The central government is working on a new incentive scheme aimed at easing financing challenges for electric trucks and buses—one of the biggest hurdles slowing India’s shift to green mobility. According to a Mint report, the plan seeks to address lenders’ hesitation to fund high-cost electric vehicles (EVs), which tend to depreciate faster than conventional diesel models, reports Moneycontrol.com.
Discussions are reportedly underway between the Ministry of Heavy Industries (MHI) and the Department of Financial Services (DFS) under the Finance Ministry to develop a framework that promotes commercial EV financing. The initiative follows recommendations from NITI Aayog and could include incentives for banks and non-banking financial companies (NBFCs), along with revised lending guidelines for electric commercial vehicles.
A person familiar with the matter told Mint that the proposed scheme may encourage lenders to offer loans at lower interest rates and design products that convert high upfront costs into manageable operational expenses. In its August report, NITI Aayog suggested creating a pooled fund—drawing from public and multilateral sources—to provide low-interest loans, particularly for small fleet operators. The think tank recommended that the scheme be launched within a year of its proposal.
A second source confirmed to Mint that preliminary talks between MHI and DFS have begun, though the size of the funding corpus has not yet been finalised. Citing estimates from Mordor Intelligence, the report added that India’s commercial EV financing market is expected to expand from $2.37 billion in 2025 to nearly $20 billion by 2030.
Financing electric trucks and buses remains a major challenge for lenders due to their higher upfront costs—around 2.5 times that of diesel vehicles—and uncertainties surrounding their resale value. Dhiraj Agrawal, Chief Business Officer at Mufin Green Finance, told Mint that the absence of a mature resale market and concerns about residual value have heightened risk perceptions among financiers.
Residual value—the estimated worth of a vehicle at the end of its loan term—is typically lower and harder to predict for EVs because batteries depreciate faster than internal combustion engines. Tracking battery health has therefore become a critical factor in assessing asset quality and resale potential.
Surya Khurana, Managing Director of FlixBus India, said that financing electric buses remains difficult due to their high cost, evolving technology, and limited performance data. Smaller operators, he noted, often lack the financial strength or credit history to secure loans on favourable terms.
FlixBus India, a subsidiary of Germany’s FlixBus, partners with local operators to offer technology-driven, affordable long-distance bus travel in India. Agrawal of Mufin Green Finance added that EV borrowers usually face higher interest rates—loan costs for electric two- and three-wheelers can be 5–14 percentage points higher than petrol or diesel models, while heavy commercial EVs attract rates 5–10 points higher than comparable internal combustion engine vehicles.
The government’s push for improved EV financing aligns with India’s broader goals of reducing fuel imports and achieving net-zero emissions by 2070. While initiatives such as FAME and PM E-Drive have accelerated EV adoption in the two- and three-wheeler segments, large commercial vehicles continue to lag behind due to steep costs.
An electric bus currently costs around ₹1–1.25 crore, compared to ₹25–50 lakh for a diesel model. Similarly, heavy electric trucks above 12 tonnes can cost ₹1–1.5 crore, nearly two to three times more than their diesel counterparts.
NITI Aayog’s report highlighted that India’s truck and bus ownership is highly fragmented, with smaller operators struggling to access financing for high-value EVs. Agrawal noted that while lenders increasingly use telematics and battery health data to track vehicle performance, the absence of standardised frameworks for reporting battery degradation makes asset evaluation more complex.
Industry experts told Mint that the limited availability of reliable data on heavy-duty EV performance continues to restrict credit flow to the sector. Despite policy efforts, adoption remains sluggish—Mint cited NITI Aayog data showing that, as of 2024, electric buses accounted for only 7% of total bus sales in India, compared to 50% in China and 14% in Europe. For heavy-duty electric trucks, adoption stood at 0.07%, versus 3% in China and 2% in Europe.
If implemented, the proposed financing plan could mark a significant policy shift—from subsidy-based incentives to credit facilitation—aligning India’s EV ecosystem more closely with global models that focus on risk-sharing and de-risking finance for green mobility.
