Keys to unlock faster EV adoption

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According to a NITI Ayog Report, the quantum of capital and finance required for India’s EV future is considerable. Between 2020 and 2030, the estimated cumulative capital cost of the country’s EV transition is INR19.7 lakh crore across vehicles, charging stations, and batteries. The projected size of the annual loan market for EVs is INR3.7 lakh crore in 2030.  

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The Focus of all stakeholders–OEMs, Finance Companies, policymakers, and the Government is to ensure the use of the EV–the vehicles need to run and create operational profitability for the Users. Providing incentives for the purchase of EVs is strategically important, as is the incentive for the use of the Asset. As an Asset, EVs are in the nascent stage of evolution but with an enormous investment in research and engineering development that is set to change and mature.  

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For EVs to successfully become a mainstream product, the acceptance and support of the Lenders are most important. Lenders need assurances from the Ecosystem in the form of favorable policy support from the Government, product quality & assured residual value coverage from OEMs, and acceptance from the Users. Providing an interest subvention and categorizing EV Loans as PSL is crucial and will help build Lender's confidence. Significant improvements in EV Infrastructure like charging stations and battery-swapping facilities will propel this adoption.  

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The other major problem or roadblock to EVs being treated as quality assets for financing is the lack of clarity on its end of life and residual value. An asset is considered fundable if the value of the asset at the end of the loan term is greater than the outstanding loan and has a ready market for resale. Where EVs being a new asset class has no generally acceptable resale value like the traditional ICE vehicles, it becomes difficult to ascertain the value. To address this, better quality products and buyback guarantees from the OEMs will be instrumental.  

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The most important component of an EV is its battery and its efficiency, for a user the vehicle has to provide a dependable battery service to use with confidence, in recent years the quality and cost of the batteries have significantly improved and have become more affordable. With the availability of charging stations and battery swapping programs, it has become easy to charge the vehicle and increased its acceptance. More investment and incentives have to be provided for such infrastructure to counter the ICE vehicles with ease of fuel availability.  

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Electronic vehicles are a sunrise sector and will attract more investments in the coming period. With dedicated support from all the players in the ecosystem, it will only improve and so will the confidence of the EV user and the EV Financiers. The most important task here is to make the EV run on the road.  

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To know the challenges and opportunities of EV lending, watch the video below.

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For more information, like this, visit our LinkedIn page, and to catch some new & really wonderful insights on lending, listen to our latest podcast on Spotify.

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Thanks for reading this article and we hope you enjoyed it.

AllCloud team

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AllCloud's Unified Lending Technology empowers lenders with the newest and latest tech stack to enable scale and aid operations. To quickly have a demo click here.

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