The Indian government is working on a new incentive scheme to address the financing challenges faced by electric trucks and buses, a major hurdle in the country’s transition to green mobility. The plan, currently being discussed between the Ministry of Heavy Industries and the Department of Financial Services, aims to encourage lenders to fund high-cost electric vehicles (EVs) by offering incentives and revised lending guidelines. The initiative follows recommendations from NITI Aayog, which suggested creating a pooled fund to provide low-interest loans to small fleet operators.
One of the main challenges in financing EVs is their higher upfront cost, which is around 2.5 times that of diesel vehicles. This, combined with uncertainties surrounding their resale value, has made lenders hesitant to provide loans. The absence of a mature resale market and concerns about residual value have heightened risk perceptions among financiers. As a result, EV borrowers often face higher interest rates, with loan costs for electric two- and three-wheelers being 5-14 percentage points higher than petrol or diesel models.
The government’s push for improved EV financing aligns with India’s broader goals of reducing fuel imports and achieving net-zero emissions by 2070. While initiatives such as FAME and PM E-Drive have accelerated EV adoption in the two- and three-wheeler segments, large commercial vehicles continue to lag behind due to steep costs. An electric bus currently costs around ₹1-1.25 crore, compared to ₹25-50 lakh for a diesel model, while heavy electric trucks above 12 tonnes can cost ₹1-1.5 crore, nearly two to three times more than their diesel counterparts.
The proposed financing plan could mark a significant policy shift, from subsidy-based incentives to credit facilitation, aligning India’s EV ecosystem more closely with global models that focus on risk-sharing and de-risking finance for green mobility. If implemented, the plan could encourage lenders to offer loans at lower interest rates and design products that convert high upfront costs into manageable operational expenses. This could help increase the adoption of electric trucks and buses, which currently accounts for only 7% of total bus sales in India, compared to 50% in China and 14% in Europe.