Home / News / India /  Govt plans easy access to affordable finance for EVs

After announcing policy initiatives to develop India as a hub for lithium-ion cell manufacturing, the government has been working on a range of measures to ensure the availability of affordable credit to the nascent electric vehicle industry.

The government’s policy think tank NITI Aayog has been working on series of measures to ensure banks and financial institutions offer credit at affordable rates to buyers of electric vehicles, and easy availability of finance for projects related to the development and production of such zero-emission vehicles.

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The World Bank Group has been assisting the government to formulate these policy measures, said two people directly aware of the development, seeking anonymity. At present the lack of finance is considered a key hurdle to EV sales.

According to the first person cited above, NITI Aayog is concerned about the lack of financing options available for customers of electric two- and three-wheelers, which senior officials said will get most traction in the next few years.

“Today the interest rate on a combustion engine vehicle is 10-14% depending on the bank and the customer. The same for an EV is 20-25% and senior officials of NITI Aayog and the government want to create an enabling environment for access to credit for these vehicles. Subsequently they will also look at the availability of finance for projects related to EVs," he added.

In its quest to reduce vehicular pollution and crude oil imports, the Narendra Modi government has been urging vehicle manufacturers to develop and manufacturer EVs in India. It had earmarked 10,000-crore for the Faster Adoption and Manufacturing of Electric and Hybrid vehicle (FAME) scheme in 2019 to promote the sale of EVs and for setting up related infrastructure such as charging stations.

On 11 November, the Centre announced a production-linked manufacturing scheme worth 18,000 crore to promote lithium-ion cell manufacturing in India.

“Currently, electric vehicles do not have a robust resale market, which makes it difficult for banks to ascertain their residual value. This leads to higher cost of financing for electric vehicles compared to their ICE counterparts," a NITI Aayog spokesperson said in response to an email query on Wednesday.

He said NITI Aayog has received a proposal from the World Bank on a few steps to offer easy access to finance for EV buyers. The proposal is at a very preliminary stage of discussion.

The EV industry is in a nascent stage and has not managed to gain traction in the domestic market due to their prices, which are higher than combustion engine vehicles, lack of charging station and absence of local manufacturing. In the last two years, automakers and startups for three- and two-wheelers have launched a slew of products expecting demand to pick up.

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