Why Buying An EV Remains A Challenge In India

According to industry participants BQ Prime spoke with, the interest rates on loans to buy electric two-wheelers can be 2-4% higher compared with loans to buy conventional vehicles.

According to a Delhi-based dealer of Hero Electric, the interest rates on electric scooter loans are 4% higher than similar petrol-powered products. Earlier, the finance companies were wary of entering the space, but now they’re gradually finding it more acceptable and less risky, said the dealer quoted above, who spoke on condition of anonymity.

“The interest rates are almost 2-4% higher, maybe because the technology is new, and businesses are new,” said Akash Gupta, co-founder and chief executive officer of Zypp Electric, which provides electric scooters for deliveries to e-commerce companies.

The company has to bear the brunt of higher interest rates to expand its fleet while helping the industry reduce carbon emissions.

“If something can be worked upon in creating more financing pools for these vehicles, for fleet operators like us it would provide some cushion,” Gupta said.

As a financier in the electric vehicle space, the biggest challenge is to raise money from the market, said RevFin’s Aggarwal. “So, our interest rates are not high because we want it that way, but because my cost of borrowing is high.”

The financial institutions lending in the space either will not lend to you or give you small amounts of money for testing, he said. That money will come at a much higher interest rate with a premium over what is charged to other people.

The crucial factor in vehicle financing is the profile of the individual. In terms of EVs, it is even more so because of the risk associated with the vehicle and the question mark on its resale value.  

Aggarwal said the buyers of electric vehicles who opt for financing are more in the lower-priced segment. These buyers have little to no credit history or bank transactions, which skews the data as the same people are unlikely to get lower interest rates even when financing vehicles powered by fossil fuels.

“Around 30-40% buyers of electric vehicles opt for financing, while the number is higher for conventional vehicles at around 55%,” said Sumit Chhazed, co-founder and chief executive officer of OTO Capital, a two-wheeler financing platform.

According to him, the loan tenure is also shorter at 12-18 months, which bumps up the monthly installments, while approved total loan amount compared with the product’s price also needs to improve.