India’s next EV push: Easier loans for electric trucks and buses in the works
The Centre is working on a new scheme to make loans cheaper for commercial EV buyers, aiming to tackle the credit bottleneck slowing India’s green mobility transition.
NEW DELHI: The Centre is working on an incentives scheme to finance electric truck and bus purchases, as lenders remain wary of expensive EVs that depreciate rapidly. The scheme will target one of the biggest bottlenecks in India’s transition to green mobility—the lack of affordable credit for fleet owners.
The ministry of heavy industries (MHI) and the department of financial services (DFS) under the finance ministry are discussing a framework to support commercial electric vehicle (EV) financing, two people aware of the development said. The effort, which follows a nudge from Niti Aayog, could involve incentives for lenders and guidelines for lending to buyers of electric commercial vehicles.
The scheme will encourage banks and non-banking financial companies (NBFCs) to lend at lower rates and design products that shift costs from upfront capital expenses to operational expenses, one of the two people said, requesting anonymity. In an August report, Niti Aayog had recommended creating a pooled fund from public and multilateral sources to provide low-interest loans, especially to small fleet operators. The thinktank suggested the scheme be implemented within a year of its recommendation.
“Talks have started between MHI and DFS for going ahead with the Niti Aayog recommendation," the second person said, adding no funding corpus has been finalized yet.
India's commercial EV financing market may expand to nearly $20 billion by 2030, up from $2.37 billion in 2025, according to Mordor Intelligence, a market intelligence firm.
Queries emailed to MHI, DFS, and NITI Aayog on 3 November remained unanswered.
Financing the shift
“Lenders encounter higher risks when financing e-trucks and e-buses, as their upfront costs are roughly 2.5 times those of comparable diesel vehicles. The absence of a mature resale market and uncertainty around residual values further elevate the perceived risk," said Dhiraj Agrawal, chief business officer at Mufin Green Finance, an EV financier.
Residual value, the estimated worth of a vehicle at the end of its loan term, tends to be lower and more uncertain for EVs because their batteries depreciate faster than ICE engines. That makes battery health tracking crucial for lenders evaluating asset quality and resale potential.
According to Surya Khurana, managing director of FlixBus India, financing e-buses is hard due to their high costs, evolving technology, and limited data on historical performance. "Unlike diesel buses, e-buses are a relatively new asset class, which makes lenders cautious about battery life, asset value, and long-term reliability. Additionally, smaller bus operators often lack the balance sheet strength or financing experience needed to secure favourable terms, resulting in higher perceived risk for banks and NBFCs."
FlixBus India is the Indian subsidiary of the German intercity coach service FlixBus, offering affordable, tech-enabled, and safe long-distance bus travel by partnering with local bus operators.
Mufin's Agrawal said EV buyers pay more in loan costs.
"In the electric two-wheeler and three-wheeler segments, loan interest rates are often 5-14 percentage points higher than for comparable petrol or diesel vehicles. Interest rates for commercial EVs (especially heavy-duty) are often 5-10 percentage points higher than ICE vehicles, depending on the lender and borrower profile," Agrawal added.
The push for a financing mechanism comes as India seeks to cut its dependence on fuel imports and move toward net zero emissions by 2070. While policy incentives such as FAME and PM E-Drive have boosted electric two- and three-wheeler sales, large commercial vehicles remain a laggard.
Electric trucks and buses cost two to three times as much as their internal combustion engine (ICE) equivalents, a major deterrent for small fleet operators. An electric bus costs approximately ₹1-1.25 crore or more, while a diesel bus may cost ₹25-50 lakh, depending on size. Heavy electric trucks, above 12 tonnes in gross vehicle weight, are similarly priced at ₹1-1.5 crore compared to ₹25-50 lakh for their diesel counterparts.
The Niti Aayog report also noted that truck and bus ownership in India is highly fragmented, with small players struggling to secure financing for high-value EVs.
“Lenders use vehicle telematics, battery health monitoring, and maintenance records to track asset performance and usage. However, the lack of standardized frameworks for reporting battery degradation and forecasting residual values in India complicates asset monitoring," Mufin's Agrawal said.
Experts said the absence of reliable performance data on e-trucks and e-buses makes it harder for financiers to assess risk, further constraining credit flow to the segment.
Despite policy support, adoption remains slow. As of 2024, electric buses accounted for just 7% of total bus sales in India, compared to 50% in China and 14% in Europe. Heavy-duty electric truck adoption stood at just 0.07%, versus 3% in China and 2% in Europe, according to Niti Aayog.
The new financing plan, if executed, could mark a shift from subsidy-led support to credit facilitation, aligning India’s EV policy with global best practices that emphasize risk-sharing and financial de-risking.
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