WHAT IS NEEDED IN Financial Innovation To Improve The Uptake In EV Sector?


Mr. Pratik Gupta, Founder, Strom Motors

With significantly lower Total Cost of Ownership (TCO), EVs are already proving to be game changers in the transportation and logistics industry across the globe. Any use case where per day utilization is high, EVs have become the first choice.

The simple formula to increase consumer side EV adoption is to try and create business models around shared mobility where platforms can enable local sharing of vehicles. Although this is the future of personal transportation, it requires consumer behavior and mindset change which typically takes much longer than changing fuel from fossils to electric.

However, we believe that there are simple solutions around this to make EVs more affordable for general public even today. Given that lithium batteries are a major portion of EV costs and are something that is a safely movable asset. Innovative financial models where consumers only pay for the vehicle shell and comforts while batteries can be leased or shared to bring down upfront costs even lower than ICE engine counterparts. Two-wheelers or a compact cars like Strom-R3 use battery packs ranging from 2-10kWh and can be designed to be easily replaceable. Imagine pulling into a battery swapping center much like fuel-stations of today and having a trained technician swap batteries within minutes giving you another 200kms of driving range at a replacement cost of less than Rs.100.

Automotive industry can learn from several other sectors where high infra and setup cost was mitigated by increasing utilization. The recent Telecom sector 4G conversion is a perfect example which has kickstarted a major revival and accelerated consumer adoption rates. As vehicle manufacturers, Strom Motors has always believed in this format and our vehicles are designed with easily accessible and swappable battery packs which are compatible with most lithium based battery manufacturers in India

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Mr. Rajeev Mishra, Managing Director, UML Lohia

When We look back in history, we sometimes can’t help but wonder why it takes so long for some good things to happen.

For those of us who are cricket mad, a big question we asked on 14th July 2019 was, “Why did it take the England 44 years to win their First world cup title?

The first electric car was made by Scottish inventor Robert Davidson in 1839. He couldn’t interest the automotive companies because the technology used was too expensive. Even today the electric vehicles remain unaffordable for the common population

Compared to IC vehicles, Electric Vehicles (EVs) come with lower operating costs but higher acquisition costs. While all the  other advantages for EVs are considered buyers are usually unable to make the move due to the high barrier of Initial ownership cost and lack of understanding about life cycle savings.

Govt has been pushing with various incentives to buyers and manufacturer. The real impetus came in 2019-20 budget wherein Import duty reduction, gst reduction announced. Income tax waver of  upto 1.5 lakh on EV loan is upfront incentive . This will boost financing from the NBFC and Banks but the issue of initial high cost will remain unsolicited and deterrent to the buyers .

Companies and financial institutions will have to offer some innovative finance scheme . Most interesting would be leasing of battery. Battery cost is almost 30%-40% of the total vehicle cost. If companies can sell vehicle without battery it will reduce the initial ownership cost thus making it more lucrative. Battery leasing can be an additional source of revenue and at the same time no burden to consumers as it may cost at par to monthly petrol bill one pay in IC vehicle.

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Other key point is  that regular vehicle leases do not work financially for electric vehicles. By separating the lease from  the EV Without Battery (EVwB) from the rest, this allows banks/leasing companies to finance EVwB lease or financing to be done is similar and more competing terms compared to ICEVs. This also reduces the overall financing cost as the EVwB can be more competitively financed over a shorter period

Long term vehicle leasing options fueled with Government incentives of reduced GST on leasing and passing the income tax benefit  of up to INR1.5 lakh on paid Lease amount as offered in case of traditional financing, 

These measures will not only boost the sales but also give confidence to consumers.

Mr. Pankaj Tiwarr, Business Head, Avan Motors

India is slowly but steadily making inroads into the electric mobility segment. As of now, the automobile sector is dominated by big players, however, start-ups too have now begun to tap this segment. Unfortunately, for the new-age players in the EV segment, the existing dominance of giants acts as an impediment despite their potential to innovate in the electric mobility space.

The bigger challenge, however, for start-ups at present is the absence of a fresh financial policy for EV industry from the government. A capital incentive plan is required at the moment to give a fillip to the newly-entered OEMs and help them sustain in the changing environment. This will also help in establishing a quality supply chain that will eventually give customers access to competitive products at an affordable price.

From the market perspective, dealers and suppliers that recently arrived in the EV space, call for funding to establish proper sourcing of raw materials and manage their inventories. With this, the industry also requires enhancement in the R&D segment to ensure constant progression in the product portfolios of both existing and new players until the EV market becomes stable.

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Retail financing is another concern as of now that needs to be addressed immediately. However, till we see banks and lenders rolling out the same, players can leverage lease financing schemes, an alternative to retail financing, to reach out to the end customers. This will involve dealers or the OEMs directly absorbing the financial risk involved in the management of funds. The model is already gaining popularity in other segments too such as fleet rental and shared services in India. 

Meanwhile, the Indian government’s proposal to lower the GST rate from 12% to 5% along with an additional income tax deduction of INR 1.5 lac on the interest paid on loans to buy EVs is a laudable move. This will further boost consumers’ confidence and accelerate EV adoption among the Indian masses.

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