More than 1.2 million people die every year due to air pollution in India, in the WHO’s list 15 cities are worst polluted, out of them, 14 are India cities. All the developing and developed countries are focusing on implementing ideas to reduce air pollution and feel that EV’s are one of the best options to reduce the pollution and carbon footprints. The EV sector has grown rapidly in the last few years in India as well as at the global level. US, China and Norway are taking huge strides in electric mobility. US leads in innovation and pushing the boundaries of EV performance; China in terms of making EVs affordable and manufactureable on large scale. India needs to be a visionary leader in the still nascent and rapidly evolving field of electric mobility. Creating the right framework and policies are of utmost importance in institutionalizing change. Banks needs to step in with smooth finance policies and encourage people to adopt EVs.
The EV 2w’s have already demonstrated their use case and the move to EV is inevitable.
Therefore the case for a move from petrol 2w to ev2w is very strong and this move will happen invariably.
Present scenario
Present Sales: The Indian automotive market is a largely two wheeler driven market. Last year alone in spite of covid related disruptions, 1.77 crore 2w were sold in India. The total 2w population in India is well over 20 crore. Out of this EV 2w accounted for 152,000 only. Compare that with over 1 lakh bookings received within a few days by a new EV 2W manufacturer.
This shows that the appetite for vehicles is there but for reasons mentioned below, the sales have suffered.
Present Challenges:
Future of EV’s in India:
Financial Market Size in Future:
Inherently EV’s are more expensive than petrol 2w’s (without government subsidy) and the payback happens over the lifecycle of the vehicle. i.e. Ev’s require the consumer to spend 20 to 30000 more upfront and that cost is recovered during the usage of the vehicle in the next 2-3 years. Now the government subsidies might encourage consumers to opt for ev’s in the short run, but over a longer period of time, that role will reduce. Also as we have learnt from other technologies that as the EV technology will mature, EV’s will not get cheaper, rather they will get feature reach and more capable while remaining at the same cost. Therefore the financing requirements of EV’s are higher than the petrol vehicles and for EV’s to succeed in the long run the cost of finance has to be viable.
The higher financing need along with the sheer quantum of investment needed means that the financial institutions of our country need to play an ever larger role in the proliferation of evs’. This need is felt by both the retail customers and fleet owners. Therefore more mainstream banks and financial institutions need to step in and develop understanding of this new industry. At the same time risks have to be understood and mitigated or shared across the ecosystem to ensure that the cost of capital is lower.