India’s EV revolution needs an innovative financing spark


Sandeep Divakaran

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Sandeep Divakaran

1 reads

Despite India’s surge in EV vehicle sales, cost remains the biggest impediment to India’s EV adoption. With traditional financing options not keeping up with the realities of electric mobility, financing options tailor-made for EVs could fuel the electrification of India’s transport sector.

January 22, 2024


Key Takeaways

  • While sales of EVs have surged in India, they still only accounted for 6.4% of new vehicle sales in 2023
  • Cost is a major hurdle to greater adoption, with the average EV costing 1.5-2X its ICE counterpart
  • Innovative financing models, like leasing, subscription, and flexible loan structures could ease the burden of the higher initial costs associated with EVs
  • Alongside this, regulatory intervention is necessary to further facilitate financiers in introducing more efficient and effective finance solutions for prospective EV owners

In the throes of a global climate crisis, India stands at the forefront of a crucial endeavour—the electrification of its transportation sector. With 70% of diesel and 99.6% of petrol consumption emanating from the transportation sector, the nation is grappling with a significant contributor to its carbon footprint. As India ambitiously strives to achieve net-zero carbon emissions by 2070, the adoption of electric vehicles (EVs) is not just a choice but a necessity.

The Indian government, cognizant of this imperative, has introduced a series of incentives and subsidies to catalyse the shift toward sustainable transportation. Initiatives such as FAME (Faster Adoption and Manufacturing of Hybrid and Electric Vehicles) and PLI (Production Linked Incentive) have played a pivotal role in stimulating the indigenous development and manufacturing of electric vehicles and the requisite charging infrastructure across the country. The success of these policies is evident in the rapid surge in EV sales, which reached 1.53 million units in 2023, marking a remarkable 50%  increase over the previous year.

In the realm of EV sales, electric two-wheelers (E2W) and electric three-wheelers (E3W) play a significant role in terms of their contribution volume.  Specifically, 56% of EV sales were attributed to E2Ws, while E3Ws accounted for 38%. Thus, it’s reasonable to conclude that the uptake of EVs is highest in the last-mile mobility segment, and the main reasons for this are the ever-increasing costs of petrol and diesel, coupled with the lower operating costs of electric substitutes.

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