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At the core is viability — and volumes. Financiers said electric car sales must show up sufficiently on the dashboard for them to build a viable finance plan.
For the personal buyer, car prices range anywhere between Rs 12 lakh and Rs 20 lakh. Financiers believe that the consumer would default because of the high prices, making it difficult for them to sell the attached vehicle.
Ashok Khanna, head, auto finance, HDFC Bank, is a veteran in the motor financing space. “Our bank will finance as and when vehicles are introduced. However, we have to see how many customers are eligible for a Rs 15-lakh car,” he said.
Khanna added that after a 5% GST cut and reduced registration cost, amounting to total relief of more than 30-35%, it is doubtful the government will extend any further benefit to the personal EV space.
Another leading auto financier said that it is looking to rejig its loan schemes to make them a bit more attractive for potential EV consumers.
“The FAME-II benefits are currently extended only to vehicles used for commercial purposes and not personal use. Large electric fleet operators are able to get finance. It’s the small fleet operator or the personal buyer who is finding it difficult to buy such cars,” said Neeraj Gupta, founder of the shared mobility cab company Meru, in which Mahindra now has a majority stake.
Gupta added that banks have to play a vital role in opening up financing, which will see volumes expand in the electric vehicle segment.
About 3,600 electric cars were sold in FY19 against a total of 31.6 lakh cars; so, less than 0.5% of sales were electric-powered vehicles, data from SMEV (Society of Manufacturers of Electric Vehicles) showed.
Electric cars are costlier by at least 30% compared with conventional cars, primarily due to the high cost of batteries. In addition, the major components are still imported.
Shailesh Chandra, head of electrical mobility of Tata Motors, said the situation is easing out as more and more products with a value proposition are being launched. “I think the challenge for banks is the new technology and low resale value,” said Chandra.
For its latest launch, the Nexon EV, Tata Motors has extended the warranty to eight years or 1.5 lakh km, something Chandra believes will give more assurance to financing companies. Hyundai Kona also offers a battery warranty for eight years, or 1.6 lakh km, whichever is earlier.
While finance companies are ready to experiment with new products and new technology, the high product cost is a deterrent. “The financier is keener on assessing the creditworthiness of the individual than the product,” said Vikas Jain, head, sales, Hyundai India.
Besides vehicle viability, financiers assess customer background and cash-flow, said Ramesh Iyer, managing director, Mahindra Finance.
To be sure, volumes are slowly picking up, making financiers more comfortable and confident about financing a new technology vehicle, said Sohinder Gill, director general, SMEV.
Earlier, EVs were 95% subsidised products: With the dependence on the government reducing, volumes in this space should increase, Gill said.
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