Full Title: Unlocking Low-Cost Lending for Electric Two- and Three-Wheelers: How India’s three-pronged strategy to fund, manage, and distribute the financial risk of lending can be a model for accelerating the transition to electric mobility.
Author(s): Clay Stranger, Marie McNamara, and Riya Saxena
Publisher(s): Rocky Mountain Institute
Publication Date: April 10, 2024
Full Text: Download Resource
Description (excerpt):
The global shift to electric two- and three-wheelers is vital for environmental and equity reasons. These vehicles play a crucial role in transporting both people and goods worldwide.
However, despite growing interest in electric vehicles (EVs), their adoption rate must accelerate to meet air quality and climate goals. A significant barrier to this is the steep financing costs compared to traditional internal combustion engine (ICE) vehicles. Currently, interest rates for electric two- and three-wheelers are twice as high as ICE equivalents, undermining the economic argument for transitioning to EVs. High EV perceived and real risks largely drive high-interest payments. When the perceived risk associated with operating, maintaining, and utilizing EVs combines with the risk of new-to-credit customers, it results in adverse outcomes, including higher interest rates, reduced loan-to-value ratios, and shorter loan terms for EV borrowers, impeding their access to cleaner transportation options.
In the broader context of the energy transition, electrifying two- and three-wheelers (e-2/3Ws) offers a significant opportunity for large-scale impact by the end of the decade. Achieving 100 percent market share in this sector could greatly benefit the climate, livelihoods, and air quality. However, this opportunity is not guaranteed and must be actively pursued.