We spoke to Mr Dhirraj Agrawal, Sr. Vice President & CEO of EV Business at Manappuram Finance. The conversation centred around factors related to financing issues in Electric Vehicle segment and what can be done to build up an ecosystem for EV financing. Here are some excerpts from the interview.
Manappuram finance is focussed on providing financing options for electric 2Ws and 3Ws.
What is the current scale of Manappuram’s operations in EV financing?
We are operating in 84 cities, with 3500+ branches all over the country. We are very well established in West Bengal, UP and Odisha – the states which are hubs for electric vehicles. We have started collaborating with good OEMs, and looking to expand our footprint in EV financing. Our book size is more than 9,000 EVs at present.
So, when you say good manufacturers, what factors do you look for while deciding whether or not to collaborate with a particular OEM?
There are a couple of factors that I and my product team consider:
1. We visit the factories and manufacturing units.
2. The scale of production – we are interested in collaborating with manufacturers who are making 400-500 e-rickshaws a month.
3. Also, we take security deposits from the dealers as well as manufacturers to avoid circumstances where dealers may shift to another brand, an exercise prevalent in EV dealerships. We are always ready to fund dealers and manufacturers who are involved in the collections.
Overall when we compare with the ICE vehicles, why is the EV financing so difficult to obtain for the buyers?
There are a couple of reasons.
1. The profile of the customers – Generally customers who apply for e-3W finance are pedal rickshaw drivers, who want to switch to electric but do not have formal financing history and sometimes not even an Aadhar card.
2. As a product EVs are riskier, as one component (battery) makes up for a lion’s share of the vehicle cost. If battery stops working, then the driver will not earn.
As a financier, I feel that this is a very risky product group but if done very sincerely and cautiously, financing EVs presents a good proposition.
This means finding finance will be easier for institutional buyers with pre-set tie-ups for deliveries business rather than an individual who is trying to procure an EV for making deliveries or running e-rickshaw on his own.
Yes, as institutions have banking history, P/L to show.
Also, right now there are hardly 2-3 private finance companies but they are financing at very high IRRs. Some banks also financed with mudra loans but that didn’t work out as the usage of the loan wasn’t traceable. This industry will really grow if good OEMs are supported by good finance companies who are ready to fund them.
The repayment in 3W segment can be tricky. What factors are considered while screening loan application and what additional measures do you take to safeguard your interest as a financier?
A couple of things. We check bureau reports but sometimes customers don’t have it.
1. We don’t fund customers unless they have a local guarantor.
2. Average EMI for an e-3W comes out to be INR 8,000. Customers nearly earn about INR 800-1000 a day, so weekly EMI has been implemented. Every Monday INR 2000 as EMI is supposed to be deposited to any branch. Also, to make the process feasible, we have involved payment gateways for direct payment from customers account.
We are also tracking the vehicles financed by us to figure out potential issues with vehicle movement, and minimise default rates.
Compiled by Karan Bhatia
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