Financing India’s Electric Two- and Three-Wheeler FleetsEXECUTIVE BRIEFNOVEMBER 2022In collaboration with NITI Aayog Cover: deepblue4you, Getty Images – Inside: Getty Images© 2022 World Economic Forum. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, including photocopying and recording, or by any information storage and retrieval system.DisclaimerThis document is published by the World Economic Forum as a contribution to a project, insight area or interaction. The findings, interpretations and conclusions expressed herein are a result of a collaborative process facilitated and endorsed by the World Economic Forum but whose results do not necessarily represent the views of the World Economic Forum, nor the entirety of its Members, Partners or other stakeholders.Financing India’s Electric Two- and Three-wheeler Fleets2 Two-wheelers and three-wheelers account for over 80% of vehicle sales in India. Supported by government policies such as Faster Adoption and Manufacturing of Electric Vehicles (FAME), adoption of electric variants of two- and three-wheelers has been steadily rising in the past few years. There are about 45 certified vehicle manufacturers of electric two- and three-wheelers in India in an otherwise consolidated auto market. Cumulative sales of these vehicles have reached an impressive 1 million units. However, this is still just 1 million out of India’s total two- and three-wheeler fleet stock of 250 million – leaving immense room for sustained growth. Achieving 100% electrification of India’s two- and three-wheeler stock requires a capital allocation of approximately $285 billion.1Although electric vehicles (EVs) are costlier to purchase, their running cost is much lower. So, the more an EV is used, the cheaper it gets. When gauged by total cost of ownership (TCO), they are already ideal for ride-hailing and last-mile delivery fleets, which have high daily utilization. These segments are leading the adoption of electric two- and three-wheelers in India and are likely to be among the first segments to transition completely to electric. For a rapid transition of fleets, capital flow to the ecosystem needs to grow multi-fold. Opening large capital pools will require de-risking of the market through deeper collaboration between stakeholders and business model innovation.India has the world’s largest fleet of two- and three-wheelers – its transition to electric requires financing of$285 billionElectric two- and three-wheeler fleets provide low-cost and zero-emission mobility to people and goods in our cities. The Government of India is focusing on innovative policy measures and national flagship schemes to scale up electric mobility in the country.Sudhendu J. Sinha, Adviser, NITI Aayog, Government of IndiaFinancing India’s Electric Two- and Three-wheeler Fleets3 Source: Roadmap for Delivery Electrification, Dialogue and Development Commission of Delhi, RMI IndiaTCO for two-wheeler deliveryICE -₹* 2/km (¢2.4)EV -₹* 0.52/km (¢0.6)This data is for fleets in Delhi. ICE two-wheelers run primarily on petrol. TCO for electric two-wheelers has been calculated after accounting for FAME incentives.TCO for three-wheeler deliveryICE -₹* 2.25/km (¢2.7)EV -₹* 1.94/km (¢2.3)This data is for fleets in Delhi. ICE three-wheelers run primarily on compressed natural gas. TCO for electric three-wheelers has been calculated after accounting for FAME incentives.₹ is the symbol for INR*Source: Roadmap for Delivery Electrification, Dialogue and Development Commission of Delhi, RMI IndiaFinancing India’s Electric Two- and Three-wheeler Fleets4 StatusCapital poolDescriptionUnlockedPrivate equityPrivate equity has been the first pool of capital that has been unlocked. According to estimates, in 2021, the sector received $1.8 billion in investments from 31 deals. Several original equipment manufacturers (OEMs), fleet owners, fleet operators and infrastructure providers have been able to raise equity at healthy valuations.PartiallyunlockedVenture capital (early stage)Venture capital in the form of early-stage equity investments has been unlocked with investments flowing into several vehicle manufacturing and fleet build out and operations. While equity deals have played a crucial role thus far in supporting entrepreneurial opportunities, the role of venture debt has been limited, if any.Dedicated climate fundsThe Green Climate Fund (GCF) has approved a fund of $1.5 billion for India’s EV ecosystem. Similarly, the Global Environment Facility (GEF) Trust Fund has approved grant and co-financing facility of ~$172 million. Such funds are being channelled through multilateral banks and other implementation partners, mostly private equity; however, as these are new, the efficacy of their ground deployment is yet to be determined.Non-banking financial companies (NBCFs)NBFCs are currently the main source of debt financing to this segment. NBFCs backed by OEMs and those speci