Its an affordable, sustainable solution for consumers to transition to EVs without high initial costs

Should I buy a regular Internal Combustion Engine (ICE) vehicle or an Electric Vehicle? Is this the right time to transition to EVs or should I wait a little longer? What if I end up buying an EV but its maintenance cost is too high? Will I be able to afford it?

You are all set to purchase a new vehicle but do these questions keep cropping up in your mind? Worry not. Here is where EV leasing comes into the picture, which provides an affordable and sustainable solution for consumers to transition to EVs without the high initial costs and maintenance.

Buoyed by the government’s push for EV adoption and spurred by the demand for decarbonisation of the transport sector, the EV leasing sector in India has been rapidly growing. A number of firms, including start-ups, have jumped into the fray and are offering tailored solutions which enable consumers to own an EV by simply paying a monthly cost.

Although various firms have different solutions, generally the lessee, either an individual or a company, selects an EV of their choice from the leasing company, signs a leasing agreement outlining the terms like payment duration, insurance coverage etc. The lessee makes a down payment at the start and then a fixed monthly payment for the duration of the agreement. The EV lease agreement can vary, ranging from two to five years.

Fig 1: Pune residents riding the new Ola S1 Pro electric scooter © Ola Electric

Advantages of EV leasing

Despite the growing popularity of EVs, their high upfront cost remains a key barrier for mass adoption, especially in the four wheeler segment. Private vehicle users and commercial fleet owners or businesses and companies are generally hesitant towards direct ownership of EVs due to apprehensions around the vehicle's performance and financial constraints. Further, limited financing options, with only few NBFCs present in the market and high interest rates, is an added barrier. Leasing helps tone down the cost for the consumers as they are able to avail an EV at an affordable down payment and an easy-to-pocket instalment each month.

Another worry for the consumer is the depreciating cost of the car. However, if the EV is taken via leasing, this concern of losing the vehicle’s resale value is taken care of. While a few OEMs add on a service and maintenance package for leasing an EV, other rental firms take care of all maintenance and servicing throughout the contract length, thus helping consumers to skip this charge.

Fig 2: Sale of Electric three wheelers are on the rise in India

Prominent players in the leasing space

As banks hesitate to finance EVs, several companies are filling the gap with the EV leasing business. Mahindra Finance and Orix Leasing expect the business to grow at a fast pace in the next 2-3 years, while others like Tata Capital, Sumitomo Mitsui Finance & Leasing, ALD Leaseplan and Revfin are expanding their EV leasing business targeting fleet operators.

Zoomcar, a self-drive car rental company in India, has started offering electric vehicles for lease in select cities. They provide flexible leasing options for both individuals and corporates, including long-term leases for electric cars. Similarly, Revv is another prominent self-drive car rental company in India that has also introduced electric vehicles for leasing.

Quiklyz, the vehicle leasing and subscription business of Mahindra & Mahindra Financial Services Limited expects 20% of its leasing business to come from zero emission products like EVs in the next two to three years. Quiklyz claims to offer the widest range of EVs, comprising both e-three and four-wheelers from original equipment manufacturers (OEMs), for leasing and subscription to potential customers. According to the company, customers will have the flexibility to upgrade their vehicle in 2-3 years keeping in tune with ever-increasing technology features in newer EV launches. The programme offers a monthly subscription fee starting at Rs 21,399 per month for electric 4W and Rs 13,549 for electric 3W load. This fee covers insurance, maintenance and roadside assistance and flexibility to upgrade.

Some other start-ups which are emerging in India include ALT Mobility, which is a full-stack EV leasing platform that enables businesses to lease EVs on a monthly basis. Another similar company is Lithium Urban Technologies, which is one of the largest electric vehicle fleet operators in India. They provide end-to-end EV fleet management solutions to corporates and government organisations. Their EV leasing services include electric cars, electric buses, and electric bikes.

In the two-wheeler segment, Zypp Electric is India’s leading tech-enabled EV-as-a-Service platform. While its service has always been the core of Zypp, the startup began its journey in 2017 with a B2C mobility service, offering electric scooters on rent/lease. The company also launched a ‘Rent To Own’ programme under which an individual could rent an electric scooter at just Rs100/day and gradually, the scooter will be transferred to that person’s name.

India’s EV sales are led by electric two and three wheelers. Nearly 62% of India’s EV sales in 2023’s first quarter came from electric two-wheelers. The electric three-wheeler market in the country is being spearheaded by cargo vehicles and e-rickshaws that are a vital component of electric last-mile connectivity. As sales are ramping up in these two segments, leasing firms are coming out with profitable solutions for consumers, both commercial and private ones, accounting for the maximum leasing in these two categories.