INNOVATIONS IN EV FINANCING: EXPLORING CREATIVE SOLUTIONS FOR CONSUMERS
India, one of the top 5 global automobile markets, has made significant strides toward promoting electric vehicle adoption to meet its target of EV30@2030 and achieve net-zero emissions by 2070. Several government-based policies and interventions, including regulatory norms and incentives for demand creation through purchase subsidies under FAME-II and reduction in GST rates, have been introduced to accelerate the adoption rate of EVs.
While the pro-EV measures have helped bring the overall cost of EVs at par with most ICE, limitations in traditional EV financing continue to hamper the mass adoption of EVs in India.
Around 50% of E2Ws, 90% of E3Ws, and 80-90% of E4Ws are currently purchased on finance in the country. However, from consumers’ perspective, traditional financing options often accompany unfavourable terms, including stringent eligibility criteria, high rates of interest, and rigid repayment terms.
These gaps further make it crucial to have low-cost and innovative financing solutions in place for EVs to make them a more affordable and practical substitute for ICE vehicles for consumers. In this regard, creative EV financing solutions such as tailored loan options, leasing options, and subscription-based financing models are emerging as a breath of fresh air in the segment.
Specialised EV Loans
Today, consumers can avail of specialised EV loans from leading NBFCs and FinTechs focused on sustainability to finance their electric vehicles. Typically, specialised loan programs offer tailored financing solutions to consumers based on their needs, requirements, and risk profile.
Each loan product is designed to meet the distinct needs of retail and enterprise borrowers and provide them with funds at competitive interest rates and flexible repayment tenure suitable for their repayment capabilities. They may also help them avail of incentives like rebates or tax credits to make it easier for consumers to finance their vehicles.
EV Leasing Options
Another innovative EV financing model that has gained acceptance among consumers is access to electric vehicles on leasing. This financing option enables individuals to get new EVs at relatively lower monthly payouts than purchasing. In addition, individuals and fleet owners are likely to avail of additional benefits, such as the chance to upgrade to a newer model and receive warranty coverage on their model. Leasing EVs is also gaining popularity among salaried individuals as they can claim the entire rental sum as an expense and boost their tax savings.
Subscription-based Models for EV Ownership
In the last few years, subscription-based models in the EV financing segment have gained prominence among consumers involved in last-mile delivery businesses, logistics, and even small to medium businesses requiring frequent movement.
New-age FinTech firms and NBFCs are experimenting with subscription-based models for EV ownership, allowing consumers to explore and subscribe to multi-brand vehicle models at a monthly fee. Typically, the fee may cover the vehicle charge along with the cost of maintenance, insurance, and charging needs. This proposition enables consumers to use EVs for a cost that is often a fraction of the vehicle’s sticker price. The innovative and all-inclusive financing solution makes EVs accessible to small-scale enterprises with limited capital.
Financing for Specific Parts and Components
With a surge in demand for innovative financing, the EV sector is observing a rise in financial products that cater to specific EV-related needs, such as battery leasing options, financing for electric motors, loans for installing charging stations, and even warranty coverages for battery degradation. Such tailored financial products focused on specific needs make EV ownership accessible and affordable for OEMs and manufacturers, who are then able to develop cost-effective vehicles for retail customers.
With the availability and ease of access to innovative financing solutions, more consumers would be able to access EVs and contribute to India’s sustainable mobility. By offering a selection of innovative EV solutions with distinct features, we can encourage consumers to explore the perks of EVs and facilitate their widespread adoption in India.
-The author is MD, Accelerated Money for U (AMU). Views expressed are personal.