Centre asks banks to extend long-term loans for electric mobility

In a bid by the Centre to identify and address hindrances to the growth of electric vehicles (EVs), central policy think tank NITI Aayog and the De­partment of Financial Services (DFS) have requested banks to extend lon­ger-tenure loans with easier conditions to electric mobility companies, said a senior government official. 

“The DFS and NITI Aayog spoke with banks and urged them to extend the tenure of loans for e-mobility, especially e-trucks and e-buses. The feedback has largely been positive and we are hopeful that there will be progress on this,” Sudhendu J Sinha, programme director for e-mobility at NITI Aayog told Business Standard. 

An extension of tenure on loans to procure e-buses and e-trucks would bring down the equated-monthly instalments (EMIs) for fleet owners and operators. It would enable faster transition to e-mobility in the mass goods and passenger transit spaces, which are among the most polluting in the internal combustion engine (ICE) segment. 

“One of the feedbacks from financial institutions was that if the warranty on the battery can be extended, it would make it easier to increase the tenure of a loan,” Sinha added. 

The government is set to have a laser-sharp focus on e-trucks in India’s EV transition journey, which — according to NITI Aayog’s findings in a recent report — have “virtually not taken off.” While official figures show sales of more than 6,000 e-trucks in the last year, most of these sales are of units with a carriage capacity of less than 3.5 tonnes.  

These are generally used for carrying short-haul freight, largely in urban areas. In fact, several countries do not count trucks of less than 3.5-tonne capacity in the category of trucks, given their usage pattern. 

Once that perspective is taken into account, only 280 of these electric trucks sold in India in 2024 were of more than 3.5-tonne capacity, which are used for longer hauls. 

“The longer-haul trucks are an important component of the road transport system as they emit over 34 per cent of the CO2 from the transport sector, despite constituting only 3 per cent of the total vehicle fleet. A significant dent in the reduction of greenhouse gas emission from road transport will not be possible without transitioning long-haul trucks to electric,” NITI Aayog said in its report titled ‘Unlocking a $200 Billion Opportunity: Electric Vehicles in India.’ Analysts say that extending easier finance, while okay for 

e-buses with clustered-procurement programmes, is much tougher for e-trucks. 

“In the context of credit profiles, the counterparty risk in e-buses is lower. In e-trucks, the counterparties are fleet operators or truck drivers, which increases the counterparty and delivery risk for lenders — that is a constraint,” said Vishal Kotecha, director and head – infrastructure and project finance at India Ratings and Research. 

According to NITI Aayog, the main challenge is that truck and bus ownership is highly fragmented with most owners being small players. 

“Since electric trucks and buses cost about two-three times as much as their ICE equivalent, the higher amounts of loan and equity make it difficult for small players to shift to electric buses and trucks. Financial institutions are also uncertain about the ability of small players to service the higher EMI. The near absence of reliable e-truck and e-bus performance data makes it more difficult for them to take lending decisions,” the NITI Aayog found.