India has achieved remarkable progress, experiencing a remarkable 16.9% rise in electric vehicle (EV) sales, totaling 1.97 million units in FY25, compared to 1.75 million in FY24. This notable growth underscores the significant transformation of EVs within the automotive sector. Although improvements in battery technology and government initiatives play a crucial role in boosting electric vehicle sales, the true game-changer is financial technology (fintech). In India, the uptake of EVs encounters obstacles stemming from financial constraints, challenges that fintech is ready to tackle.
The Traditional Financing Landscape
To comprehend this influence, it is crucial to first analyze the traditional financing landscape. In India, acquiring a vehicle has historically been a tedious process, often hindered by bureaucratic obstacles and linked to inflexible credit scoring systems enforced by traditional banks and Non-Banking Financial Companies (NBFCs). Importantly, this issue is even more pronounced for EVs. Lenders have historically been hesitant due to insufficient information regarding a key and expensive element: the battery. Concerns about battery depreciation, fluctuating and decreasing EV resale values, and the lack of a strong secondary market for EVs have led to their classification as a risky asset. This uncertainty has resulted in high-interest loans, substantial down payments, and short repayment terms, all of which economically exclude a significant portion of the population, especially those in the commercial two- and three-wheeler segment, which is crucial for last-mile delivery in India.
Dismantling the Financing Wall with Data
The financial challenges outlined above presented a clear opportunity. Consequently, this is where fintech has emerged, pioneering innovations in the industry by leveraging data. In contrast to traditional lenders who are clearly dependent on CIBIL scores for their evaluations, fintech lenders take into account a plethora of alternative data to craft and refine comprehensive risk assessments. Additionally, this emphasis on data not only speeds things up but also allows for a tailored approach.
These platforms possess the power of artificial intelligence (AI) and machine learning (ML) technologies to swiftly assess an individual’s creditworthiness, paving the way for instant loan approvals and disbursements. This swift processing capability is a world apart from the drawn-out processes usually imposed by traditional financial institutions. Such a digitally-driven strategy broadens financing opportunities for those who have been previously overlooked, enhancing access to electric vehicle (EV) ownership and, more significantly, transforming the financing landscape altogether. For instance, flexible loan arrangements are being designed with the specific cash flow patterns of commercial drivers in mind. Shifting the scheduled repayment of the loan for the vehicle’s purchase to different points in the month provides drivers with control over the cash flow and the loan.
Beyond the Vehicle Loan
The transformative power of fintech doesn’t stop with credit assessment. In fact, the influence of fintech transcends the scope of financing the vehicle and is guiding the entire ownership paradigm. One of the most impactful advancements is facilitating the Battery-as-a-Service (BaaS) model. Recognising that the battery alone constitutes 40–50% of the total cost of the EV, BaaS permits a customer to buy the vehicle and discharge the battery with a subscription model that involves a battery charge for a swap at designated stations. Critically, fintech platforms facilitate this entire new model. These platforms are truly the backbone of this entire ecosystem.
They effectively integrate payment gateways for battery subscriptions and manage battery-swapping transactions. This provides complete financial assistance to swapping operators. Furthermore, removing the battery from the vehicle also alleviates the lender’s residual value concerns completely, as the operator, not the vehicle owner, will manage the battery’s health and lifecycle.
The New Underwriting Gold
Moving forward, another pivotal change is emerging from the vehicles themselves. Specifically, a pivotal development in the industry stems not from the documentation that lenders collect in a traditional paradigm, but from the generation of proactive, predictive models. Such change is made possible because EVs generate a lot of useful telematics data, including driving patterns, charging behaviors, and detailed real-time battery health diagnostics. Fintech lenders and specialized insurtech firms are using this information to produce advanced predictive models. In this way, this data is redefining risk assessment.
Specifically, battery health data has become the most valuable asset. Battery health data allows the models to estimate the degradation curve and the remaining useful life of the battery. This allows for the creation of the “Battery Health Certificate”, a digital battery passport that offers a clear evaluation of the battery’s value. This data improves the vehicle’s residual value which allows lenders to offer better terms and boost trust in the worth of used EVs. Likewise, this data allows insurtech platforms to innovate new usage-based insurance models such as ‘Pay-As-You-Drive’ and ‘Pay-How-You-Drive’, where driving behaviour, rather than basic demographic information, is used to determine the premium. As a result, the driver of a vehicle is incentivised through discount premiums and reduced cost of ownership to exhibit safe driving behaviour.
Finally, this predictive power is immensely beneficial for large-scale operations. Predictive models provide significant benefits to commercial fleet operators. Integrated fleet management software and fintech platforms predict maintenance needs and adjust charging schedules to maximize off-peak electricity rates. Additionally, charging EVs during off-peak times lowers operational expenses. These software tools improve operational efficiency and maintenance analysis. Most importantly, this whole system gives financiers a clear and comprehensive view of the operational performance of their assets. This data visibility reduces the investment risk and increases the capital flow to the EV sector in India. Driving India’s EV fleet might use lithium-ion batteries, but accelerated EV adoption and optimal battery technology ultimately rely on robust fintech integration to optimize operational performance.