With the growing global push toward electrification, there’s an escalated inflow of fresh and innovative business models and plans. In India, asset leasing is the new driving force of Electric Vehicles (EVs) in the B2B e-commerce space.?
While there are many impediments obstructing the augmentation of EVS, one major cause happens to be financing- in terms of cost and quantum of capital. This is where asset leasing comes to the rescue.?
Skyrocketing opportunities for the B2B segment:
The gradual outset of the electrification of ride-hailing, final-mile delivery; commercial vehicles, and corporate transport fleets hold huge potential as trade signals for all stakeholders related to the EV ecosystem, like Infrastructure, Fidelity National Information Services (FIs) and Original Equipment Manufacturers (OEMs).?
Renowned OEMs and industry disruptors are leaving no stone unturned and concentrating their efforts laboriously on Research and Development of innovation, to revamp the existing means of planning and manufacturing. Additionally, there’s a constant designing and reviewing of fresh business models along with intensified development of infrastructure for charging stations.?
Although many existing OEMs have invented and launched parts and products associated with EVs, the recent and upcoming start-ups are now serving a larger share of building new products and making way for innovative business models.?
?Lack of financing options:
With EVs slowly becoming the future of mobility, and the transpiring evolution of the automotive industry, there’s a significant growth ignition of the leasing business. In India, one of the most renowned funding means has been through loans for the accession of assets, but EVs don’t seem to be emulating that trend.?According to industry executives, usage through subscription or leasing is gaining traction due to banks’ disinclination toward lending loans as EVs are relatively a new segment, and it is majorly being led by people with frequent inter-city jobs and expatriates.
Globally, in comparison to China and the USA, India offers one of the lowest lease rates for a wide range of capital assets.
There’s a stark contrast between the operational costs of EVs and their conventional counterparts since electricity is substantially cheaper than fuel, thereby EVs become a preferential resort for most people. As a matter of fact, Indian companies are now having a whale of a time, owing to the augmenting B2B opportunities.?
?Leasing: guiding the way to EV adoption:
Leasing is an extremely beneficial alternative to insufficient institutional loans in the context of funds. Talking EVs, the battery and the vehicle is eligible to be leased separately by lessors, saving time, banishing the costs of purchasing a battery, and building infrastructure, thereby helping you save for a rainy day.?
Battery swapping has become a requisite in some EVs, based on their usage and purpose. That’s where leasing models garner a lot of attention, and the lessors don’t want to miss out on this fruitful opportunity since they want to extract the best use and benefits out of their assets.?
Additionally, the reuse and resale of vehicles and batteries have become a lot easier within this ecosystem, eliminating the dependency on secondary markets. Since the upfront costs for EVs are more, leasing extends flexibility without actual ownership. Additionally, the absence of upfront costs for the lessee is a cherry on the cake, although a monthly rental is a must which is a lot more affordable than the gas-driven vehicles.?
?How does the EV leasing model function?
While dealing with the leasing of assets, entrepreneurs, start-ups, financiers, and mobility solution providers use automobiles like cars, scooters, and vans for personal or commercial use, and are accountable to pay for a monthly fee without owning those vehicles. These schemes possess minimal or zero down payment, it also cancels the hassle of registration, insurance, road tax, and maintenance. With the passage of time, the asset-leasing model is hoarding the interest of a plethora of consumers and escalating the penetration of EVs in the Indian automotive market.?
?Integrating Vehicle Leasing in the Indian Auto Market:
To accelerate the shift toward EVs and reduce carbon footprint, the government has initiated stringent and pensive steps to make the leasing of EVs economically feasible. The leasing model becomes rewarding, owing to the significantly low GST of 5% and sky-high depreciation of 40% of EVs. Since several EVs with low speeds don’t require registration, a large portion of EVs employed for commercial purposes like ridesharing, last-mile delivery, and commercial cargo are leased. The dynamic and cutthroat market of EVs is projected to amass nearly 200000 lucrative leasing contracts by 2030, leading to a robust boost in leasing companies, supportive policies, and expansion of OEMs as distribution networks.
According to the head of leasing of Mahindra Finance, an overwhelming 50% of fleet operators have switched to the leasing model and are being offered customised packages for leasing. Along with providing accessibility and affordability, they also take the worries about residual sales prices away.?
?What’s currently brewing in the EV leasing space?
Renowned automakers like MG Motor and Tata are optimistic about leasing, which is presently responsible for 15-20% of demand for their EVs.?
Quiklyz, the auto leasing and subscription business of?Mahindra?& Mahindra Financial Services Limited, is going to extend and expand leasing options in the EV sector.
Macquarie Group, one of the most eminent foreign infrastructure investors in India, is planning to set up India’s biggest EV leasing and finance company.?
?Summing Up
As per compiled data by the Centre for Energy Finance at the Council on Energy, Environment and Water (CEEW), for the first time, EV sales have witnessed a noteworthy growth of 10% in August 2022, compared to the previous month, thereby accounting for 2% of total vehicles sold in the country. The leasing model and vehicle subscription model are still on their way to fully establish in the Indian auto market but there’s betting on it to be a game changer and substantially increase penetration for the EV sector. With the ongoing trend, the leasing model surely has huge growth prospects in the coming future.
