Presently, India has 898 startups working in the EV market, as per Tracxn, a startup data firm. As many as 235 of those are based out of the National Capital Region, while Mumbai has 62 of them. Due to this parallel development in the EV market, the demand for EVs had been growing at an unprecedented rate up until May 2023. Because of the reduction in the FAME II subsidies on electric two-wheelers (E2W), implemented on June 1, from a maximum cap of 40 per cent to just 15 per cent, the sales for E2W drastically went down from 1,05,340 units in May to 45,798 units in June.
Despite all that, the overall EV sales still managed to cross the 1,00,000 mark this June, making it the ninth consecutive month to have achieved so. In the light of these developments in the last month, if a person is looking to finance an EV they do have a variety of options to choose from. Although banks don’t easily indulge in loans for EVs due to their concerns regarding the resale value of EVs because of their battery lives, there are many startups that provide you with the option to finance them. Over 63 per cent of the total E2W financing comes from these fintech startups, as per a report published by OTO Capital.
Simply put, fintech – financial technology – is the use of technology “to augment, streamline, digitise or disrupt traditional financial services”, as per Forbes. A well known example of fintech innovation is the ATM, when they were introduced back in the day. Examples from the present times would include digital wallets like PayTM or Unified Payments Interface (UPI) payment apps like Google Pay.
As per Ernst & Young’ Global Fintech Adoption Index 2019, almost 64 per cent of the world was using fintech services that year. In India itself, there are currently 7,797 fintech startups operating, as per Traxcn data.
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Out of the handful of EV based startups working in financing are Revfin, Rupyy, Muffin Green Finance (MGF), Greaves Finance, Ascend Capital, and Ecofy. How these startups work is that they tie-up with either banks or Non-Banking Financial Companies (NBFC) in order to advance credits to their buyers. Although one look at the e-AMRIT platform will tell you that banks provide EV loans at a lesser interest rate as compared to these startups, these startups also extend several benefits to the buyers – buy back the vehicle in case the user decides to sell it, or to upgrade to a better model within the same EMI plan, etc.
Because of the fintech employed in their E2Ws, they are able to gather accurate data regarding the wear and tear of the vehicle as well as the battery, making it easier for them to revalue it in case they land up in the second-hand market.
The e-AMRIT portal enables an individual to get all the information that they may require in case they are interested in buying an EV. There are two ways, apart from fintech startups, to finance an EV – Banks and NBFCs. Startups, themselves, take these loans from either banks or NBFCs at lower interest rates and extend them to their buyers at a bit higher interest rates along with some additional benefits including buyback and battery replacements.
But if an individual is looking forward to getting these loans directly from these financial institutions, they must go for an auto loan instead of a personal loan. Under Section 80EEB of the Income Tax Act, if a person decides to take an auto loan to buy an electric two or four wheeler, they can claim up to Rs. 1.5 lakh of tax savings on interest paid. But this is only applicable if it’s the buyer’s very first EV and only if the loan has been taken from a recognised financial institution. Benefits like these won’t be available if one opts for a personal loan to buy an EV. Therefore, awareness is required in order to make the most of the currently available benefits in the EV space.
The availability of reliable and affordable financing options is essential for driving the widespread adoption of electric vehicles in India. There are several companies such as Revfin, Mufin Green Finance, Greaves Finance, Ascend Capital, Ecofy, to name a few, that are at the forefront of supporting this transition by offering different customer-centric financing solutions. All in all, EV financing is instrumental in empowering individuals and businesses to embrace electric mobility, the path towards contributing to a greener and sustainable future for India.
