Unlike the used vehicle market, no market exists for used commercial EVs. The former has been one of India’s biggest vehicle sales enablers. So, what effect can the used-CEV market have on new vehicle sales?
Gurugram-headquartered AMU Leasing is exploring the potential of used/second-hand electric vehicles (EVs) in India. Nehal Gupta, MD, AMU Leasing, and Director, Electric Mobility Financiers Association of India (EMFAI), pointed towards uncertainty regarding the life of used EVs as one of the major roadblocks in the commercial EV finance space.
“We have been working around the commercial EV landscape for a long time now and are sure that the business of second-hand EVs is a major roadblock,” she said.
Unlike second-hand vendors and dealers of used cars in India, there practically exists no market for used commercial EVs in the country. The second-hand vehicle market has been one of the biggest enablers of internal combustion engine-powered vehicles.
“The questions we want to answer include what happens to a bad asset (Commercial EV) that has to be collected back from an end-consumer, and how can EVs be given a second dose of life,” she explained.
Not many are currently interested in buying a second-hand commercial EV because of the possible inclusion of added CAPEX to change batteries. She highlighted that unless this problem is solved, commercial EV financing will remain limited to corporations, and small business owners will not open themselves to adopting or experiencing EVs.
For the uninitiated, though commercial electric three-wheelers have become the poster boy of India’s EV adoption, their deployment is still limited to fleet owners and logistics companies.
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“Collections and recovery of bad assets as problems, stand as solved. Now, the problem is what to do with recovered commercial EVs,” Nehal said. She added that the cost of battery replacement in commercial EVs is as high as 60%, much larger than down payments made by buyers for sourcing commercial vehicles. Also, the “lease” EV model faces a big challenge when an EV has completed three years and might become “unprofitable” in the long run.
Buyback Guarantee From OEMs
Having financed over 5,000 EVs so far, Nehal believes the CEV finance problem can be solved if the CEV OEMs offer buyback programs. She noted the move would help instil confidence in buyers and financers towards commercial electric vehicles. “The move would show how confident OEMs are with their electric vehicle offerings and encourage organisations like us to push EVs in India aggressively,” she explained.
According to a report by NITI Aayog and Boston Consulting Group, the absence of a holistic EV financing ecosystem is a significant hurdle to the large-scale adoption of EVs in the country. With growing EV adoption, we estimate around Rs 45 to 55 thousand crore will be required to finance EV purchases by 2026. Currently, around 50% 2W, 90% 3W and 80-90%4W are financed in India. Given the higher upfront cost of EVs, it is even more important to have low-cost financing solutions to make them an affordable substitute for ICE vehicles for the average Indian consumer.
In its EV financing innings so far, AMU Leasing has maintained a healthy NPA rate of below 1%. The biggest challenge in financing batteries for electric rickshaws is the completion of the price difference of over Rs two lakh. However, the price difference of over Rs two lakh is the biggest challenge in financing batteries for electric rickshaws and lithium-ion batteries.
She said, “We are exploring that, but the OEMs need to give us confidence!” AMU is also preparing a tech stack to enable better collections of repayments via new models, including daily and weekly instalments.
If the model of the used CEV market it is working upon works out, the same will include a repair hub that will be used to give a second life to EVs. The same will also be used to retail CEVs collected from defaulters.
