Centre eyes incentive scheme to power EV truck, bus financing: Report

India's commercial EV financing market is projected to grow from $2.37 billion in 2025 to nearly $20 billion by 2030

The central government is reportedly developing an incentive scheme to improve financing options for electric trucks and buses, addressing one of the major obstacles to India's green mobility transition-limited access to affordable credit for fleet operators. According to a Mint report, the initiative aims to tackle lenders' reluctance to finance expensive EVs that depreciate faster than conventional vehicles.

As per Mint, discussions are underway between the Ministry of Heavy Industries (MHI) and the Department of Financial Services (DFS) under the finance ministry to create a framework that supports commercial electric vehicle (EV) financing. The plan follows a recommendation from NITI Aayog and could include incentives for banks and non-banking financial companies (NBFCs) as well as new lending guidelines for electric commercial vehicles.

One person familiar with the matter told Mint that the scheme may encourage lenders to offer loans at lower interest rates and structure products that convert upfront capital costs into operational expenses. NITI Aayog, in an August report, had suggested the creation of a pooled fund-drawing from public and multilateral sources-to provide low-interest loans, particularly for small fleet operators. The think tank had recommended that the scheme be rolled out within a year of its proposal.

A second source quoted by Mint confirmed that preliminary talks between MHI and DFS have begun but added that the size of the funding corpus is yet to be determined.

Citing estimates from Mordor Intelligence, Mint noted that India's commercial EV financing market is projected to grow from $2.37 billion in 2025 to nearly $20 billion by 2030.

Mint said queries sent to MHI, DFS, and NITI Aayog on November 3 remained unanswered.

Financing the Transition

According to Mint, financing electric trucks and buses poses unique challenges for lenders due to higher upfront costs-roughly 2.5 times that of diesel vehicles-and uncertainty about resale value. Dhiraj Agrawal, Chief Business Officer at Mufin Green Finance, told Mint that the lack of a mature resale market and concerns around residual value increase the risk perception for financiers.

Residual value-the estimated worth of a vehicle at the end of its loan term-is typically lower and less predictable for EVs, largely because batteries depreciate faster than internal combustion engines. This makes tracking battery health a key factor in assessing asset quality and resale potential, Mint reported.

Surya Khurana, Managing Director of FlixBus India, told Mint that financing e-buses remains difficult given their high cost, evolving technology, and limited historical performance data. He said smaller operators, in particular, often lack the balance sheet strength or credit history to access loans on favourable terms.

FlixBus India, a subsidiary of Germany's intercity coach operator FlixBus, works with local bus operators to provide affordable, technology-driven long-distance bus travel in India.

Agrawal of Mufin Green Finance told Mint that EV borrowers typically face higher borrowing costs. Loan interest rates for electric two- and three-wheelers can be 5-14 percentage points higher than those for petrol or diesel models, while commercial EVs-especially heavy-duty ones-attract rates 5-10 points higher than comparable internal combustion engine (ICE) vehicles.

Aligning with Net-Zero Goals

As Mint noted, the push for improved EV financing mechanisms aligns with India's broader goal of reducing dependence on fuel imports and achieving net-zero emissions by 2070. Although government schemes such as FAME and PM E-Drive have accelerated adoption in the two- and three-wheeler segments, larger commercial vehicles remain laggards due to cost barriers.

An electric bus currently costs around Rs 1-1.25 crore, compared to Rs 25-50 lakh for a diesel model. Similarly, heavy electric trucks weighing above 12 tonnes can cost between Rs 1-1.5 crore, roughly two to three times the price of their diesel counterparts, Mint reported.

NITI Aayog's report also pointed out that India's truck and bus ownership is highly fragmented, with small players struggling to obtain financing for high-value EVs. Agrawal told Mint that while lenders use telematics and battery health data to monitor vehicle performance, the absence of standardised frameworks for reporting battery degradation complicates asset evaluation.

Industry experts told Mint that the shortage of reliable performance data on heavy-duty EVs continues to restrict credit flow to the sector.

Despite policy support, adoption rates remain low. Citing NITI Aayog data, Mint reported that as of 2024, electric buses made up only 7% of total bus sales in India, compared to 50% in China and 14% in Europe. The adoption of heavy-duty electric trucks was just 0.07%, versus 3% in China and 2% in Europe.

According to Mint, the proposed financing plan could represent a strategic shift from subsidy-driven policies to credit facilitation-bringing India's EV policy closer to global models that emphasize financial risk-sharing and de-risking.