A 2018 report by the State of Global Air showed that one of India’s silent killers is air pollution as it has killed many people. Air pollution is caused by crop burning and other climatic conditions that interfere with air quality. Various stakeholders need to work together to combat toxic air. One way of fighting air pollution is the reduction of vehicular emissions. In many cities and towns, motor vehicles contribute to about 40% of the total air pollution. Approaches such as adopting electric vehicles are some of the measures taken by states like Delhi to address vehicular emission issues. The Delhi Government’s EV policy targets to have 25% of electric vehicles registered by 2024. 

It is essential to note that increasing the number of electric vehicles on the roads requires substantive work such development of charging stations, public awareness, EV model availability, among other factors. Another barrier to EV uptake is the high upfront cost. India sells around 40-lakh motor vehicles, of which 25% are bought outright. Banks and non-banking financial institutions fund the remaining 75%. 

A report by the Reserve Bank of India data showed that the total vehicle lending was about ₹4.7-lakh crore in 2019. The report also indicated that in the December 2019 quarter, banks provided ₹10,155-crore of vehicle leading loans, which is more compared to December 2018 quarter, which was ₹3,833-crore. These loans were mainly for conventional engine vehicles since electric vehicles formed only less than 1%. This indicates that one of the major challenges in India is the funding of electric vehicles. 

When funding conventional vehicles, financial institutions and banks only look at the buyer’s capacity to pay. However, this is not the case with electric vehicles’ financing. They consider other factors such as resale value, battery life, and vehicle longevity, which lead to high down-payment, higher interest rates, and shorter repayment periods. Another issue concerning EVs financing is that no typical policies and practices, unlike conventional vehicle financing. This means that different banks and financial institutions have their lending terms. 

Most banks and financial institutions are not willing to finance electric vehicles due to several reasons. However, the main problem is the lack of substantive demand. There is a need to ensure that the vehicles’ financing cost is brought down to spurt the demand. Delhi Government’s EV policy has an innovative approach that offers a 5% interest rate for a given segment of vehicles. 


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