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The steady build-up of consumer excitement for electric vehicles (EV) has not spilled over to lenders.
According to manufacturers and EV buyers, lenders are reluctant to lend to this segment citing issues of vehicles’ residual value.
While the EV segment is in its infancy, accounting for just 1.3 per cent of the overall automobile sales in the country, demand for battery-powered vehicles is expected to surge.
EV manufacturers will require help from lenders given that more than 85 per cent of all vehicles sold are financed.
Mahua Acharya, Managing Director, Convergence Energy Services (CESL), said: “When the batteries stop (functioning) does the loan go bad? We have also heard of large banks saying that they do not wish to repossess an autorickshaw, which is otherwise a source of livelihood for the driver’s family. For them, it is a reputational risk for a few lakhs of rupees. The biggest fear is there is no surety of the resale price.”
Delhi-based CESL is a state-owned company tasked with procuring EVs for selling or leasing.
EV sales are projected to grow at a CAGR of 90 per cent till 2030. Electric two- and three-wheelers are the biggest volume generators presently followed by passenger vehicles.
Govt push
The government has left no stone unturned to push EVs — from tax cuts and loan repayment relief to fiscal incentives to manufacturers.
The RBI is considering a proposal from NITI Aayog to place EV loans under priority sector lending, which will allow the sector to get loans at lower interest rates.
Suman Mishra, CEO, Mahindra Electric Mobility, said: “The residual value of the product is not established as this segment has not even completed five years which is why financiers charge a higher IRR. So, obviously limited financing is available in the market as a whole.”
An EV dealer, on condition of anonymity, said: “It is easier for banks to finance petrol/diesel cars because that’s an established business model. But the EV business is not proven yet and that is why banks are reluctant.”
But banks say auto loans are provided on the basis of the repayment capacity of the borrower and do not depend on the vehicle type. “There are no issues in financing EVs as loans are a function of a borrower's repayment capacity and not so much the cost of the vehicle,” a banker said.
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