When Puneet Chaudhary decided to get a sub-dealership of Kinetic Green, which sells electric three- and two-wheelers, he expected a swift takeoff in sales as customers are more inclined toward electric mobility amid rising fuel costs. He gets seven-eight inquiries a day. But a year and a half later, he has sold only eight three-wheelers.
“Demand is neither a problem today, nor was when we started off. It’s the financing hurdle that has become a big pain,” Chaudhary said over the phone from Bijnor, Uttar Pradesh. Of the eight EVs sold so far, he has self-financed half of them at an interest of 14-18%.
“Banks don’t want to take risks today, and we had to do something to sell the vehicles and create awareness,” Chaudhary said. This was the biggest bottleneck that has been hurting demand. If not for the poor financing, he said he would have sold more than 200 vehicles to date.
That’s also the story of four other battery-powered three-wheeler dealerships BQ Prime spoke with. They didn’t want to be named citing business concerns. While banks do not want to take risk just yet, lack of financing is a real hurdle as India pushes electric mobility to curb emissions and cut down imports.
Sales of battery-powered two-wheelers alone have more than doubled so far this year and are expected to reach close to 10 lakh by the end of FY23, according to data on the website of Vahan, under the Ministry of Road, Transport and Highways. EV three-wheeler sales have doubled to 1.7 lakh in FY22—a large part of which comes from e-rickshaws that are not regulated.
India—the third-biggest emitter of greenhouse gases on the planet and home to cities with the world’s worst air—is also offering billions of dollars worth of incentives to boost EV adoption and domestic manufacturing.
Yet, lenders’ reluctance to finance is threatening to stall the nascent growth. Multiple incidents of EVs catching fire in the last two months have not helped either.
“Basis our discussion with financiers, there are a couple of things that are holding banks back,” Hemal Thakkar, director at Crisil Ltd., told BQ Prime over the phone. One of the biggest factors, Thakkar said, is that the resale value of EV is not established. Second, he saidm the battery tech is still evolving and has not settled as of date.
Saurav Kumar, founder and chief executive officer, at Euler Motors, an electric three-wheeler maker, said financiers take multiple things into account when it comes to financing. “Be it the secondary value of the battery pack, technology risks associated with EVs, their own understanding of EVs—and that increases the IRR percentage.”
Opportunity Loss
EV makers and dealers of three-wheelers are worried as lack of financing is hindering their ability to meet the growing demand.
“It’s definitely playing a spoilsport,” Amitabh Saran, chief executive officer at, Altigreen Propulsion Labs, an electric three-wheeler startup, said. “Everyone is waiting for the market to pick up and maturity to happen. But volumes can’t scale up until you have good financing.”
He said his firm could have ramped up sales a lot sooner if not for poor financing. “It took a while to convince the financiers. The first few that came on board looked at the balance sheets of our customers, and then took a decision about financing, and not so much about the vehicle.”
Kumar said unlike in two-wheelers, the cost of three-wheelers is nearly 20% more compared to an ICE-powered variant, which also means higher upfront payment.
Euler, he said, is losing out on 10-15% of the demand because of poor financing options. This could go worse as the company ramps up its production to 3,000 vehicles a month.
According to Crisil’s Thakkar, the opportunity loss in electric three-wheelers is huge. From the cost of ownership perspective, electric three-wheelers make sense; and when it comes to financing, almost 95% of them are funded.
“So, if the financing is poor there will be a challenge. In case of two-wheelers, since only 25-40% of customers opt for financing, there is less impact, but the impact is still there," he said. "Financing is making a big difference in electric three-wheelers.”
Kinetic Green’s dealer Chaudhary, who also sells low-range electric two-wheelers, said he would have sold four times more battery-powered scooters if the financing was available.
Moreover, whatever financing is happening, it’s done at a higher rate.
“NBFC interest rates are much higher when it comes to EV financing,” Saran said. “Ad hoc loans are available at 24% and that, too, are very choosy and picky.”
Euler’s Kumar agreed. “Interest rate in the retail side is around 24% and in the institutional side, where companies rope in as part of their fleet, it is 12-15% depending on the client.”
That compares with the financing of ICE two-wheelers at 9-13% by banks, while in NBFCs it could be as high as 18%.
According to Thakkar, majority of the financing for electric three-wheelers is being done by NBFCs, while some banks have come in for two-wheelers.
Gaining Confidence
Things, however, are changing slowly as bigger manufacturers join the fray.
“Financers are having a perception that traditional manufacturers will be a good fit for funding and are not wanting to take a bet on new-age companies,” said Thakkar.
Euler and Altigreen are working with financiers using their data and technologies like geo-fencing to earn their confidence.
Euler's Kumar said they spent a lot of time educating the financiers so that they have some idea about the product. “We even provide them with service-level data so that they can see if the vehicles are serviced well so that they have some transparency on the assets they have financed.”
NITI Aayog, the government's think tank, is also working on a draft proposal to promote the financing of EVs, two people aware of the plans told BQ Prime. One of the proposals is to include a partial credit guarantee scheme, and fast-tracking to include EVs in priority sector lending, they said on the condition of anonymity.
NITI Aayog has yet to respond to BQ Prime’s emailed queries.
Ather Energy acknowledged that the challenges around EV financing existed because the products weren’t of great quality and didn’t qualify as strong assets, but said for the most part, the problem has been solved.
“With credible players and stronger products coming in, financial institutions now have the confidence to lend, treating the EV as collateral, which allows them to provide loans at interest rates similar to petrol vehicles,” Ravneet Phokela, chief business officer at Ather Energy, said. “Vehicles can be geo-fenced, the health of the key components can be tracked, which in turn provides objective data when it comes to resale of the vehicle.”
The confidence is evident as Chaudhary managed to get one bank to finance four electric three-wheelers earlier this year. “It’s a positive, but their scrutiny is a lot more than ICE-vehicle.”
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