New Delhi (NVI): The market size of India’s Electric Vehicle (EV) financing industry in 2030 is projected to be worth USD 50 billion (Rs 3.7 lakh crore) – about 80 percent of the current size of India’s retail vehicle finance industry, worth USD 60 billion (Rs 4.5 lakh crore) today, according to a new report
The report, titled ‘Mobilising Electric Vehicle Financing in India’ by NITI Aayog and Rocky Mountain Institute (RMI) India, highlights the role of finance in India’s transition to electric vehicles (EVs).
It analyses that the transition will require a cumulative capital investment of USD 266 billion (Rs 19.7 lakh crore) in EVs, charging infrastructure, and batteries over the next decade.
“The need of the hour is to mobilize capital and finance towards EV assets and infrastructure,” Amitabh Kant, CEO, NITI Aayog, said.
“As we work towards accelerating the domestic adoption of EVs and push for globally competitive manufacturing of EVs and components like advance cell chemistry batteries, we need banks and other financiers to lower the cost and increase the flow of capital for electric vehicles,” Kant added.
India’s EV ecosystem has thus far focused on overcoming adoption hurdles associated with technology cost, infrastructure availability, and consumer behaviour.
Financing is the next critical barrier that needs to be addressed to accelerate India’s electric mobility transition, NITI Aayog said in a statement.
End-users currently face several challenges, such as high-interest rates, high insurance rates, and low loan-to-value ratios.
To address these issues, NITI Aayog and RMI have identified a toolkit of 10 solutions that financial institutions such as banks and non-banking financial companies (NBFCs), as well as the industry and government, can adopt in catalysing the required capital.
“Re-engineering vehicle finance and mobilizing public and private capital will be critical to accelerating the deployment of the 50 million EVs that could be plying on India’s roads by 2030,” said Clay Stranger, Senior Principal, Rocky Mountain Institute.
“These solutions represent high-leverage areas for interventions in finance, and we believe that many are relevant beyond India,” Clay Stranger added.
The 10 solutions recommended in the report include financial instruments such as priority-sector lending and interest-rate subvention.
Others are related to creating better partnerships between OEMs and financial institutions by providing product guarantees and warranties.
Furthermore, a developed and the formal secondary market can improve the resale value of EVs and improve their bankability.
Recommendations beyond finance include digital lending, business model innovation, fleet and aggregator electrification targets, and the creation of an open data repository for EVs.
The report further determines that investment in India’s transition to electric mobility has the potential to create significant economic, social, and environmental benefits for the country.