Electric three wheeler, popularly known as e-rickshaw, has left stylish electric cars and motorcycles far behind on the bumpy, dusty Indian roads. The Society for Manufacturers of Electric Vehicles estimates that there are over 1.75 million electric three-wheelers on Indian roads as against a mere 8,000 electric cars. It is also estimated that the Indian e-rickshaw market, at a CAGR of 9%, will touch $5 billion by 2025 and these figures are a testimony of growth and viability of the Electric Vehicle (EV) industry in India.
The e-rickshaw has been adopted on a large scale in states like Delhi, Rajasthan, Uttar Pradesh, Bihar and West Bengal, where it has replaced ICE (Internal Combustion Engine) three-wheelers. There are two reasons for the e-rickshaw’s widespread success – one, it provides a noiseless, and pollution-free first and last-mile connectivity for passengers and goods delivery and two, the owner-drivers of e-rickshaws earn about Rs 25000 per month, a 3X increase in their average monthly income, thereby improving their life and social status.
Despite this success story, many challenges are restricting the growth of the EV industry in the electric three-wheeler market like high production cost, far-flung nature of the market, low credit supply to its potential buyers and other technical limitations. Here, the Fintechs, with their innovative solutions, have stepped up their contribution to the growth of the sector.
Fintech solutions for the EV industry
Fintechs offer speed, ease and reach to the EV industry. A more symbiotic relationship between the two sectors can help the latter expand 10X-20X of the present growth.
- Credit supply solutions for potential buyers – Access to finance for buying e-rickshaw is difficult for the buyer. Traditional financers stay away from this sector as a typical borrower is challenging to underwrite as he is generally semi-literate, doesn’t have a credit history and resides in geographies that are unserviceable and economically unviable.
Despite these issues, several lending companies like Revfin, Vedika, Pooja Finance, and Manappuram are actively and successfully providing finance to this market. They have found solutions through digital technologies, and they leverage the high smartphone penetration in the country. These digital lending platforms use a blend of data-driven tools like machine learning algorithms (MLAs) and nontraditional data tools like psychometrics, SMS and biometrics to make their underwriting decisions. This also eliminates much human intervention, which inturn makes any geography, even small towns with limited sales, viable to provide credit.
- Digital payment solutions – Fintechs are looking to drive digital payments in the commercial e-rickshaw first/last-mile delivery segment. As most drivers are smartphone equipped, they can receive fare/payment in their e-wallets as well as pay their EMIs.
- Other innovative digital solutions – Embedded IOT devices help lenders and insurers to keep track of vehicles, limit the range of vehicle movement through geo-fencing or immobilize vehicles in case of theft. These devices also give an understanding of driver productivity, which can then be optimized for higher productivity ultimately translating into more income and better management of debts for the owner-driver.
- Fintechs supporting the EV ecosystem – Fintechs are playing a significant role in developing the ecosystem for electric vehicles, through tie-ups with insurance providers; partnerships with battery manufacturers to finance replacement batteries; creating an instalment-cum-subscription model to make it easier for buyers to buy the vehicle.
The pandemic has propelled reverse migration which will increase the employment demand in small towns. Growing e-commerce in these areas with a spiraling need for hyperlocal deliveries and first/last mile connectivity will make the demand for EVs high in the near future. A healthy combination of digital technologies of fintechs, eCommerce players, insurers, in addition to support from the government, spell a fantastic time of growth for the EV sector in India.
The writer is Founder & CEO, RevFin)