There are more than 1.75 million electric three-wheelers in India, according to the Society for Manufacturers of Electric Vehicles. This is an impressive number compared to the meagre 8,000 electric cars in the country bought annually so far. This stark contrast highlights the significant presence of electric three-wheelers on Indian roads.
Furthermore, industry projections suggest that the Indian e-rickshaw market will experience a CAGR of 9% to reach $5 billion by 2025. These statistics clearly demonstrate the promising growth and sustainability of the Electric Vehicle (EV) industry in India.
“Beyond the numbers, this paradigm shift represents a significant shift in mindset, embracing eco-consciousness and reimagining mobility solutions. As we venture into this transformative era, the electric vehicle industry revolutionise the way we commute. It will also create new avenues for job creation, technological innovation, and global competitiveness. For this, the right boost by Fintech companies in the sector has begun,” asserts finance and loan expert Manish Mehta, Founder and CEO, Mekay Consultants.
However, the high upfront costs associated with EV purchases remain a significant barrier to widespread adoption. In response to this challenge, the fintech industry has stepped in with innovative solutions. Electric vehicle finance has become an option of choice for all stakeholders. Through the integration of technology and alternative financing models, EVs are more accessible and affordable for consumers.
Current challenges in electric vehicle finance
- High upfront costs: A key hurdle hindering mass adoption of EVs is their relatively high price tag. These vehicles often carry a premium compared to traditional cars due to the costly battery technology and other components. The price differential poses a significant deterrent for potential buyers interested in embracing sustainable transportation options.
- Limited access to financing: Traditional financing options such as bank loans may not always cater specifically to EV buyers. Stringent credit requirements and the absence of dedicated EV financing programs. Lastly, the lack of awareness about existing options makes it challenging for individuals to secure affordable financing.
- Resale value concerns: Potential buyers often express concerns about the resale value of EVs, particularly electric three wheelers. Rapid technological advancements and shifting consumer preferences can impact the future value of these vehicles. Apart from that, it will create uncertainty and hesitancy among buyers.
Innovations in EV fintech solutions
“Towards the cause of mitigating climate change and global warming, there has been a race for sustainable mobility alternatives, making EVs the ideal choice,” said Sameer Agarwal, Founder & CEO Revfin Services, which is an advanced digital consumer lending platform for accessible loans. This fintech platform has its own NBFC.
He adds,upfront high cost of acquisition of EVs, coupled with range anxiety and lack of adequate charging infrastructure, are roadblocks to widespread adoption. To remove such entry barriers, the option to take the EV leasing route will encourage aspirants and ease adoption. Moreover, leasing of electric three-wheelers in India isolates you from the concern of depreciation of the asset as the value nose-dives. This matter when it is compared to buying the vehicle.
How are fintech companies innovating for electric vehicles?
Electric vehicle leasing platforms
Fintech companies have introduced innovative leasing platforms tailored to the unique needs of EV owners. These platforms offer flexible lease terms, lower monthly payments, and the option to upgrade to newer models as technology progresses. By alleviating the financial burden associated with EV ownership, leasing platforms are attracting more customers. This is accelerating the adoption of sustainable transportation.
Sameer substantiates the strategy by adding, “Leasing is among the most cost-efficient for such micro-entrepreneurs and also has the potential to catalyse employment generation for millions of people, simultaneously reducing carbon emissions.”
Peer-to-peer lending platforms have disrupted the traditional lending landscape by directly connecting EV buyers with potential lenders. These platforms utilize technology to match borrowers and lenders based on their financial profiles and creditworthiness, enabling individuals to secure loans at competitive interest rates. By eliminating intermediaries, peer-to-peer lending platforms simplify the financing process and broaden access to affordable EV loans.
The high cost of EVs is significantly influenced by expensive battery technology. BaaS models address this concern by separating the battery cost from the vehicle purchase price. Instead of a lump sum payment upfront, consumers pay a monthly fee for the battery’s usage. This approach reduces the initial investment required and addresses worries related to battery performance and longevity. Furthermore, BaaS models allow for battery upgrades as newer and improved technologies become available, providing customers with the latest advancements without purchasing an entirely new vehicle.
Based on our discussion with experts, the Future of Electric Vehicle Financing is based on these three things.
- Integration of blockchain technology
Blockchain technology holds tremendous potential to revolutionize EV financing by providing transparent and secure transactions. With smart contracts and decentralized ledgers, blockchain can facilitate peer-to-peer transactions and automate payment systems, making EV financing more efficient and accessible. This integration could streamline administrative processes, reduce the risk of fraud, and enhance overall trust within the financing ecosystem.
- Expansion of charging infrastructure financing
Fintech solutions are also expanding their focus to include financing options for the installation and maintenance of charging infrastructure. Startups are emerging to provide funding for the development of robust and widespread charging networks. This ensures that EV owners have convenient access to charging stations. Sameer asserts, “Electric vehicle charging stations and swapping alongside easing the availability of loans will further stimulate the ecosystem and enable people to ‘go electric’. Set-up of such infra supported by incentivising the stakeholders in their endeavours is the need of the hour.”
- Inclusion of environmental and social factors
As sustainability gains prominence, lenders are starting to incorporate environmental and social factors into their financing decisions.
Nikhil Bhatia, Co-Founder & Chief Operating Officer, HOP Electric Mobility talks about pay as you go. He informs, “We just implemeted a PAY AS YOU GO program with our Hop OXO customers, where consumers pay us for each kilometre travelled”. This eliminates the issue of battery life for consumers. The focus is then on offering value-driven products at affordable prices for ‘Bharat’. HOP Electric Mobility offers e2Ws, scooters, and motorcycles with connected technologies. They are priced from Rs. 68K to 1.48 lac. (without subsidy). They have three products in the market currently — two e-scooters and an e-motorcycle.
Bhatia describes their efforts to encourage EV adoption. He says, “In areas where traditional banks do not lend, we made easy financing available across all of our ‘HOP Experience Centres’ through our NBFC.” He says PLI will also help them achieve scale in India for the rest of the globe.
This kind of boost allows lenders to offer preferential rates or terms to individuals purchasing electric vehicles. This encourages the adoption of sustainable transportation and rewarding environmentally responsible choices. In this way, financing becomes a catalyst for promoting positive environmental impact.
The Final Word…
Sameer concludes, “Taking a bigger picture, companies should chart their ESG roadmap considering the rising pollution levels and the urgent need for industries to take a turn towards sustainability.” He suggests that this way, the significance of sustainable mobility platforms trickles down right from the top, and the government, where EVs and other forms of New Energy Vehicles and fuels (such as Hydrogen Fuel Cells) are being scouted to achieve the goal of transitioning to such platforms by 2030.
In short, there is a long road ahead to go, but innovative fintech solutions are reshaping the landscape of electric three wheelers vehicle financing in India. Good news is, this paves the way for a sustainable future. Looking ahead, the integration of blockchain technology, the consideration of environmental and social factors in financing decisions, and the expansion of charging infrastructure financing will further enhance the accessibility and affordability of EVs. With these developments, electric vehicle financing is set to unlock the potential for a greener and more sustainable transportation ecosystem.