NITI Aayog Report Emphasises on ‘Finance’ for Better EV Future

The role of finance is critical for the holistic and comprehensive growth and development of India’s electric vehicle industry and a ‘just transition’, finds a new report released by NITI Aayog and the Rocky Mountain Institute (RMI) India.

The report, titled ‘Mobilising Electric Vehicle Financing in India’, finds that the transition to clean mobility will require a cumulative capital investment of $266 billion in electric vehicles, charging infrastructure, and batteries over the next decade.

The report also identifies a market size of USD 50 billion for the financing of EVs in 2030. This is about 80% of the current size of India’s retail vehicle finance industry which itself is worth USD 60 billion today. The report finds that India’s battery market can surpass $15 billion by 2030 and the battery demand can swell to about 260 GWh by the end of the decade.

Amitabh Kant, CEO, NITI Aayog, says, “The need of the hour is to mobilise capital and finance towards EV assets and infrastructure. As we work towards accelerating the domestic adoption of EVs and push for globally competitive manufacturing of EVs and components like advanced cell chemistry batteries, we need banks and other financiers to lower the cost and increase the flow of capital for electric vehicles.”

The final consumers of EVs and related services are facing a plethora of challenges that include high interest rates, high insurance rates and low loan-to-value ratios. Hence, the report identifies financing as the next critical barrier that needs to be addressed to accelerate India’s electric mobility transition. The country’s EV ecosystem has thus far focused on overcoming adoption hurdles associated with technology cost, infrastructure availability, and consumer behaviour.

Both NITI Ayog and Rocky Mountain Institute have proposed a toolkit of 10 solutions to address these challenges and promote the EV sector in the country. These are meant to be adopted by financial institutions such as banks and non-banking financial companies (NBFCs), as well as the industry and the government in accumulating the required capital.

RMI’s senior principal Clay Stranger believes that re-engineering vehicle finance and mobilising public and private capital will be critical to accelerating the deployment of the 50 million EVs that could be plying on India’s roads by 2030. “These solutions represent high-leverage areas for interventions in finance, and we believe that many are relevant beyond India,” he said.

The Toolkit of Solutions

The 10 solutions recommended by the think tank in the report include financial instruments such as priority-sector lending and interest-rate subvention. Fostering better partnerships between original equipment manufacturers (OEMs) and financial institutions by providing product guarantees and warranties. The report also calls for the formalisation and development of a ‘secondary market’ which can improve the resale value of EVs and raise their bankability.

Digital lending, business model innovation, fleet and aggregator electrification targets, and the creation of an open data repository for EVs are non-finance recommendations in the report for the growth of the industry in India.