Karamveer S. Dhillon, Founder, Perpetuity Capital
1. How do government incentives, such as tax credits or subsidies, influence the EV financing market?
Government incentives in India play a vital role in making EVs financially accessible to consumers and businesses, thus driving growth in the EV financing market. By reducing acquisition costs associated with purchasing an EV, supporting infrastructure, and encouraging green finance, incentives such as FAME II , EMPS Subsidies, PME-Drive, Vehicle scrappage policy and PLI schemes are making EV financing increasingly viable for all, including manufacturers, lenders and borrowers. As a result, they accelerate India's transition to sustainable mobility.
2. How do you evaluate the residual value of an EV versus a traditional gasoline-powered vehicle?
The residual value of an EV is one of the more complex aspects of our underwriting process. Unlike traditional gasoline-powered vehicles, where the depreciation and second hand markets are well-established, EVs have a different set of influencing factors. The residual value of an EV depends heavily on battery life, technological obsolescence, and the broader market's adoption rate of electric mobility.
While EVs may have had steeper depreciation in the past, their residual value is stabilizing due to technological advances, longer-lasting batteries, and fast charging batteries. We are currently piloting a LBLM for health and residual analysis of Perpetuity Capital's existing financed vehicles and second use vehicles which we are looking to finance. We have tie ups with brokers and other platforms including turno where we will be financing used EVs.
As EVs become mainstream and more charging options are available, we expect the gap in residual values between EVs and traditional cars to narrow significantly.
3. How do you tailor financing options for different customer segments, such as individual consumers versus fleet owners?
At Perpetuity Capital, we understand that individual consumers and fleet owners have vastly different financial needs and expectations. For individual consumers, the focus is typically on affordability and long-term financing options that align with personal budgets. We offer flexible terms and lower down payments for first-time EV buyers and captive users, making the transition to electric easier.
Fleet owners, on the other hand, prioritize scalability, total cost of ownership, and operational efficiency. For this segment, we provide structured financing options that account for bulk purchases, longer amortization schedules, and the potential for government rebates and schemes on fleet electrification.
We also collaborate with fleet operators to offer tailored leasing or financing solutions including refinancing of existing fleets helping them unlock capital needed for working capital.
4. What impact do changing interest rates have on the affordability of EV financing?
Interest rates play a pivotal role in the affordability of all forms of vehicle financing, and EVs are no exception. When rates are low, it becomes easier for consumers and businesses to finance higher-cost EVs, lowering the barrier to entry. However, with rising interest rates, as we've seen recently, the cost of borrowing increases, which can make EVs less affordable. The problem is, Institutional capital isn't comfortable with the risks associated with EVs
We mitigate this by offering fixed-rate financing options that protect borrowers from fluctuations in interest rates over the loan term. Additionally, we focus on AMC contracts at the time of purchase to offset any costs associated with ownership and maintenance of the vehicle.
5. How do ESG (Environmental, Social, and Governance) factors influence your company's financing decisions?
Environmental, Social, and Governance (ESG) criteria are embedded in our corporate strategy and play a significant role in our decision-making process. We believe that promoting sustainable finance is not just a business opportunity, but a responsibility. Financing EVs is inherently aligned with our ESG goals as it directly contributes to reducing carbon emissions and promoting cleaner mobility in the country.
We evaluate our loan portfolios for environmental & social impact, ensuring that a significant portion is directed toward clean mobility and financial inclusion. From a governance perspective, we maintain transparency in how we allocate funds to ESG initiatives and engage with stakeholders to ensure compliance with evolving environmental regulations.
By integrating ESG considerations into our financing models, we not only promote sustainability but also create long-term value for both our customers and investors.
6. What role do partnerships with EV manufacturers, dealerships, or charging infrastructure providers play in your business model?
Partnerships are a cornerstone of our business strategy. Collaborating with EV manufacturers allows us to offer exclusive financing schemes that lower the cost of ownership for our customers. We often work with manufacturers to offer bundled financing that includes vehicle purchase, insurance and battery chargers, providing a more holistic solution for consumers.
Similarly, partnerships with dealerships help streamline the loan approval process, enabling a seamless experience for buyers. We have developed an app for dealers to onboard customers along with our sales executives so we can reduce our overall TAT. Moreover, we are working with OEMs to integrate APIs so our tech stack can directly pull data once a vehicle is financed and is on road - no need for an external IoT device. These partnerships are essential for creating a comprehensive ecosystem that not only supports EV adoption but also adds value to our customers at every touchpoint.
7. What unique risks do you associate with financing electric vehicles, and how do you mitigate them?
Financing EVs has two inherent risks; a product risk and a credit risk. On the credit side we have developed our own tech stack that enables customers, especially new to credit segment (NTC), to access credit. A segment that is typically overlooked by Banks and traditional lenders. Through our techstack we analyze 30+ data points that give us a risk score. If a customer meets our criteria he gets an approval immediately.
On the product side, we ensure we have a finance tie up with OEMs that covers the asset during the period of warranty and also negotiate a subvention which helps us account for the risk incase of a product defect. One of the unique risks associated with EV financing is the uncertainty surrounding battery life, range anxiety and replacement costs. Battery technology is evolving rapidly, but a premature battery failure or the high cost of replacement could impact the vehicle's residual value and the borrower's ability to repay the loan.
To mitigate this risk, we use a combination of extended warranties, extended tenures allowing borrowers time incase of any mishap, and data-driven valuation models that account for battery health including measuring SOH and battery cycles to reasonably estimate its useful life.
8. What innovations in financial services do you think will be most transformative for EV adoption?
I think 2 things, one is figuring out the useful life of an EV and refinancing it will open up a broader financial services market than one that already exists today. There is currently no second buyer of EVs, at least on the passenger side. On the ICE side of things you have cars24,Spinny etc which are used car platforms for ICE vehicles that are solving for that problem but nothing for EVs.
Second, driving patterns and behavior are yet to be factored into financing and insurance of a customer. If you can find a correlation between driving patterns and credit risk, you can drastically improve your underwriting process, especially for commercial vehicles, something which was not available for ICE commercial vehicles.
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