India has the world’s largest fleet of two- and three-wheelers – its transition to electric requires financing of $285 billion.
Two-wheelers and three-wheelers account for over 80% of vehicle sales in India. Supported by government policies such as Faster Adoption and Manufacturing of Electric Vehicles (FAME), the adoption of electric variants of two- and three-wheelers have been steadily rising in the past few years.
There are about 45 certified vehicle manufacturers of electric two- and three-wheelers in India in an otherwise consolidated auto market. Cumulative sales of these vehicles have reached an impressive 1 million units.
However, this is still just 1 million out of India’s total two- and three-wheeler fleet stock of 250 million – leaving immense room for sustained growth. Achieving 100% electrification of India’s two- and three-wheeler stock requires a capital allocation of approximately $285 billion.
Although electric vehicles (EVs) are costlier to purchase, their running cost is much lower. So, the more an EV is used, the cheaper it gets. When gauged by the total cost of ownership (TCO), they are already ideal for ride-hailing and last-mile delivery fleets, which have high daily utilization.
These segments are leading the adoption of electric two and three-wheelers in India and are likely to be among the first segments to transition completely to electric.
For a rapid transition of fleets, capital flow to the ecosystem needs to grow multi-fold. Opening large capital pools will require de-risking of
the market through deeper collaboration between stakeholders and business model innovation.
“Availability of capital is not the primary constraint for India’s transition to electric two and three-wheeler adoption. Capital will flow if we can first address the various risks that have been introduced in this technology transition. We need to collectively focus on solutions, that is today, reliability of components, charging infrastructure, and after-sales network, and this requires each stakeholder to take ownership of the risks under their control. Isolating and de-risking value and re-use of the battery will be key,” said Nitin Seth, Chief Executive Officer, of Reliance New Mobility.
The finance is the key to enhance the penetration of EV. The hesitancy of the Nationalised Banks in extending affordable finance for EV citing battery life etc is to be overcome.
The very high expectation of IRR and thereby increased rates is a deterrent.
Like ICE , the appraisal, approval and disbursement process has to be faster