Nehal Gupta is the Founder and Managing Director of Accelerated Money for U (AMU), a tech-driven NBFC focused on sustainable development. With over three years of experience in the BFSI/FinTech space, she manages an AUM of $18 million and a team of 100+ members across 15 states in the Electric Vehicle Financing ecosystem. Nehal is passionate about financial self-sufficiency and sustainability, supporting India's Green Energy initiatives, and becoming a key player in the EV financing sector.
In an in-depth conversation with Women Entrepreneurs Review magazine, Nehal shares the dynamic aspects of Electric Vehicle (EVs) playing in the economic landscape of India. Although a newer concept, NBFCs and banks are keen to track carbon emissions, supporting commercial vehicle financing.
Electric Vehicle (EV) adoption has been consistently growing in India with total annual sales reaching 1.2 million units in 2022-23. How do you foresee this phenomenon developing in the future?
Electric vehicles are experiencing growth in three main segments: two-wheelers, three-wheelers, and four-wheelers. The fastest-growing segments are two-wheelers, while the other three are influenced by their use case. The trend is consistent across all categories, with sales fluctuating depending on the use case.
External factors contributing to this growth include charging infrastructure, policy, government regulatory factors, and government plans for 2030. The transition from ice to EV requires strong support and policies from various stakeholders. The two main markets for electric vehicles are B to C and B to B, with the commercial sector experiencing rapid growth. Passenger sales are also expected to follow in the three-meter formula segment.
How are NBFCs tailoring financing products to meet the growing financing needs of both individual consumers and commercial fleet operators for electric vehicles?
Non-banking and finance companies (NBFCs) have traditionally supported commercial vehicle financing, catering to B to B and B to C customers. These customers are mostly new to credit, lacking a banking score or bank account. NBFCs assist these borrowers by developing credit scores, which banks may not invest in due to other demands. They focus on specialized products and niche markets, targeting underbanked customers and MSMEs that are six months to five years old. NBFCs support new growth sales and EV financing due to their niche and expertise. However, focusing on multiple segments is challenging due to the complexity of asset, borrower, ecosystem, charging, and infrastructure details. Currently, NBFCs focus on EV financing or leasing, creating a data bank for customers and banks in the future.
What challenges do NBFCs face in terms of financing EVs, and how are they addressing risks like high upfront costs and credit assessment?
The new EV industry requires time to gain economic viability, as new assets take time to perform and analyze. NBFCs like AMU must continuously explore new markets and create data to understand the performance of their assets. They must not compete with larger banks or offer higher interest rates, so they focus on unmanned customer bases. Challenges include high-risk profiles, which can come from assets, customers, earnings, or external factors.
To overcome these challenges, NBFCs collect monthly data on borrower-on-borrower trends and understand the trends. Initial teething challenges for NBFCs in the country include understanding battery deterioration, battery health, and charging efficiency. However, they must take the risk of being expensive to continue growing their business, evaluate portfolio quality, and adjust strategies as needed.
How can NBFCs collaborate with OEMs, charging infrastructure providers, and government bodies to offer comprehensive EV financing solutions?
Financing for electric vehicles (EVs) involves strategic partnerships with government policy companies, OEMs, charging infrastructures, and battery companies. The government plays a crucial role in subsidies and incentives for EV financing. Battery OEMs play a vital role in ensuring the quality and performance of the battery. The government has been instrumental in stakeholder consultations, helping to identify the right customers for financing. AMU has partnered with SIDBI and is offering exclusive loans to women borrowers in Rajasthan. Asset quality is essential, including quarantines, security guarantees, and buyback arrangements. MOUs and service-level agreements with larger OEMs are crucial for safeguarding securities and checks and balances in the new market.
What role do government subsidies and incentives play in NBFC-driven EV financing, and how can NBFCs integrate these into their offerings?
Incentives help reduce the upfront cost of electric vehicles (EVs) compared to traditional electric vehicles (ICEs), reducing the total cost of ownership (TCO). These incentives help customers compare EVs to ICEs, allowing them to save over time. However, incentives should not be given for extended periods, as they can lead to price volatility. Instead, incentives should be standardized and phased out over time. As lithium prices fall, EVs will become more affordable, and in a few years, no longer need incentives.
NBFCs can integrate with incentives by financing assets based on an invoice, with the incentive part already accounted for at the OEM, dealership, or customer level. This reduces the financial burden on consumers and businesses, as the final price after the incentive is financed, is the net of the incentive.
How are NBFCs innovating with leasing, battery financing, and other models to reduce the financial burden on consumers and businesses adopting EVs?
Battery as a service model, such as battery using or battery swapping, is becoming popular due to the desire to separate batteries and vehicles, reducing asset costs and allowing for better repayment and underwriting capabilities. NPFs, like AMD, offer flexible repayment solutions for fixed and swappable batteries, ensuring the quality of the battery. Understanding service level agreements, warranties, and buyback values is crucial for NPFs like AMD to offer dynamic solutions to borrowers.
What long-term growth opportunities do you see in financing the transition to EVs?
The market for EVs is exciting, offering opportunities across the entire value chain, including new vehicles, battery chargers, battery as a service, retrofitment, and battery recycling. The South and West Indian market is particularly interested in retrofitment solutions. The recycling market is expected to grow as big as the ice to second-hand market history. The government is focusing on heavy commercial vehicles due to their higher pollution emissions. EMU aims to be at the forefront of this transition, ensuring they don't miss out on the opportunities. The market is expected to grow at a pace of nearly $50 billion over the next decade.
What is your overall outlook on the EV market’s growth in the near future?
Many companies have been interested in experimenting with EVs due to ESG and Sustainable Development Goals. NBFCs and banks are keen to track carbon emissions to compete with European and Australian countries. India's political climate and US elections are expected to push for sustainable development, attracting foreign direct investment. The outlook is positive for moving towards more sustainable assets, including clean electricity sources and management. While challenges exist, the sector is heading in the right direction, with a focus on the performance of this segment in the next decade.
