Electric vehicle sales in India have been gaining momentum. In 2024, for instance, close to 19.50 lakh EVs were sold. However, electric passenger vehicles accounted for only around 90,000 of those. The share of electric passenger vehicles in the overall PV market has also been in the low single digits. How can that change?
New product launches, for one, are expected to drive up the penetration as consumers get more choices. The Finance Industry Development Council (FIDC), the representative body of non-banking finance companies, says, that just as the government incentivised manufacturing through production-linked incentives, there is a need for similar initiatives for EV financiers.
FIDC highlighted various challenges faced by financers for EVs. Currently, EV financing is treated similarly to ICE (internal combustion engine) vehicle finance and there are no special incentives available. However, there are specific EV-related challenges that they face. For instance, there is a lack of standardised battery life assessment and resale mechanism. There are also depreciation fears due to evolving battery tech and unclear warranties, the FIDC pointed out.
FIDC also noted that the rapid advancement in battery technology, like solid-state batteries, sodium-ion batteries, and so on, increased asset risk. Moreover, there was also limited data on battery degradation in Indian conditions.
One of the reasons behind the slow adoption of electric cars is the range anxiety people have and the limited charging infrastructure available, particularly in smaller towns. FIDC said there is a high "collateral risk" for financiers if EVs remain underutilised. The cost of capital is also high, according to FIDC.
"FIDC urges the Government of India to adopt a holistic approach, combining fiscal incentives, regulatory clarity, and infrastructure development to unlock $50 billion in EV financing by 2030," said Mahesh Thakkar, director general of FIDC.
FIDC has called for amendments to the Motor Vehicles Act to identify EV batteries as a separate asset class. This, FIDC says, would give a boost to financing or leasing of EV batteries. Furthermore, it wants the battery number to be mandatorily registered in the vehicle registration certificate to check the fraudulent sale of batteries.
FIDC also feels there is a need to develop a national telematics platform for real-time battery tracking, which can be shared across platforms.
On the regulatory side, FIDC said there was a need to treat EV financing differently, just as asset financing was given special treatment sometime back. There is also a case for regulatory forbearance in prudential norms, and FIDC feels one-time restructuring of EV loans should be allowed.
