The COVID-19 pandemic has made the whole world aware of the fleeting nature of life. The many confinements that have been imposed in its wake have greatly benefited the planet.
According to scientists, reducing industrial and vehicle emissions has successfully filled the gaping hole in the Earth’s ozone layer. While it is absolutely necessary to preserve the earth’s conventional fuel sources like coal and oil which are being depleted at a rapid rate, the energy needs of this planet are so immense that it is easier to say that ‘to do.
Governments around the world and international regulators must enforce the laws to enable widespread acceptance and optimization of clean and sustainable fuel technologies. And this is where electric vehicles come into the picture.
India’s electric vehicle market was worth $ 5 billion in 2020 and is expected to reach $ 47 billion by 2026 while growing at an impressive CAGR of over 44% during the forecast period. Likewise, the global electric vehicle market was valued at $ 162.34 billion in 2019 and is expected to reach $ 802.81 billion in 2027, with an annual CAGR of 22.6%.
While the VE moment has accelerated rapidly in the developed world, it is still at an incipient stage in developing economies. India’s electric vehicle movement is driven mainly by the backseat of three-wheelers and electric rickshaws, more than two million of which crowd the roads. The current boom in electric vehicles is gradually spreading to heavy vehicle categories and public transport services.
General demand for electric vehicles in India has skyrocketed further amid pandemic-induced turbulence and increased demand for streamlining hyper-local and last mile deliveries. So much so that even fleet operators who were previously accustomed to traditional internal combustion engines (ICE) are now switching to electric vehicles. The main reasons for this critical transformation are the comparatively lower operating costs as well as the environmentally friendly nature of electric vehicles. The switch to electric vehicles has not only calibrated considerable profitability, but is also helping fleet operators meet their Sustainable Development Goals (SDGs).
Therefore, it is only natural that fleet operators are now seeing a steady increase in vehicle deployment compared to before. The advantages ushered in by the electric vehicle boom have also triggered a significant demand for electric two-wheelers and high-speed L5 three-wheelers. However, most of the cost involved in buying an EV revolves around the EV battery primarily, which can account for up to 40 percent of the total cost.
Thus, many fintech entities sanction loans for the purchase of electric vehicles at attractive interest rates. The demand for electric vehicle loans is increasing, especially at the B2B frontier, where fleet operators want to own electric vehicles and need financing for them. At the same time, the demand for individual loans is also on the rise, as more and more electric vehicle owners seek operational alliances with fleet operators due to the higher income assurance in this case.
There are many other considerable factors that have contributed to the surge in loans for electric vehicles, mainly in Tier 3 cities and small towns. This growing demand is directly linked to the migrant outflow that occurred last year during the pandemic. Dubbed the biggest mass departure of humans in living memory; migration is also leading to a sharp increase in demand for electric vehicles in rural hamlets and tehsils. A plethora of migrant workers are currently engaged in professional activities in their villages and hometowns and have no intention of returning to the big cities. And it’s interesting that the electric vehicle boom has made its way through the bustle of small towns and cities and is poised to generate plenty of job opportunities in the form of rickshaws. and electric mopeds for the masses.
With the corresponding increase in freight deliveries / requirements, drivers who drive fleets of electric vehicles now have the opportunity to earn more. This equips them with a loan repayment capacity, which is essential to their social advancement and their overall progress. The EV movement is also galloping at a rapid pace in the south and west of the country with huge demand generated for L5s and two-wheelers.
In an effort to secure EV loans, Original Equipment Manufacturers (OEMs) are now more confident in their production approach and are even extending buyout guarantees to their financiers to continue investing in the EV segment. Hence, it is safe to say that the overall dimensions and scope of the electric vehicle market is booming in India.
The author, Sameer Aggarwal, is co-founder and CEO of RevFin. Opinions expressed are personal