How NBFCs and EV sector are symbiotic

The steady transition towards clean mobility will be made possible through a cumulative investment of around Rs 19.7 trillion on electric vehicles in the next ten years, NBFCs have to support the sector for faster realization of green goals.?

Eyeing sustainable growth by reducing the overall carbon footprint in India has set an ambitious goal to electrify 70 per cent of all commercial cars, 30 per cent of private cars, 40 per cent of buses and 80 per cent of two and three-wheelers by 2030. In recent years, there has also been a significant change in consumer behaviour and people are now getting more inclined towards purchasing electric vehicles or prefer to commute through clean and cleaner modes of transport. Market researchers have indicated that around 66 per cent of commuters now prefer electric vehicles as a mode of transport.

However, for a steady penetration of electric vehicles on the Indian roads, non-banking financing companies (NBFCs) have a major role to play. The increase in the sale of electric vehicles has been fuelled by the new and reformed EV financing through the NBFCs.

The sale of electric vehicles has increased multifold over the months, especially in the last one year. In February 2022, sale of the electric two-wheelers has surged to a staggering 32,449 units from just 6,083 units same time last year – around five times an increase in a year. The growing demands and increasing focus on green and clean mobility have made the electric vehicle sector more attractive for financial institutions like banks and non-banking financing companies (NBFCs), who have been drafting several strategies for financing in the industry.

The electric vehicle sector in the country also has a major role to play in India’s ambitious target to become a $5 trillion economy by 2024-25. In this line, the NBFCs in the country and fin-tech players across the country have been playing a transformational part in the fast-paced adoption of electric vehicles in the country. Financing is the key tool which can fill the gap in the domestic EV value chain and India is pacing up in mobilizing capital and finance towards EV assets and infrastructure.

It is projected that the steady transition towards clean mobility will be made possible through a cumulative investment of around Rs 19.7 trillion on electric vehicles in the next ten years to build up a stable ecosystem boosted by a robust charging infrastructure. While Original Equipment Manufacturers (OEMs), banks, fleet operators, industry start-ups and central and state governments are the major players to drive the electric transition in India, non-banking financial companies (NBFCs) will also play a relevant role in revolutionizing the domain.

The government has also been taking several initiatives to boost up EV penetration in the country. The Department of Heavy Industry (DHI) of the government has revised the Faster Adoption and Manufacturing of Electric Vehicles Phase II (FAME II) and increased the incentives on electric two-wheeler vehicles from Rs 10,000 per kWh to Rs 15,000 per kWh. Also, the government has introduced a Production Link Incentive (PLI) scheme worth Rs 18,100 crores for investments in advanced chemistry cell battery manufacturing and Rs 26,058 crore for automotive manufacturing of EVs.