Context
Transport is India’s third most polluting sector, responsible for 14% of national CO2 emissions, around 90% of which comes from road transport. Trucks account for just 5% of vehicles but generate 34% of transport emissions, a share projected to reach 60% by 2050 without intervention. Freight is also central to India’s economy, contributing 5% of GDP and employing 22 million people, while truck activity could quadruple by 2050. Aligned with India’s Nationally Determined Contribution (NDC), policy support for battery electric trucks (BETs) is growing: BETs were added to the PM e-DRIVE incentive scheme in 2024. Around 1,100 BETs have been deployed so far, but financing barriers continue to constrain adoption at scale.
Goals and approach to transformational change
The project aims to move BET financing from a limited number of pilots towards a mature, replicable market by addressing early-stage uncertainty over residual values and mobilising private capital, including for small and medium fleet operators. By reducing this risk, the project is expected to enable more competitive financing terms and accelerate adoption beyond early movers. Longer-term policy support and charging infrastructure will further lower transition barriers and strengthen investor confidence. Demonstrating that residual-value risk can be covered without distorting markets could provide policymakers with a more efficient alternative to upfront subsidies and support replication in other Indian states, transport segments and Global South markets.
Components and support mechanisms
The project’s core financial mechanism is a EUR 16 million Residual Value Risk Coverage Facility. If a financed BET is repossessed and its resale value falls below an agreed baseline, the facility covers the shortfall, while financiers retain credit risk and recovery responsibilities. By targeting the specific risk deterring BET lending, the facility can enable lower interest rates and longer loan tenures without distorting resale markets. As deployment grows, it will also generate performance and resale data that can help commercial insurers eventually assume this risk, allowing the facility to serve as a temporary market bridge rather than a permanent subsidy.
Technical assistance complements the facility by building bankable project pipelines, supporting policy development and charging infrastructure, and sharing lessons with financiers, policymakers and operators. Outreach will include women and underrepresented groups.
Long-term impact
Deploying around 13,300 BETs is expected to avoid approximately 1.51 MtCO2e during the project. As India’s electricity mix becomes more renewable, lifecycle emissions savings are expected to increase substantially. By reducing residual-value uncertainty and building a track record for lenders and insurers, the project aims to establish a self-sustaining financing market that can support BET adoption and continued emissions reductions beyond the project period. The model could also support replication in other road transport segments and markets facing similar financing barriers.