The EV financing challenge haunting India’s green mobility transition

In India’s booming gig economy, delivery partners power everything from food deliveries to quick grocery runs. Today, most driver partners prefer to drive an electric vehicle (EV) for last-mile deliveries due to the lower operating costs compared to their petrol and diesel counterparts.

Yet, despite being the backbone of urban convenience, millions of gig workers struggle to get access to EV financing. As a result, EV fleet operators have stepped in to rent vehicles to delivery partners.

Non-banking financing companies (NBFCs) and startups that bridge the EV financing gaps, however, have their own set of challenges.

First, gig workers, many of whom have migrated to cities in search of work, do not have a credit history or even a bank account, making it difficult for banks and NBFCs to finance these vehicles.

Second, NBFCs with an EV financing arm deal with a higher cost of funds—the interest rate that financial institutions have to pay to borrow money to then lend to customers.

“We will be getting it (money) from banks as well as public sector banks at 12%. That is the reason you feel that the loans are costly in the EV segment as compared to ICE vehicles. We are also pushing Niti Aayog as well as these public sector banks like PNB, then SBI, to give us funds at a better rate,” said Dhiraj Agrawal, CBO at Mufin Green.

Third, as Agrawal describes, the product itself is a challenge. Currently, there is no second-hand market for these vehicles as opposed to the well-oiled secondary market that has been developed over the years for ICE vehicles, making these assets potentially risky ones to underwrite.

Fourth—battery problems. Most Indian OEMs have partnered with third-party battery manufacturers to provide them with lithium-ion batteries. This makes it difficult for financing companies to determine the warranty of the batteries compared to the vehicle.

“There are cases when, after a few months or a year, when the customer goes back to the dealership for servicing the battery, they are often told that the battery is out of the warranty window. This is the product risk we see on a customer level,” Agrawal added.

Agrawal added that financing companies are very selective about the OEMs they look to partner with.

“I have come across NBFCs who have shown concerns that a certain OEM’s after-sales support was a challenge, and they had to burn their fingers. But I think things are getting better. It has been a learning curve for OEMs as well.” However, Agrawal did not name any specific OEMs.

Vivekananda Hallekere of Bounce Infinity echoes the same thought. “We have seen a lot of NBFCs which talk to us, they'll be like, no, Bounce scooter is expensive compared to another scooter. But they're trying to make sense of it on a spreadsheet. But what they have to make sense of is not why a scooter is cheaper, but will the scooter last, right? So a bunch of NBFCs have gone to bet on wrong assets, burnt fingers, and now they are shy of everything.”

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The push for electrification

Ecommerce and quick commerce platforms have government mandates to electrify their delivery fleet, pushing many companies to lay down electrification targets. For instance, Walmart-backed Flipkart and food delivery platform Zomato are looking to transition their fleet to fully electric by 2030.

The demand generated has attracted many startups to set up shop in this segment. For fleet operators, financing is a less arduous process, but it is not without complexities.

“When we look at a lot of fleets, especially EV-only fleets, most of them are new entities, they're startups. They don't have very strong balance sheets. They've not done so much fundraising yet. A lot of them have negative cash flow or are burdened. So, I think financially the fleet operators are not very strong to be able to underwrite them purely on the basis of financials as one would do in traditional financing,” said Sameer Aggarwal, Founder at Revfin, an EV-financing company.

The balancing game

Startups have turned to alternative sources to provide solutions to EV users.

For instance, EV-financing company Vidyut interviews its customers, understands the routes these vehicles would travel on, and the number of trips their customers expect to take daily. The company also undertakes a field investigation to check whether their living arrangements have provisions to support EV charging and does neighbour reference checks, according to Xitij Kothi, Co-founder of Vidyut Tech.

This helps Vidyut understand customers’ basic creditworthiness before disbursing loans.

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However, not many companies have the bandwidth to undertake such rigorous checks, and so have a different model.

Mufin Green Finance, an NBFC that finances EVs, for example, does not fund gig workers directly. Instead, it provides financing for fleet operators that, in turn, equip gig workers with vehicles.

EV fleets are a relatively new business model with many of the players still learning how to find the balance between striking profitability while operating on razor-thin margins.

According to Rashi Agarwal, Co-founder at Zypp Electric, the EV financing landscape has progressed rapidly over the past few years. “Five years ago, when we started it, we definitely had a share of challenges, because big banks and NBFCs were just not open to it. At that time, I think a lot of fintech companies mushroomed. And it opened up doors because they came up with the concept of EV financing through tech, smart ways of doing financing. That was a pivotal moment,” she says.

Despite these downfalls, the ecosystem has seen the emergence of many EV financing startups such as Revfin, Vidyut, and Altmobility, among others.

“We have seen that good NBFCs have also done a great job. So we work with Revfin, Alt Mobility and a bunch of these new-age companies that are doing a very good job on electrification. They have a very good understanding of what works, what doesn't work,” Hallekere added.

According to a blog post by Blume Ventures, India’s EV financing market is valued at about $2.4 billion in 2025 and is expected to grow at a compound annual growth rate (CAGR) of 63%, reaching $19.9 billion by 2030.