There is no doubt about the fast adoption of Electric Vehicles (“EVs”) globally and India is no different. It is expected that India will see EV sales worth US$100 billion by 2030. As per a report released by Niti Ayog, the quantum of capital and finance required for India’s EV future across vehicles, charging stations, and batteries is estimated to be INR19.7 lakh crore cumulative between 2020 and 2030. Given the nascency of the technology and the market, the financiers are currently unable to offer competitive products due to real and perceived risks. The current financing products are therefore plagued with issues like higher down payments, shorter tenures, and higher interest rates. This provides a huge opportunity to build an alternative to financing in the form of leasing, which can meet the demands of both end-customers, as well as the financiers.
The ability to sweat the asset more in case of commercial use case has paved the way for favorable Total Cost of Ownership (“TCO”) from day one and hence we are evidencing increased demand for EVs by businesses across multiple form factors including 2Ws, 3Ws to 4Ws. However, financing for commercial use cases is even more challenging as the creditworthiness of the customer is dependent on asset utilization and business viability versus a relatively stable income profile in the case of an individual taking a loan. Further, asset usage is also much higher than the personal segment, resulting in additional concerns around the asset risk as well. These factors have resulted in a huge gap in financing of EVs for commercial use cases versus ICE across segments.
Source: Driving Affordable Finance for EVs in India by BCG, ADB and Niti Ayog
Hence, there exists an opportunity to build an alternative to financing in the form of leasing which can meet the demands of both end-customers, as well as financiers. However, given the nascency of the product and complexity of the use case, we were looking out for an extraordinary team that can deliver upon the following:
- Strong understanding of the asset to minimize asset risk;
- Ability to use the same asset multiple times in case of second lease term, repossessions, etc.;
- Ability to build strong credit models for assessing and minimizing customer default risk;
- Ability to build a strong pipeline of lenders to finance the assets;
- Ability to structure products on a case-to-case basis by sitting in the center of the value chain; and
- Ability to build out and leverage the right tech and data stack (given the connected nature of EVs)
When we met Kunal Mundra, we were impressed by his approach towards building multiple products with a ‘no one size fits all’ strategy. Our belief in him was further strengthened by his long-sighted view of entering into an equity partnership with Grip and getting Nikhil Aggarwal on board as a co-founder to get access to customers, 2nd life assets, financiers, customer credit data, asset performance data, etc. for accelerated ramp-up and reduced risk. Being an existing investor in Grip, and being convinced by Kunal’s capability and experience as CEO of Cars 24, made us quickly decide that this is the best team to back in the sector. Co-leading the round with ADB is of immense value as it could potentially unlock various debt financing opportunities for the company as it scales further.
Elertifi is poised to make India’s transition to EVs easier by controlling the entire journey for an EV user, including:
- OEM discovery and vehicle recommendation;
- Leasing and financing solution (on and off balance sheet);
- Service and maintenance across the asset lifecycle;
- Refurbishment and 2nd life vehicles; and
- Tech and data stack with remote vehicle monitoring, diagnostics and control
Now being almost 3 months into the investment and having seen the company’s achievements and progress in such a short time frame, we are confident of our decision and very excited to see Electrifi on the path of becoming the market leader in the space.
