SIDBI Launches Pilot Scheme ‘Mission 50K-EV4ECO’ for Enhanced Financing in Electric Vehicle Space to Strengthen Ecosystem
- ByStartupStory | April 15, 2023
The Small Industries Development Bank of India has announced the launch of a pilot programme to improve financing terms for electric vehicles and strengthen the entire ecosystem.
Small Industries Development Bank of India (SIDBI) said in a statement that the pilot phase of ‘Mission 50K-EV4ECO’ aims to strengthen the EV ecosystem, including uptake for two, three, and four-wheelers, through direct and indirect lending.
The pilot scheme, which is the precursor to SIDBI-World Bank’s EVOLVE scheme, has two components: direct lending and indirect lending.
This pilot will be followed by increased multilateral support for the ecosystem, according to the statement.
According to SIDBI, through extensive consultations with stakeholders, it has been identified that MSMEs and NBFCs involved in the electric vehicle ecosystem face difficulties in obtaining sufficient financing at competitive interest rates.
It also stated that bankers perceived these projects to be high risk on the supply side.
Similarly, dedicated NBFCs (non-banking finance companies) face high funding costs, resulting in a high landed acquisition cost to the ultimate beneficiary. There is also a need to push the three-wheeler EV segment, and Mission 50K intends to address these challenges, according to the company.
According to the statement, SIDBI will directly lend to eligible MSMEs (including aggregators, fleet operators, and EV leasing companies) for the purchase of electric vehicles and the development of charging infrastructure, including battery swapping.
The indirect scheme, which is aimed at NBFCs, including small unrated focused and emerging NBFCs that are actively engaged in EV financing, will reach out to the last mile by inducing access to funds while also lowering landed costs, according to the company.
SIDBI’s enterprise growth strategy includes a significant role for NBFCs. They have demonstrated a willingness and ability to reach bottom-of-the-pyramid businesses, particularly in credit-deficient geographies, as well as the adoption of innovative and nimble credit delivery models and an understanding of the local ecosystem, according to SIDBI Chairman and Managing Director Sivasubramanian Ramann.
“In line with the national mission of EV30@30 SIDBI has adopted EV as a priority and by launching mission 50K- EV4ECO we intend to promote the entire EV value chain,” he said.
MSMEs, aggregators, and other critical actors in the EV value chain have been having difficulty convincing financial institutions to lend to them, he said, adding that channelising agencies are also having difficulty.
According to him, EV financing is primarily provided by small, unrated NBFCs with extensive knowledge of the EV sector.
“At present, it is not possible for these NBFCs to cater to all MSMEs requiring financing for an electric vehicle for their day-to-day operations or commercial use. We realised the need to give it a developmental push thus giving a fillip to the national agenda of a carbon-neutral nation,” Ramann added.
“India has set an ambitious climate change mitigation target and has committed to low-carbon growth in the energy and transport sectors. The transition to electric vehicles (EVs) is a critical cornerstone for transport sector decarbonisation,” said Sudhendu Sinha, Advisor (infra and e-mobility) at NITI Aayog.
Electric two- and three-wheelers have the greatest potential for EV adoption in India, accounting for 79% of passenger road activity, and are already cost-competitive with conventional vehicles, according to him.
“To support India’s commitment to EV30@30, SIDBI taking the lead in launching the Mission 50K-EV 4 ECO scheme is a step in the right direction. This will enable access to affordable financing for EVs,” Sinha said.
“We look at SIDBI to prioritise the three-wheeler segment. I am sure these feet on-ground pilots shall enable quick replicability and scalability through multilateral support,” he added.
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