The Finance Industry Development Council (FIDC) has urged the government to implement a comprehensive EV financing strategy combining fiscal incentives, regulatory clarity, and infrastructure development to unlock $50 billion in electric vehicle (EV) financing by 2030. It has called for establishing a dedicated fund with SIDBI or NABARD for financing support to NBFCs.
A collaborative effort is crucial for India to meet its net-zero targets and establish itself as a global leader in the EV sector, Mahesh Thakkar, Director General of FIDC said in a letter to Niti Aayog.
Despite the sector’s potential to drive decarbonization, financing remains a significant challenge. Non-Banking Financial Companies (NBFCs) have emerged as the primary players in EV financing, yet they face numerous hurdles due to the evolving nature of the industry. FIDC stresses that just as the government has supported EV manufacturing through schemes like FAME and PLI, a similar approach is needed for financiers to mitigate risks and boost investment confidence.
Key challenges
EV financing is currently treated the same as internal combustion (IC) vehicle financing, with no special incentives for financiers. Additionally, the absence of standardized assessments for battery life and resale value creates uncertainty in the secondary market, making depreciation risks a concern due to evolving battery technologies and unclear warranties.
Battery-related risks and rapid technological advancements—such as solid-state and sodium-ion batteries—create asset uncertainties, complicating financing. Limited data on battery degradation in Indian conditions exacerbates these concerns.
Inadequate charging infrastructure, particularly in Tier 2 and Tier 3 cities, leads to range anxiety and increases collateral risks for financiers if EVs remain underutilized. Other major challenges include high cost of capital, a lack of clarity on insurance policies—especially for retrofit cases—and low consumer awareness regarding EV performance, maintenance costs, and financing options.
Recommendations
To address these challenges, FIDC has proposed several policy measures. The organization advocates for the establishment of a dedicated fund with SIDBI or NABARD to provide financing support to NBFCs for lending towards EVs. Additionally, it recommends subsidized interest rates, priority sector classification for EV financing, and the creation of a ₹5,000-crore government-backed guarantee fund to cover potential defaults.
FIDC also suggests a collaborative approach between original equipment manufacturers (OEMs) and financiers to standardize used EVs, similar to past initiatives like Maruti True Value and Mahindra First Choice. Establishing a national agency for battery certification and launching EV buyback programs with assured residual values could further enhance the resale market’s viability.
In terms of infrastructure development, FIDC urges the government to fast-track rural and urban charging hubs. Furthermore, legislative amendments to the Motor Vehicles Act should recognize EV batteries as a separate asset class, facilitating financing and leasing opportunities while preventing fraudulent sales.
To ensure long-term sustainability, FIDC calls for the implementation of technology-driven solutions such as a national telematics platform for real-time battery health monitoring.
