex of battery replacement every 4-5 years with low financing
options. On the other hand, financiers are unable to offer competitive products due to real and
perceived risks, given the nascency of the technology and the market.
Overall, the challenges faced by the EV ecosystem are rooted in 6 major risks surrounding EVs:
Resale value of the battery is unestablished as second life use cases or a secondary
recycling market are yet-to-be established and there is lack of traceability of battery
health due to lack of certification standards.
Resale value of vehicle without the battery is unknown. Further a secondary market for
used EVs has not been established yet.
Significant skepticism regarding product performance and technology given its nascency
and lack of historic data to gauge durability of product for different applications.
Uncertainty in savings and earnings since higher EMI and higher down payment are
needed against an income which is contingent on running & usage of EVs
Inherently different capex structure due to battery replacement required every 4-5 years
(in 3W).
Ticket size barriers on loans and EMI precluding a large number of people from owning EVs
personally.
1
2
3
4
5
6
8 | Financing for EVs in India To address the challenges detailed above, multiple entities in India and across the world like
governments, OEMs, financiers, and startups have come up with a variety of solutions. These
can be categorized into 5 broad levers:
Absorption of additional risk in EV financing by the broader ecosystem to bring down the
cost of borrowing for end customer.
Restructuring of financial products to help mitigate challenges such as higher down
payment or higher EMI through innovative models to improve cash flows for end customer.
Reducing the risk of battery technology by addressing the uncertainty around battery
performance and developing a secondary market for used batteries.
Reducing the risk of product resale by developing a used vehicle market.
Creation of a platform to enable collaboration between different stakeholders and
channelize capital for EV financing.
Based on a comprehensive understanding of the challenges faced in EV financing and an
extensive review of solutions across these 5 pillars, a 10-point action agenda is proposed below
(Actions 1-10) to address the different risks prevailing in India’s EV ecosystem.
1
2
3
4
5
Financing for EVs in India | 9
Thrust Area 1: Enable the broader ecosystem to absorb the additional risk in EV
financing to bring down the cost of borrowing for end customers
Due to concerns around technology and long-term economics (including resale value), FIs
perceive that financing an EV vehicle has additional risks over ICE. Thus, as a mechanism to
limit their exposure, FIs pass this risk to end-consumers which ultimately results in higher cost
of borrowing. Some mechanisms through which the broader ecosystem can absorb some of
the inherent risk or provide FIs with access to low-cost capital are proposed below:
Ensuring affordable financing for EVs
Enable collaboration between different stakeholders & channelize capital towards EV financing
Absorption of additional
risk by broader
ecosystem
Set up low-cost funds
with risk sharing
mechanisms / FLDG
Promote green bonds
and asset-backed
securities
Include commercial EV
loans for driver owners
under priority sector
lending with loan
limits by segment
Enable de-coupling
of battery and vehicle
to facilitate leasing /
swapping / pay per use
models
Establish battery
safety standards
& performance
certification framework
Promote secondary
market for used
EVs OEM buyback
programs, through
purchase subsidies, etc.
Develop framework for
circular economy for
battery
Support scaling of
business models like
fleet ownership, reverse
leasing, flex loans etc.
Reduce EMI through
interest subvention,
income tax exemption
beyond FY23 & re-
introduction of
accelerated depreciation
Restructure products
to improve cash flow
profile
Reduce risk of battery
technology
Reduce risk of product
resale
Build industry-wide platform to ideate, promote and fund innovative financing models & raise technology awareness. 10
1479
8
2
5
3
6 #1 – Establish low-cost funds with risk sharing mechanisms / first loss default guarantee
Access to low-cost capital can be facilitated through the creation of a risk-sharing facility like
a loan loss reserve that can cover general default or loss due to specific risks, for e.g., product
failure. This reserve can be created at the behest of the government and structured to include
multiple stakeholders across the EV ecosystem through funding mechanisms like grants, risk
underwriting, debt, equity, debt and equity with first loss guarantee, etc. The government,
along with FIs and MDBs can explore some of these structures to mobilize significant amount of
nascent institutional capital to accelerate financing for EVs in India.
#2 - Promote green bonds and asset-backed securities
Green bonds have emerged as an innovative financial instrument in the last decade to
mobilize significant amount of nascent institutional capital, distribute risk over a larger base
through asset backed securities and bring down the cost of capital. However, additional
government and regulatory support is required for the proliferation of green bonds as a
financing instrument in India. Creation of a coherent and comprehensive taxonomy and
definitions along with establishment of proper standards is essential to build investor
confidence and increase participation in this instrument. Additionally, support in the form of
tax incentives for retail investors, inclusion of green mobility funds for CSR investments, and/
or coverage of additional issuance costs (green certification) for issuers can also be provided.
Separately, MDBs can also support green bonds through the identification/creation of funds
with a green portfolio to cover concentration risk.
#3 - Include commercial EV loans under priority sector lending
A targeted priority sector lending policy to support specific EV segments and use cases could
be beneficial for the sector. For example, the inclusion of EV loans under priority sector lending
with internal lending limits for Driver cum Owner commercial applications/fleets can be
considered. This will help in increasing financing options for the end customer and reduce the
cost of borrowing with entry of banks in the segment.
Thrust Area 2: Restructure financial products to help mitigate challenges such
as higher down payment or EMIs through innovative models that can potentially
improve cash flows for end customers
Purchasing an EV currently has higher financing costs than traditional ICE vehicles. Depending
on the vehicle segment, the down payment can increase by up to 20% while EMIs can reach up
to 1.5-1.8x of those for comparable ICE vehicles (albeit for shorter tenor loans). Hence, innovative
financial products that can mitigate some of the challenges faced by both financiers as well as
customers are required to improve cash flows for customers.
#4 Facilitate de-coupling of battery and vehicle to enable leasing / swapping/ pay per use
models
De-coupling the battery from the vehicle allows the financiers to factor risks for vehicle and
battery separately and create standalone products for vehicle without battery and the battery
itself. This reduces loan amount on the vehicle (hence reducing down payment & EMIs) &
gives customers an opportunity to incur expenses for the battery as per usage – essentially
making the cost profile similar to ICE vehicles wherein fuel costs are directly proportional to the
usage of the vehicle. To enable this, support will be required from the government in terms of
policies which will help sale of vehicles and batteries separately. This could be done through
multiple initiatives like detailing vehicle registration procedures at the RTO and state transport
departments, detailing subsidies for vehicles without batteries and designing incentives for
battery manufacturers and BSS operators either under an existing framework (for e.g., FAME-2)
or a new policy, which will also help in stimulating demand.
#5 Reduce EMI burden for customers through subvention schemes and tax exemptions
Subvention schemes can be designed to offset a portion of the customer’s interest burden
by enabling other players in the ecosystem to absorb a part of the interest burden. The
Financing for EVs in India | 1110 | Financing for EVs in India government can offer direct interest subvention schemes paired with conditions on extended
warranty / buyback guarantees by OEMs. This can also be led by MDBs or other 3rd parties
where the MDBs partner with banks / NBFCs to provide EV loans mandating certain subvention
vs ICE loans. In addition to interest subvention, the government can also look at extending
income tax benefits provided to individual owners under Section 80EEB for loans sanctioned
beyond FY23. Accelerated depreciation for EVs can also be reintroduced for EV purchases by
organizations using loans, to help offset interest cost burden for commercial applications.
#6 Provide support for the scaling of business models like fleet ownership, reverse leasing,
flexible loan structures, etc.
Banks, MDBs, and other DFIs can help mobilize low-cost funding for any existing or upcoming
financial entity, for e.g., startups, fintechs etc. providing innovative solutions (for e.g., fleet
ownership, reverse leading, flexible loan structures, etc.) by setting an asset financing structure
which is front ended by the financial entity itself. The financial entity will be responsible for
operationalizing the asset finance company, disseminating funds, and absorbing the credit
risk. Banking and financial institutions, on the other hand, can act only as investors thereby
safeguarding their returns.
Thrust Area 3 – Reduce the risk of battery technology by addressing the uncertainty
around battery performance and developing a secondary market for used batteries
Since batteries can comprise 30%-40% of the total vehicle cost, battery life and degradation
are a major concern for financiers. Given the nascency of the technology, FIs have limited
understanding on how battery health and consequently vehicle performance will change
during the product lifecycle. These concerns can be assuaged through a targeted battery
policy as proposed below.
#7 Establish battery safety standards and performance certification framework
A holistic battery technology roadmap/policy is needed to address the risks associated with
battery technology through collaboration between EV OEMs, players along battery value chain,
and 3rd party testing agencies. The objective is to create a certification mechanism that will
boost financier confidence on battery performance and traceability. This framework needs
to cover key areas including classification guidelines for EV batteries, battery labeling and
information requirements along with unique ID for traceability and regulation for EV batteries
to contain a smart BMS with guidelines around data capturing and sharing, to enable proper
certification of batteries. The framework should also focus on rigorous enforcement of the
AIS-156 and AIS-038 (Rev 2) safety standards. In addition to this, standards also need to be
developed for performance and ageing testing for EV batteries.
#8 Develop framework for circular economy for battery
Development of a secondary economy is essential to establish a floor price or a salvage value
for second life of batteries / end-of-life scrappage which will help financiers in assessment
of value they can recover from the asset in case of default. To facilitate a circular economy
for batteries, battery recycling and end-of-life regulations are required, laying down the
roadmap across target recovery rates at material level, recycling efficiency, target rates for use
of recycled content in new batteries, standards on 2nd life use cases, etc. A comprehensive
long-term roadmap (8-10 years) is needed to guide the R&D efforts for recycling and second
life usage which will attract interest of private players to invest and facilitate development
of innovative solutions. Additionally this will also help in mobilizing the capital needed for
commercialization of these solutions and creating a robust secondary ecosystem for batteries.
Thrust Area 4 – Reduce risk of product resale by developing a used vehicle market
Most EVs sold to date have not gone through the entire product lifecycle to enter the used
vehicle market till now. Hence, the secondary market for EVs currently remains very nascent
in India. Governments globally have helped kickstart this market through purchase subsidies
while OEMs are also facilitating sales through models like leasing. A similar push in India can
help initiate market development for used EVs.
Financing for EVs in India | 1110 | Financing for EVs in India #9 Promote the secondary market for used EVs through purchase subsidies, OEM buyback
programs, etc.
Purchase incentives for used EVs in the form of one-time grants, tax breaks, etc., can be
considered. Conditions for disbursing incentives can be placed to ensure a minimum
performance of the vehicle, for e.g., minimum battery capacity and range, maximum
kilometers driven before resale, etc. OEMs can also facilitate secondary market development
through buy-back programs with back-to-back arrangements with financiers.
Thrust Area 5 - Create platforms to enable collaboration between different
stakeholders and channelize capital for EV financing
While there are multiple startups providing affordable solutions for EVs, their reach is
currently limited, and they require access to capital to scale up their solutions. On the other
hand, financiers still consider EV as a risky sector due to the knowledge gap and limited
understanding around technology. It is essential to bridge this information asymmetry through
collaboration between OEMs, industry bodies and other players in the EV ecosystem.
#10 Build industry-wide platform to ideate, promote innovative financing models & raise
awareness on technology
A unified platform can be created that brings multiple stakeholders like EV OEMs, battery
manufacturers, legacy banks and NBFCs, fintechs, MDBs, DFIs, etc., along with representatives
from relevant government ministries. The platform will help with following objectives:
• Ideate, design, and promote innovative financing models.
• Undertake projects in this space to incubate, roll out and scale these initiatives.
• Help channel private capital and identify regulatory challenges.
• Facilitate knowledge exchange between multiple stakeholders.
12 | Financing for EVs in India Financing for EVs in India | 13
Given the complexity of challenges faced throughout the ecosystem, it is crucial to have
a multi-pronged approach with integrated solutions to address barriers across policy,
technology, vehicle economics, and customer behavior. This requires the government, financial
institutions, OEMs and various industry players to collaborate and create holistic solutions to
promote affordable financing for EVs. Effective execution of the actions proposed below can
help accelerate the penetration of EV financing in India. Introduction
01 Electric mobility has witnessed exponential growth globally, driven by environmental
commitments and sustained policy support by various governments along with improving
economics of EVs. Additionally, with battery prices likely to rationalize over the long term, we
expect the scales to further tip in favor of EVs. Inarguably, India is one of the top 5 markets for
automobile sales globally and its strong commitment to driving EV adoption in the country
augurs well for the growth of the EV industry.
However, some key challenges in the widescale adoption of EVs continue to persist. These
include consumer anxieties regarding the vehicle, the relatively higher cost of establishing a
charging infrastructure, unencumbered access to technology, and the cost of the technology
itself. The Government of India (GoI) has been proactively working on resolving some of these
issues through various regulations and interventions in an effort to drive demand creation and
promotion of local manufacturing in this sector.
Some of the key regulatory interventions include:
• CAFÉ or Corporate Average Fuel Efficiency / Economy
1
regulations, which came into force in
India in April 2017. Under this regulation, the average corporate CO
2
emissions basis sales-
volume weighted average for every auto manufacturer must be less than 130 g/km by 2022
and below 113 g/km, thereafter. The aim of the regulation is to drive auto manufacturers to
move to electric or hybrid car manufacturing in the long run.
Demand creation & charging infrastructure set up:
• The GoI has already set the stage for the adoption of EVs in India through multiple schemes
that are aimed at stimulating demand including purchase incentives, road tax waivers,
scrapping, and retrofit incentives.
The Faster Adoption and Manufacturing of Electric Vehicles or FAME-2 scheme
2
, started in
April 2019, has an outlay of INR10,000 crore and aims to support 1.56 million EVs. The policy
is focused on providing demand incentives in the form of purchase subsidy given basis
battery size of vehicle. The FAME-2 policy also lays out capital subsidy of up to 100% of
equipment cost for setting up EV charging stations.
• In addition to this, GST on EVs has also been reduced to 5% starting from April 2019 while
GST for ICE vehicles remain 18% or more depending on the vehicle. GST cess for EVs has also
been removed. In the Draft Battery Swapping Policy, NITI Aayog has also proposed cutting
the GST on EV batteries from 18% currently to 5%.
• Several states, for e.g., Delhi, Maharashtra, etc., have also introduced individual policies
3
supporting the central government’s initiative. For example, the Maharashtra government
has introduced a scheme that offers an INR 5,000 subsidy per kWh of battery capacity
(maximum subsidy of INR 10,000) for electric 2W and electric 4W (maximum subsidy of INR
1,50,000).
Promotion of local manufacturing:
• In addition to demand creation incentives, the government has also focused on creating a
supply chain for EVs in India. Examples include the Advanced Chemistry Cell PLI
4
scheme,
Auto and auto component
5
PLI with a combined budgetary outlay of INR 18,100 crore and
INR 26,000 crore respectively, targeting cell production, other auto and EV components
production and vehicle assembly.
• A Phased Manufacturing Program
6
has been introduced for EV components as guidelines
for OEMs for receiving FAME-2 subsidy to enforce local content requirement
• Several states like Karnataka, Tamil Nadu, Maharashtra, etc., too have supported these
initiatives by making EV manufacturing a focus sector and offering state specific incentives
and schemes
7
to promote manufacturing.
With extensive policy support from the government at the central and state level, overall EV
volumes are expected to grow to 30-35 lakh units by 2026 (excluding e-rickshaws) driven by
different levels of adoption across vehicle categories. The 2W segment is expected to be the
primary driver with 13-15% adoption, followed by 3W and 4W segments with 18-20% and 3-5%
adoption respectively.
While these measures will help in bringing the overall Total Cost of Ownership (TCO) of EVs
at par with ICE (Internal Combustion Engine) in many cases and facilitate the large-scale
Financing for EVs in India | 1716 | Financing for EVs in India adoption of EVs, it is essential for affordable financing options to be available to customers to
further drive adoption.
Currently, ~50% 2W, ~90% 3W and ~80-90% 4W are financed in India
8
. Given the higher upfront
cost of EVs, it is even more important to have low-cost financing solutions for EVs to make them
an affordable substitute for ICE vehicles for the average Indian consumer.
Today, financing an EV remains a challenge with limited options available in the market along
with unfavorable loan terms. Financiers too face challenges in providing competitive products
due to real and perceived risks, given the nascency of the technology and the market. With
growing EV adoption, the EV financing market is expected to grow to INR 45-55 thousand crore
by 2026. It is essential to understand and address the challenges being faced across the EV
financing ecosystem to unlock the capital required to drive India’s green transformation.
This report is focused on understanding comprehensively the challenges faced in EV financing
today and also present initiatives for different stakeholders in the EV ecosystem that can
act as potential solutions. The second chapter details the challenges faced by customers
across vehicle categories along with the perspectives of financiers to understand the root
causes for lack of affordable financing options for EVs, currently. In chapter three, an extensive
benchmarking of best practices in India and across the globe has been carried out to capture
innovative solutions. The last chapter, i.e., chapter four, proposes a holistic, multi-pronged
agenda to accelerate the penetration of financing in the EV market to support adoption.
2W
EV
Penetration
EV Market
Volume
EV Market Size
(Rs. Cr.)
Financing Market
Size (Rs. Cr.)
3W
1
Cars
LCV
Bus
13-15%
2800-
3200k
35-40k 13-15k
18-20%85-95k3.5-4k2.5-3k
3-5%
170-
230k
28-36k20-27k
45-55k
3-5%18-22k1.9-3.2k1.5-2.5k
8-9%15-20k10-12k8-10k
FY26 (E)
Total11-13% 3000-3600k 75-95k
Exhibit 1.1: EV financing opportunity in India
1. Only e-autos considered; e-rickshaws are excluded
Financing for EVs in India | 1716 | Financing for EVs in India 1.1 Approach & methodology
To understand the challenges in the EV financing market in depth across vehicle categories
and use cases, we have split each vehicle category by usage and further by types of vehicles
available within each category:
Electric 2Ws have been split into personal and commercial based on usage.
Both low-speed EVs (maximum speed of 25 km/h) and high-speed EVs have
been covered under each.
• Personal: Individual buyers purchasing vehicle for personal usage
• Commercial: 2W purchased for commercial usage across passenger
(bike taxi / rental) & goods transportation (parcel delivery, food & grocery
delivery)
Electric 3W L5 category has been covered for the following segments. L5
vehicles defined as 3W with maximum speed exceeding 25 km/h and motor
power exceeding 0.25kW
• Passenger: Vehicles used for transportation of passengers from one point
to another
• Cargo: Vehicles used for goods, parcel, and grocery delivery
Electric 4W category has been split into personal and commercial based on
usage
• Personal: Individual buyers purchasing car for personal usage
• Commercial: Fleet operators providing services targeted for corporate
customers (for e.g., CarsOnRent, EcoCars) and passenger segment / ride
hailing services (for e.g., Ola, Uber, Meru)
18 | Financing for EVs in India
Note:
1. Low-speed 2W categorized as vehicles with maximum speed of 25 km/h; vehicles with maximum speed >25km/h
considered as high-speed
2. L5 vehicles defined as 3W with maximum speed exceeding 25 km/h and motor power exceeding 0.25kW
In order to build a holistic view on the challenges in EV financing in India and to identify
financing related pain points across vehicle categories, a comprehensive study was conducted
with inputs from primary and secondary research and 60+ discussions across the ecosystem.
This included discussions with dealers of 2W, 3W and 4W categories across cities and with
financiers across banks, NBFCs and startups. Considering the well-established financing market for ICE vehicles, the EV financing landscape
was benchmarked against ICE across vehicle categories to capture customer pain points and
financier challenges.
To understand challenges faced by customers, 3 key parameters were evaluated:
• Availability of loan options: An evaluation of the number of financing options available
across banks, NBFCs, and captive financiers and whether these financiers have
representatives to educate customers at dealerships was done, to assess the depth of the
EV financing market.
• Ease of availing finance: Factors such as the eligibility criteria, documentation required,
steps involved in the credit underwriting process, and the turn-around time for disbursal
were evaluated to understand if financial institutions have any additional checks for EV
loans vs ICE.
• Loan terms: Terms and conditions set forth for the borrower by the lender were assessed
across 3 key factors - the interest rates charged, maximum Loan-to-Value (LTV) ratios, and
tenure options available.
Financing for EVs in India | 19
From a financier’s perspective, challenges were detailed out to understand the reason for
pain points faced by customers. Potential support required by financiers to offer competitive
products for EV financing vs ICE were also captured. Some of the key questions discussed with
financiers are listed below:
Why are financiers skeptical when lending to EVs?
How do the two inherent risks in auto financing – asset risk and credit risk, differ for EV vs
ICE vehicles?
What are the root causes for additional risks in EV financing across these parameters?
What are some innovative solutions which the financing ecosystem across startups &
legacy players have come up with to solve for these root causes?
What support is required from other players like OEMs, government and other members
of the ecosystem to provide affordable financing to EV customers in India?
Using the above-mentioned approach, a comprehensive view of current challenges was
formed both from the customer and financier perspective. Details of specific challenges
faced in each vehicle category are captured in the next section.
1
2
3
4
5 Key Challenges
in EV Financing
in India
02 2.1 Current financing landscape for EVs
Personal use-case | Financing gaps for EVs identified in 2W but not in 4W
Vehicle financing is driven by two primary underlying risks – asset risk and credit risk.
• Asset risk captures the risk associated with vehicle performance, maintenance, and resale
value.
• Credit risk, on the other hand is driven by creditworthiness of the customer and his capacity
and intent to repay.
The 3 parameters mentioned earlier, which are availability of financing, ease of financing
and loan terms are driven by financier’s confidence across both these risks. The current EV
financing landscape, assessed across these 3 parameters, has been captured below in detail
for all vehicle categories for personal and commercial segments.
2.1.1 Personal
In the personal segment there are 2 vehicle categories, 2Ws and 4Ws. Creditworthiness of
customers in this segment has been observed to be good given the relatively stable income
profile (for e.g., salaried or business owner, net monthly income post-tax, etc.). Hence, the key
risk that financiers consider in this segment is the underlying asset risk.
Exhibit 2.1: Loan terms in personal segment
Low-speed EVHigh speed EVICEEVICE
Banks
NBFCs
1-4%higher interest rates charged vs ICE
1.5-3% higher rates vs ICE typically; difference
can be higher for low-speed vehicles
--
Typically similar interest rates;
20-25 bps lower rates available
under green loans
Interest
Rate
Differential
18-24 24-36
1
4836-120
2
36-84
Tenure
(months)
65-75% 75-80%
3
Up to 95% 80-90% 80-90%LTV
2W4W
1. 60-month tenure option available with Hero Fincorp; 36 months available only for top OEMs 2. Up to 10-year options available
for green loans 3. Select banks offering LTV up to 90% for top OEMs
Source: Expert interviews; Dealer visits; BCG Analysis
Financing for EVs in India | 2322 | Financing for EVs in India In the 2W category, it has been observed that EVs are
generally bought by customers whose credit profile is similar
or marginally better than those of ICE, given the higher price
of EVs compared to ICE. However, due to higher asset risk
associated with EVs, especially for low-speed vehicles, there
are limited options available currently and the loan terms are
unfavorable compared to ICE for both low-speed and high-
speed EVs.
• For low-speed vehicles, there are limited bank & NBFC
options since the vehicles are unregistered. On the other
hand, for high-speed vehicles, NBFCs are the primary
lenders, with number of options available at dealerships
being similar to ICE. Few banks, who are willing to lend, do
so only to select OEMs offering high speed vehicles.
• NBFCs typically have stronger credit requirements for low-
speed vehicles (e.g., salary slips/bank statements for a
longer period; 6 months vs 3 months typically) while there
is no difference between credit checks for high-speed
EVs vs ICE. For high-speed EVs, banks however maintain a
stricter credit assessment vs ICE loans.
• Loan terms offered are starkly unfavorable for both low-
speed and high-speed vehicles.
• Low Speed: Interest rates charged by banks are 1-4%
higher vs ICE, while delta for NBFCs can be even higher.
LTV offered is 20-30% lower while tenor available is also
much lower (18-24 months vs 48 months for ICE).
• High Speed - An interest differential of 1-4% vs ICE
exists for banks while 1.5-3% for NBFCs. These are
coupled with 15-20% lower LTV and lower tenor (24-36
months vs 48 months for ICE).
—Branch manager,
a national bank,
Bangalore
We have never given
out an E2W loan in our
branch, and hence
not aware of green
loans, you need to
speak directly to our
representative at
dealership for more
details
—Multiple EV
dealerships
Financiers prefer to
not be present in EV
dealerships because
of low sales volumes,
they prefer connecting
over call or provide
brochure for reference
From a customer perspective, thus, there are limited financing options for EVs. In addition, the
options available require higher down payment because of low LTV; and higher EMI because of
high interest rates and lower tenors. Hence, affordability is a key concern for most customers in
the personal space as higher financing costs can upset monthly budgets.
From a financier’s perspective, the key risk that drives unfavorable loan terms is the asset risk,
some of the reasons for which are mentioned below:
• There is uncertainty around life of the battery given the nascency of the technology.
• There is presence of multiple small OEMs with limited track record and inadequate service
network. These smaller OEMs assemble imported kits with limited quality checks, raising
concerns over product quality. In addition, the future of the OEMs itself is uncertain.
• The resale/salvage value of the batteries and the products is unknown.
Financiers, hence, design their loan terms to mitigate these risks. To limit their capital at risk,
lower LTVs are offered, while higher interest rate is offered to cater to the concerns around OEM
credibility, product quality & resale value. Uncertainty of battery life is managed by matching
the loan tenures with the warranty offered on the battery, resulting in lower tenors for 2W loans.
When it comes to the personal 4W category, however, financing is usually much easier. EVs are
offered similar options and financing terms compared to ICE.
• Banks, the primary lenders in the personal ICE 4W space, are willing to lend for EV models
and hence number of options are similar to ICE.
• There is no difference in eligibility, documentation, or turnaround time for approval for EV
loans vs ICE.
Financing for EVs in India | 2322 | Financing for EVs in India 1. Rates higher for passenger fleets (ride hailing) vs corporate fleets 2. Typically, 3 years for passenger fleets; 4-5 years for
corporate fleets
Source: Expert interviews; Dealer visits; BCG Analysis
• Loan terms in the personal EV and ICE segment too remain similar. In fact, as a support to
the government’s effort to promote EVs, there are green loans available with some banks
like State Bank of India and Union Bank, which offer a 20-25 bps discount along with higher
tenor of up to 10 years.
Even though availability, ease and loan terms are comparable to ICE, information asymmetry
does exist, with dealers and financier representatives unaware of green loan offerings by
banks.
The comparable financing options for EV and ICE are driven by the fact that from a financier’s
perspective, both credit risk and the asset risk of 4W EVs is comparable to ICE. Given higher
price for EVs, it has been observed that customers usually purchase this vehicle as a second
car for intra-city use. Hence, financiers are typically confident of the customer credit profiles,
lowering the associated credit risk. The asset risk associated is also lower than 2W, since only
large OEMs like Tata, Mahindra, MG, Hyundai etc. have offerings in this segment. This provides
financiers comfort on product quality and serviceability of the product even though the
technology still remains unproven.
2.1.2 Commercial
In the commercial space, across 2W, 3W and 4W vehicle categories, asset is typically financed
basis earnings from the vehicle. Hence, creditworthiness of the customer is dependent on asset
utilization and business viability, thus adding more complexity in assessing the credit risk. Asset
usage is also much higher than personal segment, resulting in additional concerns around the
asset risk as well.
Exhibit 2.2: Loan terms in commercial segment
Low-
speed EV
High-
speed EV
ICEICEICEICEEVEVEV
Banks
NBFCs
1-9% higher vs ICE
12-24
75-80%
2-3% higher vs ICE; difference
more pronounced in case of
low-speed EVs
12-18
65-70%
12-24
75-85%
1-7% higher vs ICE
24-42
70-90%
-
-
--
-
24-60
85-
100+%
2-2.5% higher vs ICE
1-8% higher vs ICE
24-42
70-90%
24-60
85-
100+%
0.5-2%
1
higher vs ICE
36-60
2
60-70%
48-60
80-90%
Interest
Rate
Differential
Tenure
(months)
LTV
2W 3W - PASSENGER 3W - CARGO 4W
Commercial use-case | Financing gaps for EVs identified across all segments
Financing for EVs in India | 2524 | Financing for EVs in India —Leading
Electric 2W OEM
dealership, Delhi
Loans are currently
not being given
out on company
names since subsidy
is only available
on the name of
an individual;
we recommend
companies to buy
multiple vehicles on
the proprietor’s name
Electric 2Ws are mainly used by e-commerce players for food
and parcel delivery. These vehicles are typically purchased
by startups or aggregators rather than individual buyers and
hence assessing creditworthiness of the firm and viability of
business model plays an important role in determining credit
risk. Current landscape for EV financing in this segment is as
follows:
• Overall options are generally limited. Very few NBFCs and
even fewer banks are willing to finance commercial loans
across EVs (high speed or low speed) and ICE
• In terms of eligibility for loans, selective practices have
been observed, for e.g., some NBFCs are unwilling to lend
to proprietary firms or firms with >3 partners. Further, for
loans on an individual rider’s name, NBFCs typically lend
only if the company is an established 3rd party logistics
(3PL) provider or the end-client for the 3PL is a large
e-commerce player.
• Loan terms for EVs are unfavorable vs ICE, especially for
low-speed vehicles
• For low-speed vehicles, interest rates are 2-3% higher
vs ICE, combined with 10-15% lower LTV and lower
tenor (12-18 months vs 12-24 months for ICE).
• Interest rates are 1-9% higher for high-speed vehicles
as well, along with 5-10% lower LTV. Tenor, however,
remains same as ICE since the warranty offered on
battery is similar to the maximum tenor offered for ICE
loans (24 months).
Unlike 2Ws, electric 3Ws are purchased by both driver cum
owners as well as fleet operators in the passenger and
cargo segments. Since the customer profile in this segment
usually belongs to the low-income group for both EV and
ICE, individual creditworthiness plays and important role in
assessing credit risk and eligibility for loans.
• NBFCs have been the primary lenders in ICE and continue
to be the primary lenders in EVs with number of options
available being similar across EV and ICE. Further, there
are also various local, unregistered individual lenders
ready to finance EVs at high interest rates. Banks rarely
lend to 3W EVs across passenger and cargo segments.
• In terms of eligibility, home ownership or a guarantor
is required in the case of cargo EV, while no such
requirement is present in case of ICE or passenger EVs.
Further, while similar documents are required across EV
and ICE, several dealerships request for multiple blank
post-dated cheques as collateral for financing EVs.
• NBFCs typically charge 1-7% higher interest rates for
passenger EVs vs ICE and 1-8% higher rate for cargo EVs
vs ICE, combined with 10-15% lower LTV and lower tenor
(24-42 months vs 24-60 months for ICE). Local individual
lenders are also a source of financing for this segment,
charge a steep 25-27% fixed interest rate p.a. for both ICE
and EVs.
—Leading EV OEM,
Kanpur
Banks are unwilling to
lend to EV segment
due to historically
higher NPA problems,
poor resale value of
damaged battery,
along with an
underdeveloped
secondary market
Financing for EVs in India | 2524 | Financing for EVs in India Electric 4Ws are used primarily in 2 commercial applications, corporate fleets and passenger
services (OLA, Uber, etc.). Loan eligibility and loan terms are determined basis cash flow profiles
of these 2 businesses.
• When it comes to the commercial EV space, all banks & NBFCs lending to 4W ICE customers
are willing to lend for EV models.
• However, banks selectively lend to companies with an existing fleet greater than 50 or
those servicing corporate customers given higher stability of cashflow vs fleets targeted
for passenger services. Businesses falling outside this segment are generally financed by
NBFCs.
• Interest rates are around 0.5%-2% higher for EVs vs ICE. The delta in interest rates is more
pronounced for fleets used for passenger services. LTV offered for commercial EV loans is
10-20% lower while tenor is lower only for passenger fleets (3 years vs 4-5 years for ICE and
corporate EV fleets).
From a customer perspective in the commercial category, lending practices remain selective
along with stricter credit assessment for both EVs and ICE. However, for EVs, customers have to
pay higher down payments because of lower LTVs and higher EMIs due to higher interest rates
and lower tenors. In case of 3Ws, they have to bear an additional recurring capex for battery
replacement every 4-5 years as well. Financing options for this recurring capex are currently
very limited.
—National Bank
We have stopped
financing E3W due
to high NPA problem
that arises due to the
customer segment
that is unable to find
a constant source
of income due to
uncertainty of work.
—SVP EV Business,
large NBFC
We prefer financing
only established
logistics partners
of successful
E-commerce
companies like
Amazon, Flipkart. For
new startups, EV loans
even for high-speed
vehicles, will not be
offered with similar
terms vs ICE
For the financier, both the asset risk and the credit risk is
higher in the commercial segment vs the personal segment.
Asset risk is usually high for the commercial category given
the high utilization requirement, but for EVs it is further
amplified given the following:
• There is uncertainty around life of battery and
performance, especially due to heavy usage.
• In the 2W and 3W category, there are multiple small
OEMs catering to this segment with limited track record
and inadequate service network, making it challenging
for financiers to judge their product quality and vehicle
uptime.
• There is uncertainty around the value that can be
recovered in case of default. This is due to nascent
secondary market for used EVs and batteries.
• Traceability of battery is low, especially for vehicles with
detachable batteries
Financiers also face a higher credit risk in this segment. Given
the higher cost of vehicle and the current loan options, higher
down payment and higher EMI are a certainty for customers
in this category. However, the customer’s ability to service
these financing costs through higher income (due to savings
in fuel and maintenance) is dependent on number of kms
run daily and number of deliveries made each day. Not only
is this higher income variable, but these also exist concerns
on the ability to earn this higher income due to challenges
around operational ecosystem like range, charging
infrastructure, electricity cost, etc.
This adds to the overall risk of the financier and as seen in the
personal segment, financiers compensate for this additional
risk through varying loan terms to limit their exposure.
Financing for EVs in India | 2726 | Financing for EVs in India In the previous section, key challenges observed in availability of financing, ease of financing
and loan terms offered across vehicle categories were discussed in detail. Basis these
observations, below is a summary of some of the key pain points customers currently face
when they look for financing EVs:
Higher initial down payment - Upfront purchase price for EVs is typically higher than
comparable ICE models. In addition to this, LTVs offered by financiers are also 10-30%
lower depending on vehicle category resulting in significantly higher down-payment
requirement.
Higher EMI burden due to shorter loan tenor - One of the key reasons for increased EMI is
shorter tenor offered for EV loans. Tenor is usually anywhere between 6-18 months lower
depending on the vehicle category, with maximum difference seen for low-speed electric
2Ws.
Higher interest rate adding to EMI burden – In addition to shorter tenors, interest rates are
also 1%-7% higher for EVs vs ICE. In the commercial segment, across 2W, 3W (passenger
and cargo), and 4W segments, interest rates are 1-4% higher. Maximum difference,
however, was observed in the 2W space with a 2-7% difference in NBFCs lending for EV vs
ICE
Recurring capex with low financing options – For electric 3Ws, battery replacement
after 4-5 years acts as additional capex burden for the buyer with limited availability of
financing options for the same.
Limited access to funding – Limited financing options are available to customers for
EVs. In addition, there are no dedicated financiers to educate customers and sales
representatives usually have very limited understanding of how the financial product
works.
It is important to note that many of the pain points that are witnessed by customers primarily
stem from challenges faced by lenders. Each of the pain points listed above is linked to one or
more challenges faced by the financiers such as:
Resale market is unestablished – EV is a nascent sector and most products have not
undergone a complete lifecycle yet. As a result, financiers are uncertain of the capital they
will be able to recover from the asset in case of default.
No assurance of product quality – Financiers perceive a high risk of product failure for EVs
especially in the absence of any certification framework guaranteeing performance. In
addition to this there is a long tail of OEMs in the 2W and 3W markets offering EV products
making it exceedingly difficult for financiers to establish credibility of each product.
Battery life not known – The life of the battery remains a key uncertainty for financiers.
Loan tenors are typically matched to the warranty of the battery to minimize risk.
Battery technology unknown – EV batteries are a nascent technology in India and
financiers have limited understanding of the technology to be able to judge what product
specifications, materials, etc. will lead to better performance
Increased customer risk – While the customer profile purchasing EVs remains similar
to ICE, the higher down-payment and higher EMIs lead to an additional customer risk as
it adds to monthly burden when purchased for personal use and there is uncertainty in
higher earnings when purchased for commercial use given the operational challenges
which exist today.
2.2 Key challenges & risks associated with
EV financing
1
2
3
4
5
1
2
3
4
5
Financing for EVs in India | 2726 | Financing for EVs in India Customer Pain Points Financier Challenges
Higher initial down payment
• 10-30% lower LTV for EV vs ICE
depending on vehicle category
Resale market is unestablished
• Difficult for financiers to
underwrite loans
Higher EMI burden due to shorter loan
tenor
• Tenor 6-18 months shorter
compared to ICE
No assurance of product quality
• High risk of product failure, long tail
of OEMs offering EVs
Recurring capex with low
financing options
• Battery replacement cost post 4-5
years (3W)
Battery technology unknown
• Nascent technology, limited
knowledge on performance
Higher interest rate adding to
EMI burden
• Interest rate 1%-7% higher for EV vs
ICE depending on vehicle category
Battery life not known
• Loan tenures typically matched to
battery warranty to minimize risk
Limited access to funding
• Only 1-2 options offered in
dealerships
• Information asymmetry due to
absence of dedicated financiers in
EV dealerships
Increased customer risk
• Customer profile similar to ICE,
however, doubt over same
customers being able to service
higher EMIs
Exhibit 2.3: Customer pain points for EV financing stemming from challenges faced by lenders
2.2.1 Root causes of the challenges faced in EV financing
Overall, challenges faced in EV financing are rooted in 6 major risks currently surrounding EVs.
These include:
Resale value of the battery is unestablished
• The value of battery at the end of life is unknown, as use cases for second life or a
secondary recycling market are yet to-be established.
• Absence of information on usage and state of health (SOH) of battery further
accentuates this problem. This is driven by unclear standards for batteries currently,
for e.g., no clear mandate on BMS requirements, lack of data sharing regulations, etc.
Resale value of the vehicle is unknown
• The value of the vehicle without a battery is unknown as there is limited understanding
of the intrinsic value of the vehicle once the battery is used.
• Secondary market for vehicles has not been established yet nor has understanding
been developed on re-usability of a vehicle with a new battery.
Unproven technology and product performance
• Given the nascency of the sector and the technology, there is significant skepticism
regarding product performance and durability for various applications.
• Absence of historic data on product performance under various loads, temperatures,
or usage conditions further amplifies the above challenge.
• In addition to this, there are a vast number of manufacturers in the electric 2W and
3W segments. Given the lack of certification and enforcement of safety standards,
financiers are uncertain of the credibility of these OEMs since many of them are new to
the market and are only assembling imported EV kits.
Uncertainty in savings and earnings
• Consumers are uncertain on quantum of savings or net higher income they stand
to earn from owning and operating EVs, while higher down payment and EMI is a
certainty.
1
2
3
4
Financing for EVs in India | 2928 | Financing for EVs in India • Realization of higher savings for EVs is contingent on sufficient running and utilization
of the vehicle. Given the operational challenges of range, charging network etc.
savings or higher income potential is currently uncertain.
At present, it has been observed that, given sufficient utilization, there is a 1.2-1.5x
increase in income, which comfortably offsets the 1.5- 1.8x increase in EMI burden.
E.g.: An electric 3W cargo owner can earn almost INR 9,000-11,000 higher income
due to savings in fuel and maintenance against an increase of INR 5,000-7,000 in
EMI.
Additional capex during life of vehicle
• EVs, especially 3Ws, inherently have a different capex structure. The battery needs to
be replaced after 4-5 years of running. Given batteries make up 40-60% of the vehicle
cost, this is a significant investment required during the life of the vehicle.
• This adds to the capex burden of the buyer, especially because financing of this capex
is currently unclear.
Ticket size barriers
• Larger down-payments and higher EMIs preclude a large number of people from
owning EVs personally. Borrowers are hesitant of taking up a higher EMI burden beyond
a certain percentage of income, lest it disturbs the monthly budgets.
• Financiers are also hesitant on giving loan amounts beyond a range to reduce capital
at risk.
The root causes mentioned above are not homogenous across vehicle categories given
different markets are at different stages of development and adoption in India. The
applicability and degree of intensity as a challenge across the vehicle categories varies for
different root causes.
5
6
Low applicability of challenge High applicability of challenge
Key challenges Cargo Personal Personal Commercial Commercial Passenger
2W3W4W
Value of battery and at
end of life unknown, use
cases for second life not
established
Unproven technology,
product performance
& durability for various
applications unclear
Inherently different capex
structure for EV across
product lifetime
Ticket size barriers on loans
and EMI, especially for
borrowers for personal use
Value of vehicle without
battery unknown
Higher down payment
and higher EMI a certainty
against savings or higher
income contingent on
running & usage of EV
The next section of the report focuses on what are the potential levers to tackle these inherent
risks faced across EV categories.
Financing for EVs in India | 2928 | Financing for EVs in India Review of Innovative
Solutions Present
Across the Industry
03 To address the challenges detailed in the previous section, multiple entities across the world
including governments, OEMs, financiers and startups have come up with a variety of solutions.
The solutions evidenced can be categorized into 5 broad levers:
Absorption of additional risk in EV financing by the broader ecosystem to bring down the
cost of borrowing for end customer
Restructuring of financial products to help mitigate challenges such as higher down
payment or higher EMI through innovative models to improve cash flows for end customer
Reducing the risk of battery technology by addressing the uncertainty around battery
performance and developing a secondary market for used batteries
Reducing the risk of product resale by developing secondary market ecosystem for used
EVs
Creation of platforms to enable collaboration between different stakeholders and
channelize capital for EV financing
The 5 levers address different risks surrounding EVs. Each lever targets specific risks out
of those mentioned in the previous section. The first lever, absorption of additional risk by
broader ecosystem, aims to solve for additional risk added to EV loans due to all challenges
surrounding EV ecosystem today. The lever comprises of various funding mechanisms which
3
rd
parties can use to provide low-cost funds for EVs. These funding mechanisms include
grants, guarantees, green bonds & asset backed securities, debt, debt with first loss guarantee,
equity and equity with first loss guarantee. The second to fourth levers, however, solve for
different risks through different levers like creation of a secondary ecosystem for batteries
and vehicles, reducing EMI burden of customers through flexible loan structures, etc. The fifth
lever aims at creation of overarching platforms by the government specific to EV financing,
Exhibit 3.1: 5 thrust areas to drive penetration of EV financing
Enable collaboration between different stakeholders & channelize capital towards EV financing
Ensuring Affordable Financing for EVs in India
Absorption of
additional risk by
broader ecosystem
Restructure
products to
improve cash
flow profile
Reduce risk of
battery technology
Reduce risk
of product
resale
1
2
3
4
5
32 | Financing for EVs in India to facilitate collaboration across stakeholders. These platforms will serve as a think tank to
dissipate information, drive ideation, incubate and scale innovative financial models and
channel capital to EV financing
In the exhibit below, key challenges addressed by each lever are detailed. While the first lever,
covers additional risk added by all the challenges, other levers target to address specific root
causes.
In the subsequent parts of this section, an extensive benchmarking has been done to detail
select examples that have attempted to innovate in the space of EV financing by using one or
more of the above-mentioned levers.
Exhibit 3.2: Root causes targeted by 5 key thrust areas
Value of battery and at
end of life unknown, use
cases for second life not
established
Key challenges
Value of vehicle without
battery unknown
Unproven technology,
product performance
& durability for various
applications unclear
Inherently different
capex structure for EV
across product lifetime
Higher down payment
and higher EMI a
certainty against
savings or higher
income contingent on
running & usage of EV
Ticket size barriers
on loans and EMI,
especially for borrowers
for personal use
Absorption of
additional risk by
broader ecosystem
Restructure
products to improve
cash flow profile
Reduce risk of
battery technology
Reduce risk of
product resale
Enabled by collaboration of stakeholders & channelizing capital
Financing for EVs in India | 33 1. Access to low-cost funding through equity with first loss guarantee for creating an
E-Mobility financing platform
The Green Climate Fund
9
was established within the United Nations Framework Council on
Climate Change (UNFCCC) to assist developing countries in reducing their CO
2
emissions
through investment in green technologies. It is funded by 49 sovereign member states. The
Fund has accredited Macquarie’s asset management arm to propose climate projects to GCF
that would access the Fund’s financial reserves. In this proposal
10
the Macquarie group asked
GCF for $200 million in equity investment, to create an ‘E-mobility platform’ with an objective
to promote EV financing in India through financing the e-mobility space. The project has been
approved in May 2022 and implementation is currently underway.
The platform in the first phase will be funded through equity funding. $200 million will be
invested by GCF, which will act as a first loss guarantee fund, and the remaining $205 million
will be invested by other commercial investors like venture capitals, private equity investors,
FIs., etc. to be identified and onboarded by Macquarie. The platform will operate as an NBFC
and provide both equity (through project financing structures) and debt financing (through
low interest loans along with other modes like leasing) primarily to B2B players (fleet operators,
OEMs, government entities, infrastructure players). The initial target sectors are electric buses,
shared / corporate 4W fleets and electric vehicle charging infrastructure projects. Macquarie
aims to raise another $1.1 billion from local and international debt markets in the second stage
for expansion of the platform to B2C lending to reach a wider audience. The proposed model
for the fund is illustrated below. On the back of this structure the platform aims to attract other
commercial capital that would otherwise be hesitant to invest in this nascent sector.
Exhibit 3.3: Illustrative model for GCF funding for E-Mobility financing platform
EV financing
Debt financing
across eco-system
A
B
Commercial investors (equity)
Commercial lenders (debt)
Sovereign funding
Macquarie
Group
Green Climate
Fund
B2B preliminary focus
E-bus
(govt. entities/other pvt. players)
E4W fleets
(ride hailing, corporates)
B2C to be explored when mature
OEMs
Capacity expansion projects
Financing solutions for captive financing arms
Charging infra players
Swapping stations
Public charging stations
Other players in supply chain (if needed)
Fund utilizationFund structure
A
B
B
B
A
$1100Mn
$200Mn
Stage 2 Debt funding from
other commercial lenders
Stage 1 Equity funding from
other commercial investors
Stage 1 Equity
funding by GCF
$205Mn
E-mobility
platform
RBI
Green Climate Fund, Macquarie Group
Entities
Involved
IndiaGeography
Absorption of additional risk by broader ecosystem
Levers
Addressed
Financing for EVs in India | 3534 | Financing for EVs in India As mentioned in example 1, the Green Climate Fund assists developing countries in reducing
CO
2
emissions by investing in green technologies. In this instance, GCF invested in the Climate
Finance Facility created by DBSA
11
, a development financial institution (DFI) owned by the
Government of South Africa. The Climate Finance Facility Program (CFF) is a division set up
within DBSA to finance local sustainable projects with difficulty in raising funding through pvt.
players due to high risk / low clarity on project. The CFF will prioritize investment opportunities
basis the needs of target countries (South Africa, Lesotho, Namibia, Eswatini) and priorities
identified in the Paris Agreement to meet the United Nations Sustainable Development Goals.
The CFF raised $110 million initially through DBSA and GCF as the primary investors
12
. DBSA
contributed $55 million as a 15-year loan and GCF contributed $55 million through DBSA as
an accredited entity of GCF. In addition to the loans, both organizations also contributed $0.6
million grants each for set-up costs. Convergence, a grant provider for proof-of-concept
stage innovative financing instruments, also supported the program as a design partner and
provided $0.33 million funding.
The CFF will offer an investment of $5 - $10 million using two key financial instruments –
subordinated debt / first-loss guarantee and credit enhancement (e.g., tenor extension) for
projects in 3 sectors solar, water and clean mobility (EV fleet financing). Both these financial
instruments will increase confidence of private investors to co-lend to these projects.
2. Funding by Green Climate Fund, DBSA and Convergence through a mix of debts
and grants with first loss guarantee
Exhibit 3.4: Funding structure for the Climate Finance Facility
Fund Structure
$ 55 Mn
GCF DBSA
Other
commercial
investors; grant
by Convergence
(proof of concept
funder)
Grants +
Subordinate Debt
$ 59 Mn$ 330 K$ 610 K$ 55 Mn
Subordinate debt Grants
$ 610 K
Development
Bank of
Southern Africa
Convergence
Climate Finance
Facility Programme
Local projects
Other Commercial
lenders
Other
Commercial
lenders
Green Climate
Fund
Green Climate Fund, Development Bank of
Southern Africa (DBSA), Convergence
Entities
Involved
South Africa, Lesotho, Namibia, EswatiniGeography
Absorption of additional risk by broader ecosystem
Levers
Addressed
Financing for EVs in India | 3534 | Financing for EVs in India BYD, TF Securities, Didi
Entities
Involved
ChinaGeography
Absorption of additional risk by broader ecosystem,
Restructure products to improve cash flow profile
Levers
Addressed
BYD, one of China’s largest auto manufacturing companies, issued the first EV leasing
backed ABS in the Chinese market in 2018. The RMB 366 million deal was backed by 24 EV
leasing claims related to 17 different lessees
13
. The originator of the bonds was Shenzhen BYD
International Financing Leasing, a subsidiary of BYD and the issuer was Tianfeng Securities, an
investment management company. Most of the lessees were affiliated to Didi, a company that
provides app-based transportation services, including private car-hailing, social ride sharing,
bike sharing and on-demand delivery services. The proceeds of the issuance were allocated to
finance both of their direct-leasing and their sales-and-leaseback operations. Future leasing
revenue generated from the customers acted as security for investors in the green bonds to
receive returns.
This issuance helped BYD raise capital from private market against EV leases. Private investors
traditionally viewed investing in such individual leases as too small and too risky, thus
increasing the cost of capital. Aggregating small leases into a securitized pool of assets helped
create an adequate deal size, reduced risk and improved credit rating thus providing investors
higher confidence for investing at lower cost. It also helped distribute the underlying risk of EV
leases over a larger base of investors.
Since 2018, many EV leasing companies have opted to go for financing through securitizing
their bundles of leasing claims. Given the characteristics of EV leases, they offer relatively
stable and consistent cash flow stream to the ABS originator to cover interest and repayment.
The green bonds market is regulated by CSRC, primary regulator of security industries in China.
Exhibit 3.5: Illustrative model for leased asset backed green bonds
3. Leased asset backed green bonds by BYD and Didi
EV seller
Originator EV Leasing
Company
EV leasing
lessee 1
EV leasing
lessee 2
EV leasing
lessee 3
EV leasing
lessee 4
SPV/ Trust
Regulatory
Body
Investors
EV leasing company
provides leasing services
Future leasing
receivables
ABS
Proceeds
Car Payment
Proceeds Asset sales
EV
Financing for EVs in India | 3736 | Financing for EVs in India 6
Hyundai Card, Hyundai, Kia motors, Societe Generale,
Sustainalytics
Entities
Involved
South KoreaGeography
Absorption of additional risk by broader ecosystem
Levers
Addressed
Hyundai Card’s KRW 350 billion sustainability asset backed securities (ABS) is a pioneering
approach to securitization
14
. Hyundai Card is a credit card company and the captive financing
arm of Hyundai, the parent company of South Korea’s leading EV OEMs Hyundai Motors and
Kia Motors. The company issued sustainability bonds, through an arrangement by Societe
Generale (a global financial institute), to finance purchase of zero emission vehicles of Hyundai
and KIA, particularly by low-middle income segment Hyundai card holders and to support
them by providing them access to financial services. The ABS issuance combined both green
and social criteria and was pursuant to Hyundai Card’s Sustainability Financing Framework.
To maintain transparency, Hyundai will also report on the use of proceeds from this ABS in an
annual sustainability report from the investor.
Societe Generale acted as the Sole Lender and Sole Sustainability Coordinator on the
transaction, which was also the bank’s first sustainability ABS globally. Sustainalytics, a leading
ESG research, ratings and data firm, provided an independent opinion on alignment of Hyundai
Card’s Sustainability Financing Framework with Sustainability Bond Guidelines 2021, Green
Bond Principles 2021, Social Bond Principles 2021, Green Loan Principles 2021, and Social Loan
Principles 2021.
Loans to middle income segments are generally considered risky and hence the cost of
raising capital for such loans is generally higher. By combining EV loans and receivables from
financial services provided to card holders, the overall risk of default and other credit risks were
minimized to a fraction of the underlying assets. This reduced the cost of capital, distributed
risk of loans and provided Hyundai Card access to funding which could be used to issue more
loans to help grow the EV market.
Exhibit 3.6: ABS mechanism for Hyundai Card
4. Green Bonds for low-cost financing
Financial
services provider
Institutional
investors
Originator
(Captive Financier)
EV OEMs
4
5
1
2
EV Customers
ESG Rating
agency
Verification of adherence
to ESG guidelines
1
2
3
5
6
Debt Repayment
Lease/
Low-cost finance
Disbursal transferred
4Capital raised through
green bond sales
Coupon payment as per schedule
Publication of reports on fund
usage
Transactions enabled by an FI
3
Financing for EVs in India | 3736 | Financing for EVs in India Prest Loans, Eqaro Guarantees, Terra Motors
Entities
Involved
IndiaGeography
Absorption of additional risk by broader ecosystem
Levers
Addressed
5. Guarantor model to cover risk and boost credit by Eqaro Guarantees
Prest Loans, a Delhi-based digital lending company forayed into financing EVs last year
through a guarantor model. The company has collaborated with Terra Motors, a leading
Japanese EV manufacturer, and Mumbai-based Eqaro Guarantees
15
.
Prest Loans will finance approximately 70-80% of the value of EVs. For credit assessment,
they have a risk-based scoring mechanism called ‘Prest Score’ to analyze borrowers using
non-financial metrics. Under the three-way agreement, Eqaro Guarantees extends credit
default guarantees underwriting the customer risk and boosting confidence for Prest Loans
and enabling them to offer better loan terms. The loans are currently offered for vehicles
produced by Terra Motors including E-rickshaws, E-carts, loaders, delivery vehicles, etc. to both
individuals as well as corporate buyers. Terra Motors offers product quality assurance and
buyback guarantee for repossessed vehicles in case of default under the agreement.
By providing a guarantee in case of credit default and a buy-back agreement with the OEM,
Eqaro is willing to share the underlying asset risk and the credit risk of the customer with Prest
Loans. These measures help distribute the underlying risks for Prest loans and gives them
comfort to provide better loan terms to customers. In addition, presence of guarantors and
counter guarantors helps improve the credit rating of Prest loans, thus reducing their cost of
capital and increasing their ability to raise debt.
Exhibit 3.7: Guarantor model employed by Prest Loans
1
1
2
2
3
3
4
4
Customers
Financier
Internal credit scoring to define loan terms; better
terms due to guarantor confidence
Payment in case of customer default
Funds transferred for eligible customerCredit underwriting premium
GuarantorsCounter Guarantors
Guarantor backed by
global counter guarantors
OEM
Vehicle repossessed
in case of default
Buy-back option for
repossessed vehicles
Financing for EVs in India | 3938 | Financing for EVs in India CEFC Australia, Multiple retail banking institutions,
for e.g., Bank of Queensland, ANZ, Firstmac, etc.
Entities
Involved
AustraliaGeography
Absorption of additional risk by broader ecosystem,
Restructure products to improve cash flow profile
Levers
Addressed
6. Interest subvention through an on-lending asset finance program by CEFC
The Clean Energy Finance Corporation (CEFC) is a Green Bank, wholly owned by the Australian
Government, created in 2012 facilitate financing the clean energy sector by investing AUD
10 Bn on behalf of the Australian government. Through its asset finance program, CEFC has
formed multiple partnerships with retail banks to provide financing for EV projects (including
fleet procurement and charging infrastructure). The partnerships are structured through an
on-lending model where CEFC provides capital to banks who disburse these funds to the
customers
16
. CEFC provides the capital as wholesale financing to the banks and is not exposed
to any of the credit risk from the customer or asset. Hence, the funding is provided at a lower
cost to the banks who in turn use these funds to provide benefits like 70 bps subvention vs ICE
vehicle financing, longer tenures, etc.
A total of AUD 800 Mn has been disbursed through CEFC’s aggregation of partnerships till 2019-
20 and >5,000 low and zero emission vehicles have been financed. An average investment
of AUD 73,000 has been done per project with some project receiving loans as low as AUD
2,000. CEFC has been able to achieve a return of 1% over the Australian Government Bond rate
through this program (target return – 3-4% over Australian government Bond rate)
17
. CEFC also
works with banks to securitize debt, pool granular assets, and attract capital from large scale
investors, e.g., issuance of certified green bonds.
• Attractive lower cost financing – 70 bps
discount on standard finance rate, longer
tenure (varies by bank)
• Application follows bank’s credit approval
process
• Loan underwriting, risk of borrower rests
with bank
• CEFC itself is not involved in loan
administration.
CEFC
1
12
2
Commercial Banks
1
Borrowers
• Concessional debt provided to
commercial bank for lending
• Direct risk with bank and not with
underlying borrowers
Exhibit 3.8: Illustrative model for CEFC asset finance program
Financing for EVs in India | 3938 | Financing for EVs in India 3
rd
party logistics providers, for e.g., Shadowfax,
Zyngo
Entities
Involved
IndiaGeography
Absorption of additional risk by broader ecosystem
Levers
Addressed
7. Guarantor model employed by demand aggregators and fleet owners
Customers in the 3W segment who purchase vehicles for commercial applications usually
belong to the low-income segment with limited or no credit history and are hence seen as
high-risk customers by financiers. In addition, the asset risk of EVs in terms of life and battery
performance and the need for high utilization to offset higher EMI burden, further exacerbates
the challenges to offer affordable financing solutions.
3
rd
party logistics providers like Shadowfax, Zyngo, etc. are employing a guarantor model where
the fleet aggregators act as a partial credit guarantor for full time driver partners, thus sharing
default risk with the financier. They in turn offer fixed monthly payments / utilization guarantees
to their driver partners, ensuring drivers can service their EMIs. These fleet operators have a
better understanding of the technology, have better visibility on utilization levels possible with
E-commerce / industry partners and hence are in better position to assess and guarantee
individual driver partners.
Below are some salient features of the model:
Credit Assessment and loan terms: Fleet aggregators usually tie up with financiers to provide
loans to their drivers. The financier conducts credit assessment of the aggregator’s business
model, instead of the driver’s credit history and provides loans basis aggregator’s balance
sheet. This helps financiers reduce customer risk and provide loans at attractive terms.
Loan disbursement and repayment: While the loan is disbursed on the driver’s name; the
EMI is paid to the financier by the fleet aggregator, who deducts the EMI from the driver’s
monthly salary. The driver’s salary could be structured on pay-per-order or as a fixed monthly
income, depending on the business model, and he receives a net salary post EMI. Some fleet
aggregators also cover the down payment required to purchase the vehicle. In case the
driver discontinues employment with the fleet aggregator during the loan tenure, the fleet
aggregator usually re-possesses the vehicle and finds another driver for the vehicle.
Other expenses: It has been observed that at times, fleet owners have tie-ups with battery
swapping or charging networks and AMCs with OEMs, thus helping drivers further in achieving
TCO parity and reducing risk of defaults.
As an extension to the above model, large fleet owners are also exploring setting up an asset
company for EVs, wherein the vehicles are purchased in bulk and sold or subleased to drivers.
40 | Financing for EVs in India Sun Mobility
Entities
Involved
IndiaGeography
Restructure products to improve cash flow profile
Levers
Addressed
The battery swapping stations are located primarily in petrol pumps through partnership
with petrol chains for wider network footprint. The company also offers additional services like
software app for customers to track battery health, enable digital payments and GPS system
ensuring traceability of battery for financier
18
. The business model is enabled by a host of
partnerships:
• OEMs – Piaggio, Omega Seiki, Hero Electric
• Fleet Owners – Zyngo, Uber, Zypp Electric
• Real estate provider – Indian Oil Corporation Limited
• Energy provider – Tata Power
• Software provider – Microsoft
• Other strategic partners – Bosch, Vitol
8. Sun Mobility: Segregation of battery and vehicle financing
Sun Mobility, an energy infrastructure and services provider, has recently introduced the
concept of Energy-as-a-service provider by launching battery swapping operations for E2W,
E3W, and E-buses. They enable OEMs to sell swappable battery models so customers can
purchase vehicles without batteries, while they provide batteries and charging infrastructure
bundled as a pay per use model. Customers are billed per swap of battery at the battery
swapping station. 3 battery swaps cost ~Rs. 160 with approximate travel around 120 km.
The model has many benefits in terms of financing:
• Reducing the upfront cost by ~25% (approximately Rs. 75-80k) and down payment by Rs.
15-20k
• As loan amount reduces, EMI also reduced by ~20% with total monthly costs (including fuel,
maintenance, and EMI) lower by 10% vs fixed battery EVs
Exhibit 3.9: Sun Mobility business model
OEM
FinancierUsers
Swap used batteries for charged ones at swapping stations
Provide battery for vehicle
OEM & swapping tie-up
Pay for vehicle
w/o battery
Provide loan
for vehicle w/o
battery
EMI for vehicle w/o battery
Sells vehicle (w/o battery)
Financing for EVs in India | 41 Exhibit 3.10: Illustrative business model for Three Wheels United
9. Three Wheels United: Funding innovative models through focused fund
Three Wheels United is a microfinance institute in India that offers up to 100% debt financing
for auto-rickshaws, without any collateral, at similar interest rates, but longer tenures (48
months as compared to 24-36 months) and no charge for late repayments for a set period.
This reduces down payment by 25-30% and EMI burden by 15-20%. They are able to offer
these terms by harnessing technology and using innovative credit assessment and collection
mechanism. From a business model perspective, the company channels low-cost funding
through a mix of debt, equity, and concessional capital (in the form of partial credit guarantee
or impact capital) to disburse 3W loans. The company has gone through multiple rounds
of funding securing both equity investments from VCs and foreign and local debt. Securing
impact capital has been a key differentiator for the company to reduce its overall cost of
borrowing
19
.
Some of the key features of the business model are as follows:
• Innovative loan appraisal: The driver is introduced to the instrument via other community
members. To be eligible for financing, the driver is first asked to save a certain amount of
money in a pre-decided number of days. If the driver can save the requisite amount in that
period, he is then assessed basis parameters like number of rooms in the house, earning
members, etc to judge repayment capacity. The credit assessment process goes beyond
traditional factors like income statements, credit score, etc
20
.
• Community based model for collections: Drivers or borrowers are put in teams which
compete against each other. The teams have to ensure all members service their
complete monthly EMI on time each month to earn points. Cash discounts are also offered
as incentive for repayment
20
. Adding the element of social recognition in the collection
mechanism has allowed the company to keep its NPAs at less than 1% currently.
• App based collection to realize operational efficiencies: Through online payments, the
company is able to reduce its collection costs. It allows the company to keep a track of the
existing loan terms / features, the payment due, etc. It also optimizes workflow for the field
collection agents, helping them prioritize drivers who require more attention.
OEM
partners
Debt
NBFC
Market
maker
Auto-
rickshaw
Drivers
Equity
Other
Capital Sources
Foreign (through SPV)
Local
Debt
Non-Profit arm to
identify targets
Holding company
Direct investment
Guarantor Impact
Impact
capital
Equity
Loan
Repayment
Loan portfolio guaraantee
Commission
per vehicle
Driver
pipeline
Three Wheels United, Debt, Equity &
Impact Investors
Entities
Involved
IndiaGeography
Absorption of additional risk by broader ecosystem,
Restructure products to improve cash flow profile
Levers
Addressed
Financing for EVs in India | 4342 | Financing for EVs in India Vidyut Tech, Lohum, NBFC investors
Entities
Involved
IndiaGeography
Absorption of additional risk by broader ecosystem,
Restructure products to improve cash flow profile,
Reduce risk of battery technology
Levers
Addressed
Exhibit 3.11: Illustrative model for Vidyut Tech (1)
ii. Split loans for battery and EV: Loans for battery and vehicle without the battery are sold as
a bundled product. While the vehicle is financed through loans, the battery is leased out
to the customer. The battery lease is structured to receive payments on a per km basis
from the customer. Details on usage of the battery are received from the telematics data
from BMS, for which VidyutTech has tied up with OEMs for access to this information. The
decoupling of battery and vehicle reduces both upfront down payment and EMI burden
for customers making economics of owning EV similar to that of ICE. Vidyut Tech is also
exploring the options of securitizing the proceeds from battery leasing, helping them
manage the cash flows better and scale the model.
10. Vidyut Tech: Decoupled financing for battery and vehicle along with interest free
2
nd
loan with tie-ups for battery recycling
Vidyut Tech is a Fintech offering end-to-end solutions for wEV purchase, financing and resale
with 2 unique product options - interest free loans and split loans for battery & EV
21
.
i. Interest-free loans on 2
nd
battery: Battery replacement after 4-5 years is a major capex for
3W drivers. Through back-to-back tie ups with NBFCs, they have created a first loss default
guarantee structure that provides comfort to NBFCs and allows VidyutTech to extend
unique financial products. The loan offering includes an interest-free loan on 2
nd
battery
which is included with the initial purchase of vehicle. The company also re-possesses the
old battery of the vehicle which it then sells to Lohum, a battery recycling agency with
whom VidyuTech has a tie-up. Lohum provides a fixed price for used batteries to them
assuring a floor price of battery.
NBFC
Funding
Loss
guarantee
Payment for
old battery
Old Battery
Interest-free loan
EMI
New Vehicle
Old Vehicle
Loan
Old Battery
Repayment
Exhibit 3.12: Illustrative model for Vidyut Tech (2)
NBFC
Telematics
Data
Vehicle w/o battery
EMI for vehicle
w/o battery
Customer
OEM
Funding
Loss
guarantee
Pay-per-km Model
Financing for EVs in India | 4342 | Financing for EVs in India 12. Battery certification & traceability of battery health through Unique ID
Spring Free EV
Entities
Involved
USAGeography
Restructure products to improve cash flow profile
Levers
Addressed
Global Battery Alliance, Underwriters Laboratory, IEC
Entities
Involved
EuropeGeography
Reduce risk of battery technology
Levers
Addressed
11. Pay per mile subscription model by Spring Free EV
Spring Free EV is a financial technology company with the objective of driving adoption of EVs
through innovative financing solutions. The company provides solutions for both individual
drivers targeting commercial applications and fleet owners. The aim for both these products is
to remove the upfront cost barrier for EV adoption and transform the high capex into a usage
based opex model.
For ridesharing and delivery drivers, the company has launched a financial product called Free
EV
36
which offers EVs at zero down payment and no EMIs. Customers are only charged on a
pay-per-mile basis with charges starting as low as 30 cents per mile
To enable this model, Spring Free EV has partnered with OEMs and offers this product on
the 2022 Nissan Leaf S and 2019 Hyundai Kona EVs. Customers are required to submit a
refundable of security deposit of $1,000 and a registration fee of $250. Subscription is offered
for a maximum duration of 3 years, with a minimum commitment of 1,000 miles per month.
If the driver drives under the minimum commitment, they are still charged for the minimum
mileage specified in the agreement. For EV fleets the company offers another pay-per-mile
financing product, EV InstaFleet
36
. The company charges a base monthly fee plus a fee per mile
driven from fleet owners. Fleet owners are required to keep the vehicle for at least a year and a
minimum number of miles.
i. Battery certification
Battery certification procedures and mandates in Europe are made at a country specific level.
For example, in Germany, Underwriters Laboratory (UL) accredited by KBA, Transport Ministry
of Germany, to certify battery safety for OEMs
22
. Battery safety standards are mandated basis
ISO, UL, ECE standards in Germany. The R136 standard refers to testing for safety requirements
across multiple mechanical, electrical, and thermal metrics. Testing is done across multiple
metrics - battery robustness for vibration, thermal shock and cycling, mechanical shock and
integrity, fire resistance, external short-circuit protection, overcharge and over discharge
protection, over temperature protection. UL also conducts performs & ageing tests for EV
batteries under the IEC 62660-1:2018 standard
23
. The tests include the following:
Financing for EVs in India | 4544 | Financing for EVs in India • Ageing testing: Storage test (charge retention and storage life), cycle life, no-load SOC,
SOC loss at storage
• Performance testing: energy density and capacity at different temperatures and discharge
rates, power density and internal resistance, energy efficiency, cranking power at low and
high temperatures, etc.
ii. Battery recycling and second life use case
The EU Proposal for Waste Battery Regulation 2020
24
lays down regulations on second life of
batteries, recycled content requirement and target recovery rates for raw materials.
• For second life of batteries, the regulation proposes that repurposed or remanufactured
batteries need to comply with EU Battery Directive 2006 excluding requirements on carbon
footprint, recycled content requirements, performance and durability, supply chain due
diligence if repurposed/ remanufactured battery was placed for 1st Life onto market prior
to effectiveness of the respective regulations. The regulation views 2nd life applications
neutrally and puts no obligations on these batteries.
• In terms of recycled content requirement, targets proposed for Cobalt are, 12% recycled
content needed by 2030 and 20% by 2035; for Nickel, the respective targets are 4% and 12%
while for Lithium they are 4% and 10%. OEMs will need to document, and report recycled
content of these materials starting 2027.
• Targets on recovery rates and recycling efficiency are also proposed which will apply to all
waste batteries. Recycling efficiency targets are set at 65% of average battery weight from
2025 and 70% of average battery weight from 2030. The target recovery rates on materials
and effective dates are detailed below:
Date
1/2026
1/2030
CobaltLithiumNickelCopper
1/202690%
1/202695%
1/202635%
1/202670%
1/202690%
1/202695%
1/202690%
1/202695%
iii. Battery Passport initiative in Europe
The Global Battery Alliance (GBA) is public-private collaboration platform founded at the World
Economic Forum to help establish a sustainable battery value chain by 2030. The overarching
goal of the alliance is to establish a circular battery value chain and develop mechanisms
necessary for the same.
Battery passport
25
is one initiative under the GBA which proposes a unique ID for each
battery. The unique ID will act as a digital signature containing data about ESG performance,
manufacturing history and usage pattern. The battery passport platform will allow
stakeholders to share information about battery and its history to trace battery health and
end-use applicability. Its key features include recommendations to users based on up-to-
date information to extend first-life of battery, project the future life of the battery along with
continuous battery quality assessment, and incorporate patented intrusion detection devices
to hinder people from manipulating data.
Financing for EVs in India | 4544 | Financing for EVs in India The proposal for Waste Battery Regulations in 2020
24
includes making Battery Passport or
similar unique identifier essential for all EV batteries. The Passport will be a centralized data
system open to 3rd party use set up by European Commission. The Economic Operator
placing batteries on market (e.g., OEMs) responsible for accuracy, completeness and up-
to-date data included in the Passport and updating status in case of repair or re-purposing.
The proposal also includes a directive on mandating BMS for all EV batteries with data on
relevant parameters for determining state of health and expected lifetime. Access to data to
be provided to person who purchased battery and any third party acting on their behalf to
assess residual value, capability for future use, facilitate reuse, repurpose or remanufacturing
of battery.
These initiatives (i-iii) in conjunction are aimed at reducing uncertainty surrounding EV
battery technology and facilitating creation of a circular economy for batteries in Europe.
Battery certification is aimed at creating a framework for ensuring safety and guaranteeing
a minimum level of performance while recycling and second life use cases help in estimating
the salvage value of batteries. Both these initiatives are enabled by the Battery Passport that
facilitates data sharing to track battery health and ensures traceability.
Exhibit 3.13: Battery passport network providing end-to-end information on the battery
1. Cluster of cells = Module, Cluster of Modules = Pack; 2. Battery Value Guarantee = Mechanism for a battery within EV to have
a guaranteed end-of-life value, ensuring minimum depreciated value for the vehicle
Source: EU Policy, GFI, Academic Research
Battery Passport
Battery related data: Structure,
materials, UID, Mfg Info, Origin, et
Value-chain related data: Value
chain actor (name, function,
location), Material, sustainability
& circularity properties, etc.
Battery Health Certificate
Inputs: Data at cell/module/
pack level1
Outputs: State of Health, State
of Charge, Depth of Discharge,
Remaining Useful life for end-of-
first life actors & information for
second-life of battery, etc.
Battery Value Guarantee
2
Circularity performance:
Resource efficiency (of raw
materials), raw material losses,
share of secondary material, etc.
Product design: Battery module,
product designs, disassembly
instructions, etc.
Government
Government
Government
Certification Agencies
Data Providers
OEMs
General Public
Stakeholders
Data Providers
OEMs
Battery Manufacturers
Suppliers
Testing Agencies
General Public
Battery
Information
Diagnostics &
Performance
Battery Passport
Value Chain
Information
Circularity &
Sustainability
Battery Value
Guarantee
Recyclers/
2
nd
Life
Data Providers
Battery
Manufacturers
Product Design
Circularity
Properties
Maintenance
Record
Performance
Delivered
Battery Health
Certificate
Financing for EVs in India | 4746 | Financing for EVs in India Reduce risk of product resale
Levers
Addressed
In the Europe and USA, to kickstart creation of a secondary market for used EVs governments
are offering subsidies in the form of one-time grants or rebates. Used EVs offer an affordable
way for customers to shift to EVs and hence governments are providing incentives to stimulate
demand for used EVs along with subsidies on new vehicles. Select examples of government
programs
26,27
are presented in the exhibit below:
Governments across Europe, USA
Entities
Involved
Europe, USAGeography
13. CREATION OF SECONDARY MARKET FOR USED EV s
Exhibit 3.14: Used EV subsidy in Europe and USA
Select OEMs have also taken the initiative to build a secondary market for EVs. One such
example is Renault
28
. In 2018, Renault launched a long-term leasing arrangement for second-
hand Renault ZOE in France with rates starting at 59 euros per month and additional 29 euros
for battery rental. The cost of installing charging stations at the buyer’s home (up to €500)
was also covered by Renault Occasions. To build confidence in the used EV market, all cars
had to meet Renault Occasions Garantie Z.E. certification label, passing a 76-point inspection.
Additionally, warranty was provided up to 36 months including a free inspection after 1,000 km,
along with a road test. Renault also posted a suggested retail price for other dealers selling
second-hand EVs - €8,900 for a 3-year-old ZOE Life, 22 kWh battery and <30,000 km on the
odometer.
CountrySubsidy for used EVs
In US, rebates are given by state governments. In California, depending on area of
residence, rebates between $1,500-$4,000 available for used EVs. For e.g., LADWP offers
up to $1,500 for 2-8 years old EVs
Subsidy of €2,000 available for used BEVs with an original price between € 12,000 -
€45,000 and at least 120 km range
Subsidy of €6,000 for BEV, €4,500 for PHEV, not older than 1 year and driven less than
15,000 km. Minimum holding period for the car is 6 months
€1,000 one-time grant for private individuals for BEVs and fuel cell electric vehicles, at
least 2 years old. The car must be kept for minimum 2 years by new owner
Financing for EVs in India | 4746 | Financing for EVs in India The Green Finance Institute
29
in the UK was established in 2019 as a direct response to a
key policy recommendation made by the industry-led Green Finance Taskforce to the UK
Government in March 2018. It is an independent and commercially focused organisation
backed by government and led by bankers, focused on public and private sector collaboration
in green finance. The institute is envisaged to design, develop, and launch portfolios of
financial solutions that accelerate sector specific transition to low-carbon future. The coalitions
comprise practitioners from the industry, finance, government, academia, and the non-
profit sectors who understand the market failures and investment gaps and can co-design
innovative financial products.
Green Finance Institute undertakes projects around systematic transitions that need to be
financed in the economy, such as energy efficient retrofitting of buildings and decarbonization
of road transport. It also undertakes raising of capital to help fund initiatives. One example
of a project undertaken by Green Finance Institute is the Local Climate Bond campaign
30
.
The campaign was launched in coalition with Abundance Investment, an online investment
platform. LCBs are debt instruments issued by Local Authorities to raise money directly from the
public. They are regulated investment products launched by Councils to access cost-effective
funding for specific de-carbonization projects, offering local people an opportunity to invest in
their area in a way similar to crowdfunding and to make a return from doing so. Green Finance
Institute helped in raising awareness and support participating councils through the process of
releasing their Local Climate Bonds.
Within decarbonization of road transport the key focus areas for the institute are
Purchase and leasing - Co-design new and enhance existing financing solutions to
encourage increased EV adoption.
Charging infrastructure - Link public and private finance to unblock barriers to the creation
of a strategic vehicle charging network
Battery Technology - Unlock the required capital across the battery technology ecosystem
at scale and speed.
The institute has undertaken multiple projects in this space such as EV loan securitization,
bundled finance solutions, battery health certificate, battery value guarantee to name a few.
Further, it also regularly publishes thought leadership reports in collaboration with various
academias to highlight the various gaps in the investment sector and potential solutions for
the same.
As detailed above, there are various stakeholders in the EV ecosystem that are making
individual efforts to solve for challenges faced for EV financing today. In the next section, based
on learnings from best practices observed across the globe, a detailed set of initiatives is
proposed under the 5 key thrust areas that will help further the penetration of EV financing in
India.
14. GREEN FINANCE INSTITUTE: PLATFORM FOR PUBLIC-PRIVATE COLLABORATION AND
MOBILIZATION OF CAPITAL FOR SUSTAINABLE TECHNOLOGIES
Green Finance Institute
Entities
Involved
UKGeography
Enable collaboration between different stakeholders
and channelize capital towards EV financing
Levers
Addressed
1
2
3
48 | Financing for EVs in India Exhibit 3.15: Thought leadership by Green Finance Institute
Financing for EVs in India | 49 Potential solutions
to drive affordable
financing for EV
04 Based on exhaustive analysis of the challenges faced in financing EVs, and understanding
some of the levers used to overcome these challenges with innovative solutions, we have
identified 5 key thrust areas to target. These 5 thrust areas have been further detailed into 10
action items (or initiatives) with each item covering the scope and the activity required for
the initiative. The key stakeholders critical for success of each of the initiatives, have also been
identified.
I. Context
Currently, EV financing faces multiple challenges across vehicle categories given the nascency
of the electric mobility ecosystem in India. Further, due to concerns around technology and
long-term economics (including resale value), FIs perceive that financing an EV vehicle has
additional risks over ICE. Thus, to limit their exposure, FIs pass this risk to end-consumers which
ultimately results in higher cost of borrowing. This challenge could be potentially addressed by
structuring mechanisms that can enable the larger ecosystem to absorb some of the inherent
risk and/or provide FIs access to lower cost capital (below their usual rate of borrowing)
specifically for lending in the EV sector. Some mechanisms through which this can be done
have been proposed below.
Thrust Area 1 - Enable the broader ecosystem to absorb the additional risk in EV
financing to bring down the cost of borrowing for end customers
Exhibit 4.1: 10-point action agenda to ensure affordable financing for EVs in India
Ensuring affordable financing for EVs
Enable collaboration between different stakeholders & channelize capital towards EV financing
Absorption of additional
risk by broader
ecosystem
Set up low-cost funds
with risk sharing
mechanisms / FLDG
Promote green bonds
and asset-backed
securities
Include commercial EV
loans for driver owners
under priority sector
lending with loan
limits by segment
Enable de-coupling
of battery and vehicle
to facilitate leasing /
swapping / pay per use
models
Establish battery
safety standards
& performance
certification framework
Promote secondary
market for used EVs
through OEM buyback
programs, purchase
subsidies, etc.
Develop framework for
circular economy for
battery
Support scaling of
business models like
fleet ownership, reverse
leasing, flex loans etc.
Reduce EMI through
interest subvention,
income tax exemption
beyond FY23 & re-
introduction of
accelerated depreciation
Restructure products
to improve cash flow
profile
Reduce risk of battery
technology
Reduce risk of product
resale
Build industry-wide platform to ideate, promote and fund innovative financing models & raise technology awareness. 10
1479
8
2
5
3
6
52 | Financing for EVs in India II. Proposed initiatives (Action 1 to 3)
#1 – Establish low-cost funds with risk sharing mechanisms / first loss default
guarantee
Access to low-cost capital can be facilitated through creation of a risk-sharing facility like a
loan loss reserve to cover general default or loss due to specific risks, for e.g., product failure.
The reserve can be created at the behest of the government and structured to include multiple
stakeholders across the EV ecosystem.
There are multiple ways such a risk sharing mechanism can be structured with multiple
options for providing funding. These include grants, risk underwriting, debt, equity, debt and
equity with first loss guarantee, and fund innovative start-ups through a funding platform.
Some possible structures basis example seen in the last chapter could be:
i. Financing through equity with first loss default guarantee (FLDG)
• MDBs/funds/private partners can come together as equity participants either directly or
through pooled SPV to create a platform incubated by a Government entity (eg. IREDA,
NABARD etc) or an SPV, which will in turn lend out for EV purchases.
• Post proof of concept, this SPV could raise additional capital from lenders (national/
international banks) to create a large pool of capital to lend out to market.
• The MDBs can become the first loss guarantors with a particular threshold of their equity
contribution earmarked for NPAs, while the lenders earn a pre-agreed rate of return.
ii. Financing through a debt structure consisting of subordinate debt and credit enhancing
terms such as longer tenures
• MDBs / government backed funds / FIs can come together to form a platform of
subordinate lenders with higher returns, who can absorb NPAs (up to a particular
threshold)
• This mechanism can help mobilize and scale financing products initially.
• Post scale, additional capital can be raised from local/ international banks, who become
senior lenders with assured lower returns.
In addition to the above examples a mix of grants with equity and debt can also be used
to create a risk sharing mechanism. An FI or the government can also take up the role of a
guarantor for some NBFCs with innovative financing solutions, thereby improving the credit
rating of the NBFC and helping raise more capital at lower cost.
An illustrative mechanism of how the structuring of low-cost funding with risk-sharing
mechanisms can work is shown in Exhibit 4.2. A funding platform can be incubated by a
government entity or national bank to provide low-cost funding with risk-sharing facility to
banks and NBFCs lending in the EV space. The platform can be funded through a mix of equity,
debt and grant through different types of investors like multilaterals, bilaterals, green funds,
impact investment funds and philanthropic funds. The risk-sharing facility on the other hand
can be funded through equity, grants and/or subordinate debt from these investors.
Stakeholders involved: Financial Institutions Government OEMs
Financing for EVs in India | 53 The government, along with FIs and MDBs can explore some of these structures to mobilize
significant amount of nascent institutional capital to accelerate financing for EVs in India. To be
able to achieve this, NITI Aayog can assist in defining key objectives of the fund, identifying the
funding institutes, government agencies and lending partners and providing inputs on funding
structure an governance mechanisms.
#2 - Promote green bonds and asset-backed securities
Green bonds have emerged as an innovative financial instrument in the last decade. In
May 2017, India issued the Disclosure Requirements for Issuance and Listing of Green Debt
Securities31 drafted by the Securities Exchange Board of India (SEBI). The regulation includes
a list of broad project and asset categories for eligible use of proceeds. However, additional
government support is required for proliferation of green bonds as a financing instrument in
India.
Taxonomy and definitions: Regulatory support is required to create a coherent and
comprehensive taxonomy and definitions for green bonds. This is essential to remove
inconsistencies in the interpretation of what constitutes a green bond and prevent
greenwashing of projects. Further, the establishment of proper standards can enhance the
comparability of bonds. Based on taxonomies defined internationally like the EU Taxonomy and
EU Green Bond Standards (EUGBS), Climate Bond Standards (CBS) issued by the Climate Bond
Initiative, a holistic taxonomy needs to be created for India covering the following:
i. Complete list of sectors under each category specified by SEBI
ii. Detailed technical criteria for eligibility for classification of project as ‘green’ for each sector
listed above. The criteria need to be set specific to Indian context, considering the maturity
of the sector in the country.
Exhibit 4.2: Proposed mechanism for risk-sharing facility
Stakeholders involved: Financial Institutions Government OEMs
Low interest and/
or longer tenure
loans
Technical assistance
on facility
design, funding
mechanism, etc.
Identification of entities
& setting contract terms
Multilateral
Development
Banks
Bilateral
Development
Banks
Green Funds
Impact
Investment
Funds
Philanthropic
Funds
Loss reserve /
first loss
guarantee
Low-cost
funding with loss
reserve
Potential role
for government
Optional role
in structure
Provide debt capital once
platform is up & running
Capital
starting at
proof-of-
concept
stage
Credit
default
guarantee
Commercial
lenders
Types of organizations
involved
Risk-sharing
facility
NITI AayogBorrower
Platform
(Incubated by govt.
entity / national bank)
Sources of
capital for
risk sharing
Equity
(directly/SPV)
Subordinate
debt
Grants
Guarantor
Banks/
NBFCs
Financing for EVs in India | 5554 | Financing for EVs in India iii. Definition of overarching environmental objectives. For a project to be eligible, it should
contribute to one or more of these objectives and do no significant harm to any other
objective. For e.g., The EU Taxonomy lays out 6 objectives which include climate change
mitigation, climate change adaptation, the sustainable use and protection of water and
marine resources, transition to a circular economy, pollution prevention and control and
protection & restoration of biodiversity and ecosystem.
Governance: A governance mechanism also needs to be set up to conduct stringent periodic
assessments to ensure ‘green bonds’ criteria is being fulfilled, thereby improving legitimacy.
While current measures set norms for disclosing allocation of proceeds from green bonds
along with assessing environmental impact of the projects, it is essential to ensure external
review of the projects, pre-issuance and post-issuance, to provide added credence to the
instruments being traded. In the pre-issuance stage, all prospective issues must be verified
by a 3rd party to ascertain whether the bonds meet required green credentials. Post-issuance
as well, projects undertaken by the issuer, allocation of proceeds for these projects, and
holistic assessment of environmental impact should be carried out by a 3rd party reviewer like
Climate Bonds Initiative. To ensure transparency and accountability, the 3rd party reviewers’
market also needs to be regulated by SEBI. Only registered reviewers who are under ongoing
supervision by SEBI can be allowed to review and certify green bonds in India. In addition,
penalties can also be levied for noncompliance with the green use of proceeds to ensure
the issuance of green bonds remains invested in green projects throughout the life of the
investment.
Reducing cost of bonds: Cost of financing has been high due to structural issues like poor
financial health of issuers, currency fluctuation due to volatility of rupee and perceived risks
due to lack of governance, standards, and certifications. To bring down the cost of borrowing,
standards and certifications detailed above are essential which will help in reducing the
issuance cost that gets priced into the bond. Another potential intervention could be provision
of competitive credit enhancement products to drive down risk associated with green bonds
and improve credit rating. National banks and financial institutions like IREDA can develop
credit enhancement products like credit guarantees and partial credit enhancements. FIs can
also help in reducing the foreign exchange hedging costs through development of low-cost
currency hedging products. Funding for these credit enhancement and hedging products can
be secured through international DFIs like Green Climate Fund. The Reserve Bank of India (RBI)
can also facilitate external commercial borrowing through rupee denominated bonds to help
reduce cost of borrowing for green bonds.
Incentives: In addition to this, government support can also be given in the form of tax
incentives for retail investors, inclusion of green mobility fund for CSR investments, and/or
coverage of additional issuance costs (green certification) for issuers. Currently, a blanket
tax deduction of up to Rs. 20,000/- per year under Section 80CCF of the Income Tax Act 1961
for certain notified long-term infrastructure bonds is available. However, in most cases, the
tax incentive has been provided to GB issuances only by Municipal Bodies, Development
Finance Institutions or Public Sector Undertakings. To open up retail investor participation, tax
deductions can be introduced for corporate green bonds as well. Tax incentives can also be
given in the form of the following instruments:
i. Tax credits / Direct subsidy bonds – Bond investors receive tax credits / cash rebates
instead of interest payments on green bond issuance (e.g., Clean Renewable Energy Bonds
(CREBs) and Qualified Energy Conservation Bonds (QECBs) program in the US, where 70% of
the coupon from the municipal is provided as tax credit or subsidy to the bondholder)
ii. Tax-exempt bonds – Bondholders are exempted from income tax on interest from the
green bonds. Example of such bonds can be seen in Brazil where bond issuance for
financing wind projects is exempt from taxes.
On the other hand, a green bond grants scheme like Singapore can also be adopted to
incentivize issuers. For instance, Singapore provides a grant of $100,000 or 100% of the eligible
expense per qualifying issuance and covers costs incurred in respect of the independent
external review or rating done pre-issuance & post-issuance up to 3 years or tenure of bond,
whichever is earlier.
Financing for EVs in India | 5554 | Financing for EVs in India MDBs can also support green bonds through identification/creation of funds with a green
portfolio consisting of multiple green objectives like solar, wind etc in addition to EV financing.
This will help cover concentration risk. The portfolio can have e-mobility allocation or
“greenium” for e-mobility target funds. The overall economic cost of raising green bonds can
be evaluated further basis rating of the issuer, tenure, and type of bond, secured or unsecured,
and larger macro-economic conditions like inflation/ interest rates.
#3 - Include commercial EV loans under priority sector lending
Priority sector lending has traditionally been an instrument to enable better credit penetration
in credit deficient areas. The aim is to improve lending to the low-income sections as well
as allied sectors that need credit boost, which otherwise have difficulty in availing credit.
Inarguably, EVs require a similar type of support for specific segments and use cases and
hence, a targeted priority sector lending policy could be beneficial.
The inclusion of EV loans under priority sector lending with internal lending limits for Driver cum
Owner commercial applications/fleets can be considered. Stipulations can also be detailed for
various parameters, for e.g.,
A proposed structure of how green bonds will work in the context of India is presented below.
The green bond or asset backed securities issuer will need to work with multiple stakeholders
across the system, like SEBI, 3rd party reviewers and credit rating agencies as underwriters to
finance a portfolio of green projects across sectors. The government’s role will be to support
the system through providing adequate standards and certification and incentivizing investors
& issuers to help in proliferation of green bonds.
Stakeholders involved: Financial InstitutionsGovernment OEMs
Exhibit 4.3: Illustrative model for green bonds in India
Tax incentives
Draft policy for
incentives for issuer
& investors
Provide funding
at lower costs
Propose green bond classification
framework & taxonomy
Subsidized
issuance
costs
NITI Aayog
Institutional investors
Retail investors
Borrowers
Financiers
• Banks, NBFCs, SPV
Corporates
(CSR funding)
Government
(e.g., Department of
Financial Services)
Green Bond / ABS issuer
• Corporate
• FIs
Sources of capital
Regulator
Green bond
certifier
1
Underwriters
2
Credit guarantee/
Partial credit enhancement
(National Banks / IREDA)
EV financing need not be the
sole purpose of green bonds;
a pre-determined proportion
of capital to be earmarked for
financiers
Financing for EVs in India | 5756 | Financing for EVs in India • Loan sizes can be defined by segment and applications
• Lending limits can be defined for individual owners vs fleet operators
• Eligibility criteria for the loans can be laid out basis income / demographic markers
A priority sector lending mandate will help in increasing financing options for the end customer
and reduce the cost of borrowing due to the entry of banks in the segment through 3 different
models, direct lending to EV customers, co-lending with NBFCs and on-lending model with
NBFCs, as shown below:
Exhibit 4.4: Illustrative model for priority sector lending for EVs
To ensure maximum impact of this initiative, PSL can be introduced along with other initiatives
which reduce product risk, such as extended product warranties. This will help increase the
bank’s confidence in EVs and help them offer attractive loan terms.
Thrust Area 2 - Restructure financial products to help mitigate challenges such
as higher down payment or EMIs through innovative models that can potentially
improve cash flows for end customers
I. Context
Loan terms for EVs are starkly unfavorable, especially in the 2W and 3W categories, which make
up a majority of the EV market in the country today. Lower LTV and tenure paired with higher
rates of interest have increased both the upfront capex required for purchasing EVs and the
EMI to be serviced by the customers. Depending on the vehicle segment, the down payment
can increase by up to 20% while EMIs can reach up to 1.5-1.8x of those for comparable ICE
vehicles. The potential for higher income vs these rising costs, however, remains contingent on
the usage of vehicle and supporting operational ecosystem like access to charging stations.
In addition to this, in the 3W category, EVs also have a recurring capex structure across
the vehicle’s lifecycle due to the need for battery replacement every 4-5 years. This further
increases the financial burden on the customers. Hence, innovative financial products that can
mitigate some of the challenges faced by both financiers as well as customers are required.
1
2
3
Consult for design of
PSL mandates, eligible
sectors and limits
Mandate to include EVs under PSL that
directs bank credit towards the sector
On-lend PSL requirements on EVs
Provision of loans through co-lending model
Banks directly providing
loan to EV customers
Increase number of EVs
financed due to on-lending
NITI Aayog
Reserve Bank
of India
Borrower
BanksNBFCs
Financing for EVs in India | 5756 | Financing for EVs in India However, support will be required from the government to facilitate sale of vehicle and battery
separately. Additional initiatives that can potentially be explored are as follows:
• Detailing of Regional Transport Office (RTO) procedures at state level to facilitate easy
registration
• Financial support for purchase subsidies for vehicles sold without battery to stimulate
demand, either under an existing framework (for e.g., FAME-2) or a new policy
• Detailing of financial incentives for battery manufacturers and battery swapping station
(BSS) operators (for e.g., quantum of subsidies and multiplier effect (as BSS have higher
battery to EV ratio))
#5 Reduce EMI burden for customers through subvention schemes and tax
exemptions
Subvention schemes can be designed to offset a portion of the customer’s interest burden
by enabling other players in the ecosystem to absorb a part of the interest burden. A
well-designed scheme paired with extended warranties and product buy-backs can be
II. Proposed initiatives (Action 4 to 6)
#4 Facilitate de-coupling of battery and vehicle to enable leasing / swapping/ pay
per use models
Currently, the battery cost comprises majority of the cost of the vehicle and is, therefore, one
of the key drivers for higher down payment and higher EMIs. De-coupling the battery from the
vehicle provides financiers an opportunity to factor risks for battery and vehicle separately
and the customers an opportunity to incur expenses for the battery as per usage – essentially
making the cost profile similar to ICE vehicles wherein fuel costs are directly proportional to
the usage of the vehicle. In addition, models like battery leasing can be made possible thus
transferring the risk of maintenance of the battery from the owner to the lessor. An example
of how the business model works for de-coupled battery and vehicle financing in the case of
battery swapping is shown below.
Stakeholders involved: Financial InstitutionsGovernment OEMs
Stakeholders involved: Financial Institutions Government OEMs
Exhibit 4.5: Illustrative model for de-coupling vehicle & battery financing
OEM
Battery
Swapping Player
FinancierUsers
Swap used batteries for charged ones at swapping stations
Provide battery for vehicle
OEM & swapping tie-up
Pay for vehicle
w/o battery
Provide loan
for vehicle w/o
battery
EMI for vehicle w/o battery
Sells vehicle (w/o battery)
Financing for EVs in India | 5958 | Financing for EVs in India instrumental in helping build confidence on the product in the financing ecosystem and
contributing to the growth of the EV industry.
The government can offer direct interest subvention schemes to EV customers. The scheme
can be operationalized through a common platform, run by a government entity, for e.g.,
Convergence Energy service Ltd (CESL). The platform will serve as an intermediary for all
stakeholders - OEMs, financiers and customers. Registered models from OEMs which are
leigible for subvention will be present on the platform along with quotes for loans from
empaneled banks and NBFCs on each loan. Customers can access the platform to place
an order for eligible EVs and receive loans at the lowest interest rate basis their profile. The
subvention will be provided by the government directly to the financiers. The incentives can
also be paired with conditions on extended warranty / buyback guarantees by OEMs, for e.g.,
interest subvention to be offered only on EVs with warranty greater than 5 years or a buyback
guarantee of at least a set minimum % of upfront price of vehicle after specified number of
years.
Exhibit 4.6: Illustrative model for government-led interest subvention scheme
Subvention provided to be tied to warranty, buy-back option etc of OEMs; framework
to be designed by intermediary
Loan amount to be
repaid directly to FI;
disbursal directly into
customer account
Policy to buy down
interest rates for
registered EVs
Pass leads
for loan
requirement
Reimburses
subvention costs
OEMs to register on
the platform; warranty
period & buy-back
agreements to be
outlined
• Identify source(s) of
funding from subvention
scheme
• Draft policy detailing
quantum of subvention&
disbursal mechanism
• Identify partner for
operationalizing
intermediary marketplace
FIs to register
with centralized
platform
Transfer vehicle
requirements
from customer
Eligible customers provided
with letter of intent
Sale of vehicle
CustomerGovt.
FIs
NITI Aayog
OEM
Intermediary
platform
Interest subvention schemes can also be led by MDBs or other 3
rd
parties. MDBs can partner
with banks / NBFCs to provide EV loans mandating certain subvention vs ICE loans similar to
CEFC’s partnerships in Australia. OEM led subvention schemes can also be designed wherein
the OEMS help offer subvention schemes through dealers coupled with a loss fund to cover for
NPAs / product losses. However, such schemes will have to be initiated by the OEMs rather than
being pushed through regulatory measures.
The government can also look at reducing EMI burden through tax exemptions by extending
the current tax benefits under 80EEB to loans sanctioned beyond FY23
33
. A tiered exemption
structure could be provided by battery capacity or vehicle price. In addition, the government
could reintroduce accelerated depreciation for EVs purchased by an organization for
commercial purposes, using loans from financial institutions. This would help offset the interest
cost burden for EVs in commercial applications and provide further impetus for adoption.
Financing for EVs in India | 5958 | Financing for EVs in India #6 Provide support for the scaling of business models like fleet ownership, reverse
leasing, flexible loan structures, etc.
Financial entities, especially startups, providing innovative solutions like fleet ownership,
reverse leasing, flexible loan structures, etc., for EV financing require access to capital to scale
up operations and reach a wider audience. Banks, MDBs, and other DFIs can help mobilize
low-cost funding for such entities by setting an asset financing structure which is front-ended
by the financial entity themselves. The financial entity will be responsible for operationalizing
the asset finance company, disseminating funds, and absorbing the credit risk. Banking and
financial institutions, on the other hand, can act only as investors and will have no exposure to
the credit risk, thereby helping them protect their returns.
Thrust Area 3 – Reduce the risk of battery technology by addressing the uncertainty
around battery performance and developing a secondary market for used batteries
I. Context:
Batteries can comprise 30-40% of the overall vehicle cost in EVs. Along with the high financial
value, the battery is also the key component on which vehicle performance is dependent. A
major concern for FIs considering EV loans is battery degradation during the loan tenure. Given
the nascency of the technology, FIs currently have no mechanism to understand how battery
health and consequently vehicle performance will change during the product lifecycle. This
has direct impact on the customer’s ability to pay, especially in the commercial sector where
the vehicle serves as the key source of income for customers. In addition to this, the secondary
market for used batteries is also currently not developed, thereby raising concerns around the
salvage value of the asset in case of NPAs.
II. Proposed initiatives (Action 7 and 8)
#7 Establish battery safety standards and performance certification framework
A holistic battery technology roadmap/policy is needed to address risks associated with
battery technology. The objective is to create a certification mechanism that will boost
financier confidence on battery performance and traceability. To build this framework,
collaboration is required between EV OEMs, players along battery value chain, and 3
rd
party
testing agencies to cover all aspects related to certification, traceability and data sharing.
Some of the key topics the framework should cover include:
• Classification guidelines for EV batteries
• Battery labelling and information requirements along with unique ID for traceability
• Regulation for EV batteries to contain a smart BMS along with a framework for storing and
sharing the information and data needed to determine the state of health and expected
lifetime of batteries
• Guidelines around a centralized data system and data sharing norms capturing:
• Which data to be captured by whom throughout the life of the battery
• Access to data to assess residual value, capability for future use, facilitate reuse,
repurpose or remanufacturing of battery
Stakeholders involved: Financial InstitutionsGovernment OEMs
Stakeholders involved: Financial Institutions Government OEMs
60 | Financing for EVs in India For battery certification, the framework needs to focus on rigorous enforcement of standards
such as AIS-156
34
and AIS-038 (Rev 2)
35
. Enforcement of these norms is needed to ensure
compliance by OEMs since at present, OEMs still have a choice to adhere to the previous
AIS-048 standard. In addition, the AIS-156 standard does not cover battery swapping. The
standard will have to take into account that swappable batteries will have to be swapped a
few thousand times, and that a testing procedure should be established for this.
Standards also need to be developed for testing performance and ageing of batteries (for e.g.,
testing procedures laid out in IEC 62660-1:2018
23
). These can be implemented as a certification
requirement for OEMs to help build a national standard guaranteeing minimum levels of
performance.
#8 Develop framework for circular economy for battery
Development of a circular economy for batteries will help establish a floor price or a salvage
value for batteries for their second life/end-of-life scrappage value. This will help financiers
estimate the value they can recover from the asset in case of default. To facilitate a circular
economy for batteries, battery recycling and end-of-life regulations are required laying down
the roadmap across the following parameters for:
• Target recovery rates at material level
• Recycling efficiency
• Target rates for usage of recycled content in new batteries
• Reporting mechanism for battery manufacturers on recycled content used
• Standards on 2
nd
life use cases
A comprehensive roadmap is needed for the next 8-10 years to act as a guiding direction
for R&D efforts for recycling and second life usage and for mobilizing capital needed for
commercialization of these solutions. Such a framework will help in increased interest by
players in this space leading to the development of a market which can support the resale of
batteries, thereby bringing down overall financing costs.
Initiatives #7 and #8 will work in conjunction with each other to form a holistic structure for EV
batteries similar to the EU example in Chapter 3 (shown below for reference).
Stakeholders involved: Financial InstitutionsGovernment OEMs
Financing for EVs in India | 61 Thrust Area 4 - Reduce the risk of product resale by developing a used vehicle market
I. Context
EV adoption has picked up only recently in India. Most vehicles sold to date have not gone
through the product lifecycle to enter the used market till now. Hence, the secondary market
for EVs currently remains very nascent in India. Globally as well, there are very few markets
where used EVs have started to attract customers, for e.g., in the US, EVs comprised ~3% of
the used car market sales in 2021. In markets like the US and Europe, multiple stakeholders
are working together to facilitate the creation of a secondary market for EVs. Governments in
the Netherlands, France, and Germany in Europe and many states in USA are giving purchase
subsidies on used EVs while OEMs are also facilitating sales through different models like
leasing. A similar push in India could kickstart the creation of a secondary market for EVs in the
country.
II. Proposed initiatives
#9 Promote the secondary market for used EVs through purchase subsidies, OEM
buyback programs, etc.
Purchase incentives for used EVs in the form of one-time grants, tax breaks, etc., can be
considered. The subsidies can be provided as an extension to existing policies like FAME-2 or
state-level EV subsidies. Based on global benchmarks, conditions for disbursing incentives can
be placed on the following to ensure a minimum performance of the vehicle:
Exhibit 4.7: Battery passport network providing end-to-end information on the battery
1. Cluster of cells = Module, Cluster of Modules = Pack; 2. Battery Value Guarantee = Mechanism for a battery within EV to have
a guaranteed end-of-life value, ensuring minimum depreciated value for the vehicle
Source: EU Policy, GFI, Academic Research
Battery Passport
Battery related data: Structure,
materials, UID, Mfg Info, Origin, et
Value-chain related data: Value
chain actor (name, function,
location), Material, sustainability
& circularity properties, etc.
Battery Health Certificate
Inputs: Data at cell/module/
pack level1
Outputs: State of Health, State
of Charge, Depth of Discharge,
Remaining Useful life for end-of-
first life actors & information for
second-life of battery, etc.
Battery Value Guarantee
2
Circularity performance:
Resource efficiency (of raw
materials), raw material losses,
share of secondary material, etc.
Product design: Battery module,
product designs, disassembly
instructions, etc.
Government
Government
Government
Certification Agencies
Data Providers
OEMs
General Public
Stakeholders
Data Providers
OEMs
Battery Manufacturers
Suppliers
Testing Agencies
General Public
Battery
Information
Diagnostics &
Performance
Battery Passport
Value Chain
Information
Circularity &
Sustainability
Battery Value
Guarantee
Recyclers/
2
nd
Life
Data Providers
Battery
Manufacturers
Product Design
Circularity
Properties
Maintenance
Record
Performance
Delivered
Battery Health
Certificate
Stakeholders involved: Financial InstitutionsGovernment OEMs
Financing for EVs in India | 6362 | Financing for EVs in India • Minimum battery capacity
• Minimum range
• Minimum and maximum year for vehicle manufacturing
• Maximum number of kilometers driven before resale
OEMs on the other hand can be encouraged to design buy-back programs for their own
products with back-to-back arrangements with financiers. However, such schemes will have to
be initiated by the OEMs rather than being pushed through regulatory measures
Thrust Area 5 - Create a platform to enable collaboration between different
stakeholders and channelize capital for EV financing
I. Context
The startup ecosystem has been significant for driving innovations in the EV sector. There are
multiple startups in the financing space as well that are providing affordable solutions for
EVs. However, due to their limited reach these solutions are only available to a few targeted
customers. To enable startups to scale up their solutions, they require access to capital and
additional support for operationalization, regulatory changes, etc. On the other hand, financiers
still consider EV as a risky sector due to the knowledge gap and limited understanding around
technology. It is essential to bridge this information asymmetry through collaboration between
OEMs, industry bodies and other players in the EV ecosystem.
II. Proposed initiatives
#10 Build industry-wide platform to ideate, promote innovative financing models &
raise awareness on technology
Creation of a platform for EVs in India can help facilitate flow of knowledge and capital among
various players in the EV ecosystem. The platform can draw inspiration from the Green Finance
Institute in the UK which acts as a think-tank for EV financing and brings multiple stakeholders
like EV OEMs, battery manufacturers, legacy banks and NBFCs, fintechs, MDBs, DFIs, etc., along
with representatives from relevant government ministries together under one common
umbrella. A similar platform in India, backed by the government, will help in achieving the
following objectives:
• Ideate, design, and promote innovative financial models along with relevant stakeholders
and undertake projects in this space
• Incubate, roll out, and scale these projects till a certain momentum is achieved
• Help channel private capital across EV ecosystem, especially for EV startups
• Help identify regulatory/process challenges, if any, while implementing projects which need
to be addressed
• Leverage the platform to facilitate knowledge exchange between OEMs and financiers
on EV technology through initiatives like the creation of a battery technology handbook,
collaborations with industry bodies like SIAM to hold conferences, etc.
The proposed initiatives (Actions 1-10) address different risks surrounding the EV ecosystem
today. Given the complexity of challenges faced throughout the ecosystem, it is crucial to
have a multi-pronged approach with integrated solutions to address barriers across policy,
technology, vehicle economics and customer behavior. This requires the government, financial
institutions, OEMs and various industry players to collaborate and create holistic solutions to
promote affordable financing for EVs. Effective execution of the actions proposed across the 5
key thrust areas can help accelerate penetration of EV financing in India.
Stakeholders involved: Financial Institutions Government OEMs
Financing for EVs in India | 6362 | Financing for EVs in India 4.1 Conclusion and Way Forward
While the previous section detailed out the key thrust areas and the proposed initiatives, the
ensuing paragraphs summarize the key activities that need to be focused on to make each of
the 5 thrust areas a success.
Thrust Area 1: Enable the broader ecosystem to absorb the additional risk in EV
financing to bring down the cost of borrowing for end customers
In order to accelerate adoption of financing in EV’s it is vital to structure mechanisms which
enable the larger eco-system to absorb some of the inherent risks and enable FIs to extend
better loan terms to the customers. The right multilaterals / bilaterals / green funds / impact
funds need to be identified through a targeted outreach program showcasing the opportunity
in India. The right fund structure needs to be designed along with identified partner(s) to
address their risk reward considerations while meeting the intended objectives. Other partners
in the structure – government agencies, lenders, equity partners, etc. also need to be identified
and onboarded. A mechanism so designed with appropriate risk sharing amongst partners,
should be launched for financing EV products in India
Apart from risk sharing mechanisms, mobilizing significant amount of nascent institutional
capital into electrification of India’s road transport sector is important and can be done
through debt instruments like green bonds and asset backed securities. To help in proliferation
of these debt instruments for financing EV projects, regulatory support is essential. The current
framework for bonds should be benchmarked with other legislations across the globe. Key
gaps should be identified (for e.g., in taxonomy, governance etc.) and a holistic framework
should be addressed to address these. In addition, if needed, incentive structure can also be
designed & rolled out to encourage participation by private investors as well. FIs can also help
in proliferation of green bonds through creation of a fund with a green portfolio. Objectives, key
focus areas, funding mechanism and type of entities eligible for funding will need to be defined
to set up the fund. The project assessment process & other enabling factors like organization
structure, governance mechanisms, etc. will also need to be designed along with identifying
sources of funding. The right structure for funding will need to be identified to operationalize the
fund & initiate disbursement of capital.
It is equally important to improve credit penetration to increase accessibility to financing and
help distribute risk over a larger base. Hence, the government can set up an internal working
group with Reserve Bank of India (RBI) and other relevant government agencies to consider
addition of commercial EV loans in priority sector lending. Eligibility criteria basis income levels,
demographic markers and lending limits defined by vehicle segments can be drafted. This will
ensure PSL remains an instrument to enable better credit penetration to intended sections of
society.
64 | Financing for EVs in India Short Term (4-6) months
Set up low-cost funds with risk sharing mechanisms / FLDG
Identify and prioritize multilaterals/bilaterals/green funds for
investing in India, intiate outreach to showcase India opportunity
Work with relevant govt agencies to establish the fund
Design fund structure, define objectives and financing
instruments and onboard (Government / local/ international)
partners relevant to the structure
Month
3
Month
4
Month
2
Month
1
Government,
FIs
Set up committee comprising all relevant ministries & regulatory
bodies (e.g., Ministry of Finance, SEBI, RBI)
Initiate creation of fund with a green portfolio
Baseline current Indian regulations & draft a coherent and
comprehensive taxonomy for Green bonds
Design project assesment process, organization structure,
governance mechanisms, etc.
Operationalize fund and initialize disbursement of funds
Design incentive structure to promote Green bonds (e.g., Tax
incentives)
Roll out new green bond norms and incentives
Establish periodic review mechanism to ensure adherence to
green bonds criteria
Identify sources of funding and funding structure
Benchmark Green Bonds framework and legislation across the
globe
Define objectives, key focus sectors, funding mechanism and
type of entities to be funded
Government
Fls
Promote green bonds and asset-backed securities
Include commercial EV loans for driver owners under priority sector lending, eligibility and internal lending
limits can be defined by segments
Set up internal working group with RBI and other relevant
government agencies to draft PSL regulations
Roll-out PSL policy
Define stipulations like internal lending limits, elegibility of
borrowers & vehicle categories, etc.
Government
Financing for EVs in India | 65 Thrust Area 2: Restructure financial products to help mitigate challenges such
as higher down payment or EMIs through innovative models that can potentially
improve cash flows for end customers
De-coupling vehicle and battery is critical to help financiers factor risks for product and battery
separately. This helps financiers structure innovative models such as battery swapping, pay
per use, battery leasing, etc. which can reduce upfront down-payment and/or EMI payouts.
To facilitate sale of vehicle & battery separately, a coordinated effort is required at the central
level to detail registration mechanism for vehicle sold without batteries at state RTO level and
ease the process for customers. In addition, incentive structure and disbursal mechanism
need to be designed and implemented for vehicles sold without battery, for battery
manufacturers and Battery Swapping Station (BSS) operators either under FAME subsidy or a
new policy.
Direct interest subvention schemes, by the government or 3rd parties like multilaterals, can
also help reduce the EMI burden for customers. To operationalize this through the government,
all ongoing schemes in various states should be studied and a holistic scheme should be
designed with inputs from other stakeholders like OEMs and FIs. Conditions coupling subvention
with extended warranties and buy back schemes can also be included in the scheme. A
government agency (like CESL) should be identified and onboarded to create a platform
for operationalizing the scheme. Financial institutions like multilateral banks can also offer
subvention schemes through partner banks / NBFCs. The right partner banks and/or NBFCs
need to be identified and onboarded for the partnership. Funding structure for the partnership
and risk-sharing mechanism needs to be designed to roll out the subvention scheme.
Tax breaks too can be considered to help reduce EMI burden of customers. While the
government offers tax breaks under 80EEB to individuals who have purchased EVs using loans
from financial institutions, the government can look into extending the scheme beyond FY’23.
In addition, slabs based on battery capacity or price of the vehicle can be introduced to help
targeted segments. While 80EEB helps individual buyers, providing accelerated depreciation
for organizations purchasing EVs for commercial purposes using loans from FIs can be
considered. Relevant ministries (e.g., Ministry of Finance) need to design the tax breaks and roll
them out as part of the budget.
Apart from the above, there are multiple financial entities (new and existing) today
experimenting with innovative business models and financial solutions like fleet ownership,
flex loans, reverse leasing etc. who need support to scale. Multilaterals / bilaterals / funds
should be identified to set up a platform to provide such entities access to capital. The funding
structure, governance and process to identify and onboard financial entities should be defined.
The entities thus onboarded can operationalize and scale the business idea.
66 | Financing for EVs in India Roll out of subvention schemes
Incorporate inputs, finalize new norms and roll out as part of
budget
Work with relevant ministries (e.g., Ministry of Finance) to
design tax exemption and accelerated depriciation offerings
Reduce EMI burden for customers through subvention schemes and tax exemptions
Baseline current subvention schemes offered by state
governments
Identify & onboard patner (government agency, e.g., CESL)
repsonsible for operationalization
Set up digital platform for disbursal of incentive
Identify and onboard OEM partners & financial institutions to be
part of scheme
Work with state govt, agencies and private players to design
offering - extent of subsidy by vehicle category, paired with
warranty / buy-back
Mid Term (6-12) months
Qtr
3
Qtr
4
Qtr
2
Qtr
1
Government
Enable de-coupling of battery and vehicle to facilitate leasing / swapping / pay per use models
Coordinate efforts at central level for operationalizing state RTO
procedures, purchase subsidies on vehicle without battery and
incentives for battery manufactures & BSS operators
Draft incentive structure for demand side, battery OEMs and BSS
operators
Operationalize relevant procedures and incentive policy
Initiate detailing of procedures in collaboration with relevant
state governemnt departments
Government
Identify multilaterals / bilaterals for setting up a funding platform
to support startups offering products in the EV financing space
Initiate outreach to identified organisations & onboard
interested parties
Design process to onboard financial entities (for e.g., startups)
and operationalise
Define funding structure for the platform, governance and
reporting mechanisms
FIs
Support scaling of business models like fleet ownership, reverse leasing, flex loans etc.
Reduce EMI burden for customers through subvention schemes and tax exemptions
Identify partner banks & NBFCs lending in EV sector
Desing funding structure and risk-sharing mechanism
Roll out subvention schemes through partner banks / NBFCs
Initiate outreach & negotiate details of partnership (e.g., eligible
vehicles, eligible buyers, loan terms offered)
FIs
Financing for EVs in India | 67 Set up working group comprising of industry players
across battery value chain, EV OEMs, battery startups, govt.
representatives, industry bodies
Define elements of policy like target recovery rates, recylcing
efficiency, standards applicable for 2
nd
life, etc.
Roll out battery recycling and end of life regulations framework
Conduct a comprehensive study of battery recylcing
regulations adopted by countries globally
Government
Long Term (>1 yr)
Develop framework for circular economy for battery
Establish battery safety standards & performance certification framework
Set up working group comprising of industry players across
battery value chain, EV OEMs, govt. representatives, testing
agencies, industry bodies
Identify gaps vs global policies & regulations and identify
changes / additions required in current system
Design data capturing, data sharing and reporting mechanism
Detail new framework and define roles for each stakeholder to
address the gaps and enable testing, performance certification
and tracking
Baseline current battery standards and performance
certifications in India
H1’23H2’23H2’22H1’22
Government
Thrust Area 3 – Reduce the risk of battery technology by addressing the uncertainty
around battery performance and developing a secondary market for used batteries
To reduce the risk associated with battery performance and boost financier confidence,
battery safety standards and a performance certification framework need to be established.
To create the framework, a working group comprising industry players across the battery value
chain, EV OEMs, representatives from relevant ministries (e.g., Ministry of Heavy Industries),
testing agencies, industry bodies, etc. needs to be set up. The working group should baseline
existing regulations & standards in India, benchmark with global policies & identify key gaps.
The group should form a view on changes required to current policy framework and identify
new parameters/topics that the regulation should cover. In addition to this, data capturing,
data sharing and reporting mechanism also need to be laid out in this framework. Role of each
stakeholder needs to be detailed to address the gaps and enable battery certification and
tracking.
In addition to this, to facilitate development of a circular economy for batteries and establish
a floor price/ salvage value, a comprehensive policy needs to be created for battery recycling
and second life use cases. The working group comprising of industry and government
representatives can also address issues around circular economy. Elements of the policy
like target recovery rates, recycling efficiency, standards applicable for second life, use of
recycled material in new batteries need to be detailed in line with global benchmarks. The
circular economy framework can be a part of the battery safety and performance certification
initiatives through a holistic overarching policy for EV batteries.
Financing for EVs in India | 6968 | Financing for EVs in India Mid Term (6-12 months)
Promote secondary market for used EVs OEM buyback programs, through purchase subsidies, etc.
Work with state govt, agencies and industry to design incentive
structure, conditions for eligibility of model & disbursal method
Define Central vs State roles and identify platform where NBFCs
can access models registered by OEMs for buy backs
Onboard dealer network for used Evs and roll out buy back
scheme
Roll out & operationalize incentive scheme
Create buyback scheme - identify eligible models, method of
collection, support for dealers for selling second-hand Evs
Design conditions for OEM (e.g., buyback guarantees, warranty,
etc.) for eligibility for scheme
Qtr
3
Qtr
4
Qtr
2
Qtr
1
Government
OEM
Thrust Area 4 – Reduce risk of product resale by developing a used vehicle market
Developing a secondary market for used EVs can help assuage a key concern for financiers –
value that can be recovered from the asset in case of a default. To help kickstart the demand
for used EVs, the government can offer purchase subsidies with schemes on similar lines as
those offered for new EVs. Incentive structure and quantum of incentive to be given will need
to be designed in tandem with state governments and industry players. Additionally, criteria
for eligible vehicles will also need to be detailed (for e.g., conditions on OEM like buyback
guarantees, etc. and conditions on models like minimum range, battery capacity, etc.). An
existing platform (like CESL) can be leveraged, or a new platform can be created for FIs to be
able to access models registered by OEMs for buybacks.
OEMs can also help in developing this secondary ecosystem through targeted buyback
schemes for EVs. To operationalize this scheme, OEMs will have to first identify eligible models
and then detail the entire process from collection of vehicles to resale. Support to dealers for
resale will also need to be detailed. OEMs should then onboard the dealer network for used EVs
and roll out the proposed scheme.
Thrust Area 5 - Create platforms to enable collaboration between different
stakeholders and channelize capital for EV financing
Current innovation in the EV system is happening in pockets leading to limited capital inflow
and exchange of information between stakeholders in the ecosystem. To channelize capital
towards EV financing and reduce information asymmetry, industry-wide platforms need
to be created with stakeholders across industry, government, and academia. To set up the
platforms, the right partners need to be identified and onboarded to create an initial working
group with the founding members. The group should then focus on outlining the platform
structures, roles, sectoral objectives, key focus areas and outcomes to be achieved. Review
mechanisms to assess performance against set objectives also need to be designed. To
launch the platforms, key lighthouse projects need to be identified. In addition, processes to
develop future project pipeline also need to be established.
Financing for EVs in India | 6968 | Financing for EVs in India Build industry-wide platform to ideate, promote and fund innovative financing models & raise technology
awareness.
Identify partners consisting of govt agencies, financial services,
academia and industry to set up a collaborative platform
Outline platform strucuture, roles, sectoral objectives, key focus
areas and outcomes to achieve
Design a review mechanism to assess performance against set
objectives
Onboard initial founding members for the platform across all
stakeholders and set up working group
Identify key lighthouse projects for the platfrom and establish
process for developing future project pipeline
Launch platform with key lighthouse projects
H1’23H2’23H2’22H1’22
Government
Government,
FIs
Long Term (>1 yr)
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72 | Financing for EVs in India Financing for EVs in India | 73 74 | Financing for EVs in India Financing for EVs in India | 75