India’s electric two-wheeler and three-wheeler market witnessed a breakout year in 2023, surpassing 1.5 million unit sales. Despite achieving cost competitiveness with traditional fuel-powered vehicles over their lifespan, a major hurdle persists – access to financing for EVs.
To address this roadblock, the Small Industries Development Bank of India (SIDBI), in partnership with NITI Aayog, the government’s premier policy think tank, and the Rocky Mountain Institute (RMI), a global clean energy nonprofit, has unveiled a crucial report titled “De-Risking Lending for a Brisk EV Uptake.”
This timely report proposes six key de-risking measures to make EV loans more accessible and borrower-friendly. These strategies aim to minimize perceived risks for lenders, paving the way for more attractive loan terms for EV buyers.
The report advocates for a three-pronged approach:
- EV-Tailored Financial Products: Developing loan products that account for the unique lifecycle costs and depreciation patterns of electric two- and three-wheelers compared to their gasoline counterparts. This could include extended loan terms or battery replacement guarantees.
- Standardization for Streamlining: Establishing standardized eligibility criteria for both EV manufacturers (OEMs) and financiers. This would streamline the loan application process, reducing administrative burdens and delays for both parties.
- Institutionalized Risk Mitigation: Creating a framework to encourage private sector initiatives that mitigate potential losses for lenders. This might involve credit guarantees, partial risk-sharing mechanisms, or innovative insurance products tailored to EVs.
By implementing these recommendations, the report anticipates a significant acceleration in India’s electric mobility transition. This not only translates to environmental benefits but also empowers businesses and consumers through a cleaner and more sustainable transportation landscape.
This initiative comes at a crucial juncture. With India aiming to achieve net-zero emissions by 2070, promoting electric vehicles is a central pillar of their climate strategy. Making EV financing easier and more affordable will be instrumental in achieving this ambitious goal.
