Bengaluru: Smooth access to consumer finance has become a hurdle in the sale of commercial electric vehicles (EV) with banks wary of lending, worried over resale and residual value of EVs in the event of loan defaults.
Sections of EV firms in the business of manufacture and sale of electric three and four wheelers like rickshaws and cargo vehicles told this paper that there is a growing interest among low-income groups to buy e-vehicles for commercial purposes as they find them more economical in terms of operating costs and maintenance than conventional vehicles. But dealers have not been able to tap this business opportunity as private and public sector banks have not been supportive enough. As a result, many interested buyers either drop their plan or switch to internal combustion vehicles or approach non-banking finance companies (NBFCs) and avail loans at steep rates of interest, compromising on the cost advantage.
“Ninety percent of vehicles in India are sold through financing. But when it comes to EVs, especially those used for commercial purposes, lenders are on the back foot. They nurse concerns over aspects such as the value of vehicles and their batteries after a few years and their overall performance,” Bengaluru-based Omega Seiki Mobility managing director Deb Mukherji said.
There are, however, no such issues when it comes to electric cars and two wheelers. Buyers have hassle-free access to loans against the collateral; In addition, marquee cars and two wheeler makers usually have their own financing arm to support customers. But in the case of commercial vehicles, bankers assume buyers may not earn good enough income to pay loan installments, leading to defaults. Often, these customers from low income groups are migrants to cities and banks do not accept plots of agricultural land as collateral.
“Their (banks) concern is genuine to some extent. Financial institutions often put all EVs in the same basket, assuming them to have been made with substandard components sourced from China. They fail to differentiate between vehicles from established original equipment manufacturers (OEMs) and China imports,” said Nirmal Reddy, founder of Hyderabad-based OHM Automotives.
Rushi S, chief executive of Mumbai based Earth Energy said it might take a while for finance companies to understand locally manufactured vehicles that are new to the market for the lending to streamline. “Sharing the data regarding the benefit of e-vehicles, warranty, quick return on investment and the resale value of the vehicle and battery may encourage banks to change their attitude,” he said. A banking official, not willing to be identified, admitted to the problem.
The EV sector is hoping the government will do its bit. Omkara Murthy, regional head at Chennai based CK Motors said the government should take steps to make e-vehicle more affordable. “There is a huge untapped market in the commercial EV segment, but for the price of these vehicles. The government should encourage banks to support EV buyers and increase subsidies,” he said.
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