More than 1.2 million people die every year due to air pollution in India, in the WHO’s list 15 cities are worst polluted, out of them, 14 are India cities. All the developing and developed countries are focusing on implementing ideas to reduce air pollution and feel that EV’s are one of the best options to reduce the pollution and carbon footprints. The EV sector has grown rapidly in the last few years in India as well as at the global level. US, China and Norway are taking huge strides in electric mobility. US leads in innovation and pushing the boundaries of EV performance; China in terms of making EVs affordable and manufactureable on large scale. India needs to be a visionary leader in the still nascent and rapidly evolving field of electric mobility. Creating the right framework and policies are of utmost importance in institutionalizing change. Banks needs to step in with smooth finance policies and encourage people to adopt EVs.
The EV 2w’s have already demonstrated their use case and the move to EV is inevitable.
Economical: As India sees spike in the price of petrol reaching 100 Rs/ltr. A 2 wheeler costs anywhere between 1.5 rs to 2rs/km to run and add another 0.5 RS/km for maintenance etc. EV’s on the other hand cost less than 0.1/km. Therefore EV 2W have a distinct cost advantage and with the pollution aspects: WHO’s list of the 15 Worst Polluted Cities of the World, India has 14 & Road transport is alone responsible for about 67% of CO2 emissions. 1.2 Million people lose their lives early in India alone, due to poor air quality. Two-wheelers are the largest source of pollution.
Rental EV option: VA-YU provides EV 2W on rent, which makes it easy to use the vehicle and save on running cost without any capital costs.
EV 2w are largely not reliant on any charging network infrastructure and can be easily charged from normal domestic plug points.
Therefore the case for a move from petrol 2w to ev2w is very strong and this move will happen invariably.
Present Sales: The Indian automotive market is a largely two wheeler driven market. Last year alone in spite of covid related disruptions, 1.77 crore 2w were sold in India. The total 2w population in India is well over 20 crore. Out of this EV 2w accounted for 152,000 only. Compare that with over 1 lakh bookings received within a few days by a new EV 2W manufacturer.
This shows that the appetite for vehicles is there but for reasons mentioned below, the sales have suffered.
Low quality and unreliable Chinese products have dented the consumer’s trust and has made it very hard to select the right products.
Very few mechanics can repair EVs and the network for all EV manufacturers is very few and far.
A strong bank finance mechanism for EVs is still missing in the country. Very few banks, offer loans on selected models and the cost of financing is disproportionate to the cost of finance for petrol 2w’s.
Lack of resale market for EV 2w and therefore the consumers are uncertain of the end of life value of these EV's
Future of EV’s in India:
As per NITI Aayog, the electric two-wheeler industry is expected to grow at an exponential rate in the coming years, taking over 80% of the market by 2030.
Various other sources put this at an annual sales of 1.5 to 3 crore units pa by 2030 and the total EV population at over 10 crores.
Financial Market Size in Future:
This entails an investment of 5-6 lac crores on vehicles and another 1-2 lac crore on replacement batteries and infrastructure like charging network, spare batteries, workshops, trainings etc. Add to that another 3 lac crore in order to generate enough electricity to power these vehicles (200 GWh).
This is a massive undertaking and it requires contribution from across the financial industry.
The currently available financing options are very few and the cost of funding is high. This is impacting the cost-saving calculations wrt the petrol vehicles.
Inherently EV’s are more expensive than petrol 2w’s (without government subsidy) and the payback happens over the lifecycle of the vehicle. i.e. Ev’s require the consumer to spend 20 to 30000 more upfront and that cost is recovered during the usage of the vehicle in the next 2-3 years. Now the government subsidies might encourage consumers to opt for ev’s in the short run, but over a longer period of time, that role will reduce. Also as we have learnt from other technologies that as the EV technology will mature, EV’s will not get cheaper, rather they will get feature reach and more capable while remaining at the same cost. Therefore the financing requirements of EV’s are higher than the petrol vehicles and for EV’s to succeed in the long run the cost of finance has to be viable.
The higher financing need along with the sheer quantum of investment needed means that the financial institutions of our country need to play an ever larger role in the proliferation of evs’. This need is felt by both the retail customers and fleet owners. Therefore more mainstream banks and financial institutions need to step in and develop understanding of this new industry. At the same time risks have to be understood and mitigated or shared across the ecosystem to ensure that the cost of capital is lower.
Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house