In India, a significant change is happening on the roads and in the automotive industry. Electric vehicles, once a rare sight, are becoming more common. While the country’s journey towards this electric future is marked by an ambitious goal of achieving a 30 per cent electric vehicle market share by 2030, a key factor that continues to catalyze the shift happens to be EV financing.

Notably, India's retail vehicle finance industry, currently valued at $60 billion, is expected to see a significant portion shift towards EVs, potentially reaching $50 billion by 2030. This means in the upcoming years, the role of EVs will become more crucial and deep-rooted in driving India towards a more sustainable future. 

Financing: The Engine Powering the EV Revolution 

The shift to electric vehicles is a capital-intensive endeavor. In 2021, the funding for EV startups in India soared to nearly $450 million, a 250 per cent increase from the previous year. Today, several NBFCs offer specialised auto loans at affordable interest rates for EV purchases, signaling a robust market for EV financing.

Similarly, they follow a quick approval and disbursal process to keep the borrowing experience less cumbersome for those seeking financial assistance. This financial support is crucial for consumers and manufacturers, as it eases the transition to electric vehicles by making them more affordable and accessible. 

Additionally, innovative financing models are emerging as a viable solution against financing challenges. These include leasing options, battery-as-a-service models, and pay-per-use schemes, which can reduce the initial cost burden on the consumer. Such models can also address concerns about battery life and technology obsolescence, making EVs a more attractive option for consumers and financiers. 

Besides innovative financing offerings from the NBFCs and Fintech firms, the Indian government is actively working to enhance the public’s access to EVs. For instance, policies like the FAME-II scheme and reduced GST rates for EVs have emerged as beneficial steps.

These initiatives, along with tax benefits for first-time buyers, are not just boosting sales but also creating a conducive environment for EV adoption. Such policies are expected to increase the confidence of financial institutions in the EV market, leading to more attractive financing options for consumers. 

Even international investment and collaboration have been playing a crucial role in the EV financing landscape. Global investors are showing increasing interest in India's EV market, recognising its potential for growth and sustainability.

Further collaborations with international technology providers and manufacturers can also help bring down the costs of EVs, making them more accessible. 

Challenges in EV Financing 

Despite the growth, financing EVs presents unique challenges. High upfront costs, uncertain resale values, and the nascent stage of the EV market in India make it a riskier proposition for lenders. Additionally, the lack of widespread charging infrastructure and concerns about battery life impact the financing sector's confidence in EVs. 

The Road Ahead 

The push towards EVs is not just about reducing carbon emissions; it's also about creating new economic opportunities. For instance, the EV industry is well-positioned to create numerous jobs in manufacturing, services, and infrastructure development. The anticipated growth and development will drive the country towards a cleaner and green environment and benefit the economy significantly.

To begin with, reducing dependence on imported oil can significantly improve India's trade balance and facilitate economic stability. 

The electric vehicle revolution in India is a multifaceted transformation encompassing technology, policy, and consumer behavior, and its success depends significantly on the ease of access to EV financing. As India drives towards a greener and more sustainable future, EV financing becomes increasingly central, offering unique opportunities for investors, manufacturers, and consumers.

This journey, while filled with challenges, is a crucial step towards achieving India's environmental goals and establishing its position in the global green economy. Hence, more efforts are needed to make EV financing inclusive and accessible to address the challenges and develop suitable solutions. 
-By Nehal Gupta Director of AMU