Auto loans are an important segment in retail lending in India. As the economy bounces back following the Covid-19 slowdown, and consumers express an increasing affinity towards personal mobility, lending for personal vehicles, especially two-wheelers, has been on the path to recovery. Overall, nearly 77 per cent of all vehicles in India are financed through banks and non-banking financial corporations (NBFCs), though this share varies across different segments. Multiple sources demonstrate that commercial vehicles, three-wheelers, and two-wheelers are some of the leading segments in terms of credit borrowing in India.
However, the increasing success of electric vehicles (EVs) in big cities and small towns alike, particularly in the commercial, three-wheeler, and two-wheeler segments, requires special attention. Today, nearly 45 per cent of all three-wheelers sold in India – mostly comprising battery rickshaws – are electric. Further, electric two-wheelers form nearly 54 per cent of all EVs sold in FY 2021–22. The relatively higher cost of EVs also makes this segment amenable to alternate forms of financing.
EV loans in India are provided by the following kinds of financial institutions. The list of players mentioned is non-exhaustive and ever-increasing.
The State Bank of India (SBI) is one of the primary players in this space through its ‘Green Car Loan’. Banks such as HDFC have announced plans to soon enter the EV financing space, while other mainstream names, such as Yes Bank and Axis Bank, have tied up with vehicle manufacturers to provide affordable EMIs for EVs.
NBFCs in the EV financing space in India operate under either a captive or non-captive model. Captive NBFCs such as Manappuram, Vedika Credit Capital, Cholamandalam, and Greaves Finance have partnered with vehicle manufacturers to provide their consumers with affordable financing. Alternatively, non-captive NBFCs such as Three Wheels United, Revfin, and Autovert work towards financing particular vehicle segments.
Leasers in the EV space, such as Aeron Mobility, LeasePlan, QuikLyz, and Energy Efficiency Services Limited (EESL) allow owners to lease electric vehicles instead of owning them, thus encouraging the mass adoption of EVs, especially in government and commercial fleets.
Other participants in India’s EV financing space include those operating as guarantors – both private and institutional. Eqaro Guarantees is one such private company that currently collaborates with Prest Loans and Terra Motors to facilitate the financing of EVs in India, thus bridging the gap between financiers and end-consumers. On the other hand, institutions such as the World Bank and NITI Aayog in collaboration with SBI have set up a ‘first-loss-sharing instrument’ to reduce the cost of EV financing by providing credit guarantees to financial institutions. On the other hand, governments too can play a vital role in making financing more easily available for EV buyers through instruments such as interest subventions as provided by the governments of Delhi and Kerala. The Delhi Financing Corporation provides interest subventions of up to 5 per cent for all e-3Ws, while the Kerala Financing Corporation has managed to bring down interest rates on EV loans across categories to 7 per cent through a subvention of 3 per cent. These are inclusive of vehicle and charger costs, road tax, registration fees, and insurance costs.