The automotive industry’s future undoubtedly lies in Electric Vehicles (EVs), especially as more and more countries phase out fossil fuel vehicles. In India, the government has set a target to electrify 30% of the country’s transportation by 2030. However, achieving this goal requires creating awareness among the general public about the transition to EVs, the reasons behind it, the process of switching, and ensuring widespread availability of EVs. Additionally, providing affordable financing options is crucial to enable people to purchase EVs through reasonable payment plans.
Currently valued at $2.15 billion in India, EV financing is projected to reach an impressive $50 billion by 2030 (according to the Niti Ayog report “mobilising finance for EVs in India” in Jan 2021). Interestingly, fintech companies are taking the lead in the EV finance market, with startups contributing 63% of electric two-wheeler financing, while banks account for the rest. Banks face challenges in keeping up with the demand due to frequent technological advancements by manufacturers and a lack of understanding and infrastructure for e-mobility.
Active involvement from Banks and Non-Banking Financial Companies (NBFCs) is crucial in offering sustainable financial services for Electric Vehicles (EVs) to drive increased adoption in India. The significant upfront costs and concerns about technological obsolescence often discourage customers from transitioning to EVs. However, fintech startups are utilising technology and data to address these issues by introducing new business models that provide customers with the benefits of lower total cost of ownership (TCO).
Financial institutions can collaborate with fintech startups to enhance their offerings for prospective EV buyers and leverage their adaptable technologies. These partnerships have the potential to create innovative financing options tailored to the specific needs of EV buyers. By harnessing fintech capabilities, banks can simplify the loan application process, offer competitive interest rates, and provide flexible repayment alternatives, thus improving the accessibility and affordability of EVs for consumers. Banks and large NBFCs can effectively spread out the cost of EVs over time, making them more affordable and expanding the range of options available to consumers. This approach eases the financial burden and enables a broader segment of the population to view EVs as a feasible and appealing mode of transportation.
As environmental concerns grow and social inequalities persist, the financial sector must embrace sustainable practices that prioritise long-term economic stability, social well-being, and ecological preservation. With the increasing prominence of the EV market, sustainable finance supported by innovative fintech collaborations and government initiatives helps consumers overcome financial barriers associated with EV purchases. Ultimately, integrating sustainable finance into the EV sector serves as a catalyst for building a more resilient society and paving the way for a greener future.
