It is now widely acknowledged that embracing electric mobility is central to our nation's commitment to transitioning towards a more sustainable future. One of the most compelling and enduring advantages of adopting electric vehicles is their positive environmental influence. Conventional internal combustion engine (ICE) vehicles are responsible for approximately 11% of India's annual carbon dioxide (CO2) emissions, accounting for 99.6% of the country's yearly petrol and 70% of diesel consumption. In contrast, electric vehicles exhibit significantly lower emissions than their ICE counterparts. By choosing electric vehicles, consumers actively contribute to reducing air pollution, greenhouse gas emissions, and overall ecological decline.
Both the Central and State Governments have placed significant importance on and actively contributed to accelerating this transition to electric mobility through various measures. These include incentives for demand, such as the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) program, supply subsidies like the Production Linked Incentive (PLI), and reduced taxation under the Goods and Services Tax (GST) framework. The supportive policies have given a strong impetus to EV adoption, particularly in segments like two-wheelers, three-wheelers, and four-wheeler taxis.
Financial savings constitute another critical advantage of EVs in the long term. Although the initial cost of an electric vehicle might be higher than that of a traditional ICE vehicle, the operational expenses are notably lower. EVs have fewer moving parts and require less maintenance, reducing upkeep costs over time. Additionally, the cost of electricity, which powers EVs, tends to be more stable and predictable than fluctuating fuel prices.
Nonetheless, to further expedite the widespread adoption of electric vehicles, the industry must address significant psychological barriers that potential customers encounter when contemplating switching from internal combustion engines (ICE) to EVs. These key factors encompass:
Range Anxiety and Charging Time: Concerns about running out of battery power (range anxiety) and the time required for recharging.
Charging Infrastructure:The availability and accessibility of charging stations play a crucial role in the feasibility of EV ownership.
Technological Obsolescence and Battery Life: Apprehensions about the longevity of batteries and the pace of technological advancements in the EV industry.
Resale Value Uncertainty: Lack of clarity regarding the future resale value of electric vehicles.
Higher Upfront Costs: The relatively higher initial investment required for purchasing an electric vehicle than traditional ICE vehicles.
While the industry is solving some of the above points by creating more contiguous public charging networks and working on innovative options like fast charging and swapping, other points need specialised independent entities focused on Asset Lifecycle Management to emerge. EV financing is not like typical ICE vehicle financing since a large part of the cost of an EV is the lithiumbattery (will continue to be so even if chemistry changes and with indigenisation). Furthermore, these batteries have a usage beyond automotive and hence need to be managed across their lifecycle due to the higher cost and the scarce metals they are made of.
EV financing will be the most critical catalyst for EV adoption to accelerate. This will need the emergence of specialised EV financing entities that can manage the EV and the batteries across their lifecycle.By doing asset lifecycle management, these entities can bring down the cost for each user segment and remove barriers to adoption, as pointed out above. This further embellishes the benefits of circularity thereby.
EVs constitute around 1.3% of India's new vehicle sales. While this market share is progressively rising, expediting adoption requires mitigating the obstacles that hinder customers from transitioning to electric mobility. As financial institutions like banks, OEMs, and other NBFCs focus on devising financial strategies for India's evolving EV market, there arises a necessity for the Indian government to empower EV financiers by offering advantages that can not only accelerate adoption but also alleviate costs for consumers. These measures include designating EV financing as a priority lending sector, implementing lower GST rates for EV batteries to facilitate battery leasing and asset lifecycle management, introducing incentives for battery repurchase and recycling, and applying accelerated depreciation benefits for EVs, both users acquiring loans and lessors engaging in leases.
The scope of benefits offered by EV financing extends far beyond the mere acquisition of an electric vehicle, encapsulating a diverse array of compelling advantages. Opting for EV financing carries resonance on multiple fronts, from preserving the environment and generating substantial financial gains to embracing technological progress and fostering societal enhancements.
(Sandeep Divakaran, the author, is ED & CEO,evfin powered by Greaves Finance Ltd. The views expressed here are personal)
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