India’s Transition To EVs Require Rs 19.7 Lakh Crore, EV Finance Industry To Grow To Rs 3.7 Lakh Crore By 2030: Report

NITI Aayog and Rocky Mountain Institute (RMI) India released a new report ‘Mobilising Electric Vehicle Financing in India’, which highlights the role of finance in the India’s transition to electric vehicles (EVs).

It analyses that the transition will require a cumulative capital investment of USD 266 billion (Rs 19.7 lakh crore) in EVs, charging infrastructure, and batteries over the next decade.

The report also identifies a market size of USD 50 billion (Rs 3.7 lakh crore) for the financing of EVs by 2030. It constitutes about 80 per cent of the current size of India’s retail vehicle finance industry worth USD 60 billion (Rs 4.5 lakh crore).

“The need of the hour is to mobilise capital and finance towards EV assets and infrastructure. As we work towards accelerating the domestic adoption of EVs and push for globally competitive manufacturing of EVs and components like advance cell chemistry batteries, we need banks and other financiers to lower the cost and increase the flow of capital for electric vehicles,” said Amitabh Kant, CEO, NITI Aayog.

India’s EV ecosystem has thus far focused on overcoming adoption hurdles associated with technology cost, infrastructure availability, and consumer behaviour. Financing is the next critical barrier that needs to be addressed to accelerate India’s electric mobility transition.

End-users currently face several challenges, such as high interest rates, high insurance rates, and low loan-to-value ratios.

To address these challenges, NITI Aayog and RMI have identified a toolkit of ten solutions that financial institutions such as banks and non-banking financial companies (NBFCs), as well as the industry and government can adopt in catalysing the required capital.

The ten solutions recommended in the report include financial instruments such as priority-sector lending and interest-rate subvention. Others are related to creating better partnerships between OEMs and financial institutions by providing product guarantees and warranties.

Furthermore, a developed and formal secondary market can improve the resale value of EVs and improve their bankability. “The identified barriers within EV finance need to be tackled in a structured manner with innovative financing models,” said Randheer Singh, Senior Specialist at NITI Aayog.

The report further determines that investment in India’s transition to electric mobility has the potential to create significant economic, social, and environmental benefits for the country.