While e-rickshaws have already been growing at an excellent pace, one common bottleneck is usage of finance
Electric cars such as for example Tesla and fancy motorcycles are what involves mind when thinking about electric vehicles (EVs). It could therefore come as a surprise that typically the most popular group of EVs in India can be an electric three-wheeler or what’s commonly known as an e-rickshaw.
In line with the Society for Manufacturers of Electric Vehicles, there are 1.75 million-plus electric three-wheelers on Indian roads weighed against only 8,000 electric cars. The tiny number of cars sold is often viewed as the failure of the EV sector in India. The success of e-rickshaw on Indian roads, however, assures us of a wholesome growth in the EV industry, keeping the industry viable. It’s estimated that in the time 2018-2025, the Indian e-rickshaw market will probably touch $5 billion at a CAGR of 9 %.
The humble e-rickshaw started a silent revolution on the Indian roads much prior to the government announced an all-electric public transport fleet by 2030. The automobile was initially introduced in New Delhi through the Commonwealth Games; it has since that time found favor in the united states with large-scale adoption in Delhi, Rajasthan, Uttar Pradesh, Bihar and West Bengal. In lots of places, the e-rickshaw has replaced other kinds of ICE (internal combustion engine) three-wheelers and is making the first and last mile connectivity for passenger and goods delivery noiseless and polluting of the environment free. E-rickshaws have already been bringing cheer to the groups of owner-drivers too, with average earning increasing 3 x to INR 25,000 monthly, giving the owner-drivers a chance to enhance their living standards, saving cash and rise in social status.
Credit supply is quite low
As the sector has been growing at an excellent pace, one common bottleneck is usage of finance. Most banks and lending companies have stayed from this segment. With proper usage of finance, the segment can scale at a far greater pace.
Financing is quite problematic for this segment. That is due to the fact the borrower (owner-driver of the e-rickshaw) is quite difficult to underwrite, geographies aren’t always scalable and serviceable, the e-rickshaw sector continues to be in start lacking structure and there is absolutely no proven secondary market for the vehicles.
An average buyer of an e-rickshaw can be an adult male usually in his 30s, may be the sole breadwinner for his family comprising small children, is barely educated, resides in tier II or tier III towns and doesn’t have credit score.
An average dealership in a little town would sell 5-10 vehicles per month, making the marketplace very disseminate. This helps it be unviable for banks and lending companies, especially people that have human driven processes.
The scale of the sector continues to be not large enough to supply structure to dealerships, products, warranties, etc. The merchandise have a low-quality perception. The difference in quality and life of vehicles from different brands does mean it is extremely difficult to establish an effective secondary market.
Regardless of the several problems in the sector, lending companies such as for example Revfin, Vedika, Pooja Finance and Manappuram have already been actively working in the forex market.
Most owner-drivers are smartphone users. This opens up tremendous opportunities. Usage of digital technology is helping to make financing in this segment easier and better.
Fintech solutions for the EV industry
Fintechs employ a significant role to play in the EV sector, especially in small commercial two- and three-wheeler segments. Fintechs offer speed, ease and reach. Deeper engagement of the fintech sector with the EV sector might help expand the sector at 10-20 times of today’s growth.
Digital lending platforms use data driven tools to create underwriting decisions. With help of non-traditional data such as for example psychometrics, SMS and biometrics overlaid with machine learning algorithms, quick and accurate decisions on intention and ability of the borrower could be made.
Usage of digital platforms also eliminates the necessity for significant human intervention, thereby, rendering it viable to provide usage of credit even in small towns with limited sales. This can help achieve cost advantage.
Digital payments have suprisingly low penetration in the segment. A power commercial two- or three-wheeler driver is normally involved with first and last mile delivery. With digital payments they are able to receive their fare/payment in e-wallets, they are able to also hand back any change with their customers through the wallet & most significantly, they are able to repay their loan instalments digitally. All of this will make them part of the ‘formal’ economy and data rich, opening many new opportunities for future years.
Usage of digital means in insurance claims settlement to assess damage through video and pattern recognition may also make insurance models viable by reducing costs and human intervention.
Usage of embedded IOT devices is helping lenders and insurers in tracking vehicles, in the event of theft, limiting the number of vehicle movement through geo fencing, immobilizing vehicles and to understand driver productivity. Higher productivity means more money and better management of debts.
Supporting the EV ecosystem
Fintechs are playing a big role in developing the ecosystem for electric vehicles. Some example include tie-ups with insurance agencies to supply vehicle, life and EMI protection insurance to borrowers; partnerships with battery manufacturers to finance replacement batteries; partnerships with battery charging and swapping providers to create an instalment-cum-subscription model to lessen initial capital necessary to buy vehicles and partnerships with aggregators to supply revenue/earning opportunities to drivers making loan instalment payments easier.
Driving the continuing future of the EV industry
Electric vehicles are here to remain. Environmental concerns initially gave rise to the idea of EVs and the central and state governments in India have made several policy decisions for faster adoption of EVs. The economics of electric two and three wheelers are also very good, with low priced of shopping for and operating. With the recent reverse migration because of COVID-19 the demand for jobs on small towns will probably increase. A combined mix of the above with growth in e-commerce, hyperlocal deliveries and first/last mile connectivity, the demand for EVs is on a higher growth trajectory.
Usage of digital technology supplied by Fintechs when coupled with technology from other players in the ecosystem like insurers, e-commerce, payments and aggregators will generate a robust and scalable model for electric vehicles in India.