Monday, March 17, 2025

India’s EV Transition Faces a Major Hurdle: The Need for Better EV Financing

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India’s shift to electric vehicles (EVs) is gaining momentum, but EV financing remains a major bottleneck. In a recent meeting with the central government’s think tank Niti Aayog, the Finance Industry Development Council (FIDC) urged the government to introduce a dedicated incentive scheme for EV financing, similar to the existing FAME (Faster Adoption & Manufacturing of Electric Vehicles) and Production-Linked Incentive (PLI) schemes.


✅Why EV Financing Needs Government Support

Non-banking financial companies (NBFCs) have pointed out several challenges in financing EVs:

  • No dedicated incentives: EV financing is currently treated the same as internal combustion engine (ICE) vehicle financing, offering no additional benefits to financiers.
  • Lack of standardized battery assessment: The absence of a clear framework for battery life evaluation and resale mechanisms increases financial risks.
  • Concerns over depreciation: Rapid advancements in battery technology create uncertainties about asset depreciation and resale value.
  • Limited battery degradation data: India lacks comprehensive data on battery performance under local conditions, making it difficult for lenders to assess risks.

Proposed Solutions for Boosting EV Finance

To address these issues, the FIDC has suggested several key measures:

  • Dedicated EV Financing Fund: Establishing a special fund under SIDBI (Small Industries Development Bank of India) or NABARD (National Bank for Agriculture and Rural Development) to provide funding for NBFCs to offer EV loans.
  • Subsidized Interest Rates: Introducing interest subvention schemes for EV loans under ₹10 lakh, making financing more affordable for buyers.
  • Incentives for EV Financiers: Similar to how the government promotes EV manufacturing through FAME and PLI, financial incentives should be introduced to encourage lenders to finance EV purchases.

✅ What This Means for India’s EV Ecosystem

If implemented, these measures could significantly boost EV adoption, making financing more accessible and reducing barriers for consumers. With India aiming for a major shift toward sustainable mobility, addressing the financial challenges in the sector will be crucial to accelerating the transition.

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