EV adoption in the commercial segment has continued to increase significantly in the last two years along with an advancing EV ecosystem. The economic and ecological viability of commercial EVs have pushed businesses and customers to electrify their fleets. From justified TCOs to lower maintenance, EVs have proven to be a successful use case for intra-city transportation and logistics for every business application.
The demand has seen an uptick making commercial EVs one of the fastest-growing segments. More financing solutions and offers will catalyse the adoption of EVs for business. Interest in EVs for SCV and LCV segment needs to be given more prominence. This segment is being driven by single vehicle owners or businesses that are first-time buyers (whether they are DCOs or startups or SMEs and small aggregators) after having analysed the efficiency of EVs in their operations. The need, therefore, is to make financing solutions more diverse and accessible to this emerging customer set.
Accessibility of finance for commercial EVs – the need at the local level
There is a significant opportunity to enhance access to financing options, particularly in emerging markets and smaller segments where commercial EVs are beginning to gain traction. Enhancing accessibility and managing costs are two pivotal areas to consider in the financing landscape, given that EVs often have a higher initial purchase price.
In the commercial segment, Traditional Financial Institutions and banks often have viewed EVs as high risk, while NBFCs have posed high cost of funds as challenges to finance this segment.
The industry, for the EV revolution to materialize at scale, needs appropriate lending schemes that reach the bottom of the pyramid sectors, credit deficient local and independent customers, and markets – all of which can lead the EV transition from the ground up.
Innovation and Fintech in EVs – the way to go
We need players and institutions (like SIDBI) that are approaching this from a developmental standpoint – and prioritizing segment-based financing needs and customer sets that larger NBFCs and banks cannot cater to, say tier II and III markets or DCOs.
As EV companies (and the industry itself) in India grew from the ground up a few years ago– with startups and new-age technology leading the way, we need a homegrown yet innovative financing ecosystem to increase exposure for emerging customer segments. These initiatives must focus on reducing landing costs, and more affordable credit terms, for three and four-wheeler EV spaces, which will help drive the EV value chain. These schemes and projects can also be run via pilots, depending on the geography and market needs, and can be tailored to offer eligible loans and mobilize EV deployment on a large scale.
Another focus is taking unified steps towards assuring the EV asset value (including the battery costs) for customers and the financiers- which encourages the latter to be more open to lending.
Nuanced financing initiatives directed to cater to the local business ecosystem are the way forward for a smoother and faster transition to decarbonization for the country. The industry is already taking some lead in this endeavour – with two and three-tier segment-focused schemes to spur the segment growth, and also develop local infrastructure for EVs to operate. Overall, there needs to be a large-scale push to crack underwriting EV loans – as banks and other FIs are reluctant to jump in.
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