India’s transition to electric vehicles requires a cumulative capital investment of $ 266 billion (approximate) £19.7 lakh crore) in electric vehicles, charging infrastructure, and batteries over the next decade, according to a report released Tuesday by NITI Aayog and Rocky Mountain Institute (RMI).
The report also identifies a market size of $ 50 billion ( £3.7 lakh crore) to fund electric vehicles in 2030 – about 80% of the current size of India’s personal vehicle finance industry, valued at $ 60 billion ( £4.5 lakh crore). “The need of the hour is to mobilize capital and funding for electric vehicle assets and infrastructure,” said Amitabh Kant, CEO of NITI Aayog.
“As we work to accelerate the adoption of electric vehicles domestically and to drive globally competitive manufacturing of electric vehicles and components such as advanced batteries for cell chemistry, we need banks and other financiers to drive down costs and increase the flow of capital for electric vehicles . “
The Indian EV ecosystem has so far focused on overcoming adoption hurdles associated with technology costs, infrastructure availability and consumer behavior. Funding is the next critical obstacle that needs to be addressed in order to accelerate India’s transition to electric mobility.
End-users are currently facing various challenges such as high interest rates, high insurance rates and low credit-worth ratios.
To address these challenges, NITI Aayog and RMI have identified a toolkit of 10 solutions that financial institutions such as banks and non-bank financial firms (NBFCs), as well as industry and government, can use in catalyzing the required capital.
“Reshaping vehicle finance and mobilizing public and private capital will be critical to accelerating the deployment of the 50 million electric vehicles that could be on India’s roads by 2030,” said Clay Stranger, senior principal at the Rocky Mountain Institute.
“These solutions represent high leverage areas for financial intervention and we believe many are relevant beyond India,” he said.
The 10 solutions recommended in the report include financial instruments such as senior loans and interest subsidies. Others relate to creating better partnerships between OEMs and financial institutions by providing product warranties and guarantees.
In addition, a developed and formal secondary market can improve the resale value of electric vehicles and improve their bankability. “The obstacles identified within EV financing must be tackled in a structured manner with innovative financing models,” said Randheer Singh, Senior Specialist at NITI Aayog.
Recommendations beyond funding include digital loans, business model innovations, electrification targets for fleets and aggregators, and creating an open data repository for electric vehicles.
The report also notes that investing in India’s e-mobility transition has the potential to generate significant economic, social and environmental benefits for the country.
As the economics of electric vehicles continue to improve, new business models and financing instruments gain acceptance, and government programs drive early adoption and encourage domestic manufacturing, the Indian electric vehicle market is poised for growth for the coming decade, the report said.