Financing E-mobility in India: Stakeholder-Driven Solutions
As the world’s third largest oil importer and the fifth largest automobile market, India is signaling a shift to electric mobility. However, to grow the nascent EV market, financing is critical.
Co-authored with Marie McNamara
India’s 2021 annual budget prioritizes clean air and clean transportation. As the world’s third largest oil importer, and the fifth largest automobile market, India is signaling a shift to electric mobility. However, to grow the nascent EV market, financing is critical. An estimated $266 billion is needed in cumulative capital by 2030 to transition to electric mobility in the country. Stakeholders across India states are coming together to develop innovative financial solutions that can help the market achieve scale.
India is expected to be the world’s largest car market by 2050 and transitioning early to EVs can cut down debilitating air pollution, save money for vehicle owners, create thousands of new jobs, avoid greenhouse gas emissions, and help cut down the nation’s dependence on imported oil.
A new issue brief, “Stakeholder Driven Solutions for Financing Electric Mobility: Perspectives from Indian States,” presents innovative solutions to finance electric mobility in India. Several states in India, including Telangana and Gujarat, are already developing an ecosystem for electric mobility investments by providing policy incentives and setting ambitious goals. The issue brief is developed by NRDC with partners the Gujarat Energy Research and Management Institute (GERMI) and the Administrative Staff College of India (ASCI). By drawing on stakeholder perspectives from financiers, borrowers, and policymakers, the issue brief highlights innovative financing mechanisms and targeted risk management strategies that can be used to build confidence and a thriving e-mobility ecosystem.
Five key findings
1. From financiers’ perspectives, electric mobility is a relatively unknown asset class with high perceived and real risks. Potential solutions to manage and mitigate risks include multi-stakeholder deals, public private partnerships, product warranties, proven business models, and dedicated green financing institutions.
2. From borrowers’ perspectives, very few EV specific financial products are available commercially. Potential solutions, such as interest-rate subvention, multi-stakeholder contracts, lease financing, joint revenue sharing agreements, and battery financing, are promising means to increase borrowers’ access to financing.
3. From a policy perspective, each sub-segment of the EV ecosystem needs coordinated policy support. A thriving electric mobility ecosystem consists of reliable vehicles and components (e.g. batteries), viable and profitable business models, ubiquitous charging infrastructure, public transportation, and a robust resale market.
4. From industry perspectives, long-term policy support, local manufacturing, and reliable supply of components can reduce borrowing costs. Industry-wide norms for leasing, gross cost contracts that establish an enforceability framework, and multi-stakeholder agreements can help lower capital expenditure for buyers and increase financier confidence in the project cash flows.
5. From customers’ perspectives, perceived purchasing risk is too high, and the lack of a known resale value has deterred customers from purchasing EVs. Solutions, such as a backstop price guarantee by a third-party entity, rebate programs, and tax incentives, can increase customer demand for EVs.
The e-mobility sector is an interconnected market and its growth is dependent upon improving battery longevity, charging infrastructure, intelligent infrastructure networks, and innovated payment platforms among other factors. A piecemeal financing approach may not be as effective as one supporting the entire mobility ecosystem. Most effective solutions lie at the convergence of stakeholder perspective and scaling them up can lay the foundation for a financial ecosystem to support India's electric mobility transition.