Are Indian EV Startups Operating Fairly Enough For Mass Adoption Amid Ten-Year Funding Excess?

Are Indian EV Startups Operating Fairly Enough For Mass Adoption Amid Ten-Year Funding Excess?

HIGHLIGHTS:

• The electric vehicle (EV) category has recently received more investment than other automotive industries.
• In any other market, the EV investment space is now fully saturated. Execution is now more important than sentimental investment.
• It’s expected that the industry will enter a “cooling-off” phase during which investment will reach an all-time low.

Recently, more money has been spent on electric and hybrid vehicles (EVs) with another category of vehicles. Both major and small businesses have devoted important amounts of funds to the research, development, and selling of automated vehicles.

Millions of dollars have been contributed by competitors from around the whole world notably for this stage of development. The launch of brand-new and upgraded automobiles will eventually take place all around the world, making this an unbelievable experience for Ev’s stage.

The EV phase received roughly $10 Bn in global funding in 2020. This amount increased twofold to $20 Bn in just one year. Even major car companies like Ford and GM have announced billions of dollars worth of investments in the EV phase, and more are on the way.

Principal consumers are hopping on a panel in what has almost become a massive growth, paralysed by the fear of missing out. Electric vehicles represent a long-term investment prospect with potential returns in the trillions of dollars.

Future Behavior

Multiple investments have already been made. Like other markets, the EV financing space is already fully saturated. Now, it’s about implementation, not sentimental funding.

Prior to this, investments had only been made based on PowerPoint presentations and “paper projections,” but now the precise figures would speak for themselves.

The EV sector has received vital financing for every aspect. Be it battery production, OEM manufacturing of special gear, or EV-based analysis.

The large sums involved have even raised buyer apprehension. Every institution involved, whether a car manufacturer or a financial organisation, is organised for specific figures.

The period of prolonged period that was directed to as the “IT” element is that we’re directly well within. Additional funding could be made depending on the industry’s overall results.

As a result, it is projected that investment in the sector would reach an all-time low. It is considered the phase’s “cooling-off” period.

Authorities’ Insurance Policies Are Essential

Government policy development is one of the key impacts of the industry. The government and government bodies have embraced electric vehicles.

A few countries have even designated a special lane on their highways for electric vehicles and exempted them from tolls. This was when there was a manageable and restrained selection of electrical vehicles.

However, because there will be more of these vehicles on the road, it will be interesting to see how government insurance policies alter.

Recently, the local government of New Delhi, India, debuted a fleet of electric public buses. Additionally, the federal government asserts that by 2025, more than 80% of New Delhi’s buses will be powered by electricity. 

If such an enhancement takes place, it will probably be quite beneficial to the entire industry. This indicates a specific region. If the complete international figures had been taken into account, it have had amazing results.

Performance Problems

Future investments‘ fate will be determined by the sector’s overall effectiveness. The question of whether the investments were made quickly or not is one that must be carefully considered.

Every EV-related business, large and small, has recently garnered capital. It seemed as though everyone who declared to be associated with the category of electrical vehicles had access to funds.

One of the major concerns raised by buyers is if the investments were made thoroughly or merely based on emotion. Now, everything can be reduced to numbers. If the trend continues, eventually petroleum-powered cars may be obsolete and there will be no turning back.

The expanding EV finance market in India

With non-banking financial firms (NBFCs) in the sector experiencing a 10 to 12-fold boost in deployments in the past 12 months, along with an exponential rise in investor interest in the category, India’s low-cost EV financing industry is achieving greater traction.

Due to the high demand for electric vehicles (EVs) lacking four tires and EV-related support businesses like battery and recharging station manufacturers.

“Over the past 12 months, our monthly disbursements have climbed by an aspect of more than ten. We weren’t even doing 10% of what we were doing just a year ago. According to Sameer Aggarwal, founder of EV finance firm RevFin, “this represents the broad rise in the industry.”

The 2018-founded RevFin, which has its headquarters in Delhi, operates in more than 300 Indian cities and specializes in financing electric three-wheelers. Recent debt financing for the firm totalled Rs 100 crore, with Northern Arc, Liquiloans, and UK charity Shell Foundation among those who participated.

In its four years of operation, another player in the market, Delhi-based Mufin Finance, which recently underwent a rebranding effort and established a Mufin Green EV Finance subsidiary, has been able to put EVs worth Rs 160 crore on Indian roads.

“As of August 31, 2022, our active AUM (assets beneath management) is about Rs 110 crore. According to Pankaj Gupta, chief executive of Mufin Green, “We possess a 7% market share in e-rickshaw finance and have now reached nine states, 114 locations, and more than 800 PIN codes across India.

Akasa Finance, situated in Noida, Uttar Pradesh, which specializes in financing electric two-wheelers and e-rickshaws, attests to the rise in e-rickshaw sales and associated loans.

The company reported that in the last six months, both its Assets Under Management (AUM) and deployments increased more than four times.

“The site is beginning to seem quite appealing. Due to Covid and the limited EV penetration last year, we saw our AUM at about Rs 30 crore and deployments at about Rs 25 crore.

The 2022 deployments, yet, are estimated to cost roughly Rs 150 crore, according to Rohit Mehta, managing director of Akasa Finance.

Mehta contended that although borrowers of conventional loans for cars with internal combustion engines will often pay an average interest rate that is slightly less than that of EV borrowers, these figures will fall as the segment becomes more popular.

While EV loans have an interest rate of 24–25%, loans for two- and three-wheeled vehicles powered by gasoline or diesel have an interest rate of roughly 21–20%.

A twenty-year-old industry cannot be compared to one that is merely two years old. Mehta expected that debt levels will decrease especially as the enterprise grows and garnered new capital.

In reality, a group of EV financiers last week established a non-governmental industry organization named the Electric Mobility Financiers Association of India (EMFAI), which focuses on financing EV purchases as other goods and services important to the ecosystem.

According to data received from EMFAI, there are now 13 EV finance players, up from four last year. Total disbursements have increased by 50% to Rs 1,000 crore, while investments, comprising debt and equity, range between Rs 1,000 and 2,000 crores.

“One of its most significant obstacles to the mainstream use of EVs in the country is the availability of funding. The founding president of EMFAI and CEO of RevFin Sameer Aggarwal stated, “Members of EMFAI are dedicated to giving this access not only for electric vehicles but for connected infrastructure and ancillary items.

A rising ratio of investors

A Bengaluru-based EV lending company called Three Wheels United (TWU) raised $10 million as part of a Series A funding round coordinated by Delta Corp Holdings and included contributions from both new and existing investors.

“We want to make a profit and have an AUM of $100 million… According to Cedrick Tandong, co-founder and CEO, in a prior conversation, financiers are also very interested in the EV finance business.

According to Anup Jain, managing partner of early-stage venture capital company Orios Venture Partners, “it is a bright period for the Indian EV startup ecosystem, which includes the financing industry as well, with over $1.7 billion invested in 2021 and over $600 million already invested in 2022.”

Investor interest in EVs has increased across early- and late-stage activity as a result of the aforementioned factors.

Anjali Bansal, the founder of Mumbai-based Avana Capital, which focuses on climate change mitigation, stated that fascinating technology-led solutions are emerging spanning manufacturing, battery technology, finance, charging, exchanging, and decentralized energy storage.

However, NBFCs asserted that there are more possibilities and options to raise money in the debt market.

Major banks and NBFCs are eager to participate in this market.

Large NBFCs and banks have not yet joined the EV financing market, although several are working together to finance EVs.

According to Mehta, “at least three to four banking firms had sought partnerships with us, largely to explore the industry and thus tremendously keen in entering Electrical car finance.” They have approached our team regarding collaborating, however, I couldn’t identify them.

In reality, OEMs and EV logistics companies are also providing micro-credit to drivers in the gig economy so they may buy cars or bikes.

Micro-finances are provided to its delivery personnel by Zypp Electric, a Direct-to-Consumer (D2C) EV brand that enables last-mile delivery to switch to electric.

The founder of Zypp, Akash Gupta, claims that “our technology stack allows service executives to embrace an EV with no deposit and a small EMI/rental program that grants him the motorbike accessibility, like a micro-leasing contract.”

Increasing usage cases

Many IT and food delivery startups are contacting NBFCs in the EV finance sector, according to representatives Moneycontrol spoke with, about converting their fleets of delivery cars to environmentally friendly ones.

Mehta of Akasa stated, “We choose a transition in usage cases from just local private use or car sharing to diagnosing laboratories and grocery delivery firms looking us out for EV finance.

Challenges with debt collection and digital adoption

As the EV finance industry is still at an early stage, there are some issues in debt collection.

“Put simply, due to the greater likelihood of payments may float, it might be challenging to determine credit ratings or recover debts. According to Mehta, many EV three-wheeler owners still rely on conventional methods and don’t have proper GPay (Google Pay), PhonePe, or other UPI payment setups.

According to Aggarwal of RevFin, the use of digital technology is still in its infancy, particularly in the three-wheeler market.

Even if the EV market is growing more quickly, the direct-to-consumer two-wheeler market is facing growing resistance due to safety concerns.

According to reports that surfaced on Tuesday, a fire that started in an electric scooter charging station at a hotel in Secunderabad resulted in the deaths of around six persons.

Moreover, the Centre has released guidelines for EV certification, EV battery manufacturing, and EV running tests.

In order to accommodate automobiles with fewer than four tires and an electric power system, the automobile sector specifications (AIS) have indeed been amended. Electrical two-, three-, and four-wheeled passenger and transport cars will be subject to the updated specifications.

edited and proofread by nikita sharma