Innovating vehicle finance via energy!

Something I learned recently is that almost 60 per cent of light commercial vehicle (3W/4W) loans in India go into some form of default. While many are resolved, they often lead to the vehicle owners-operator going into a debt spiral - if you have ever been in credit card hell you know what this can mean.

So how does someone resolve this issue? It is not something a traditional NBFC giving a loan to a traditional internal combustion engine 3W can easily do. Because they don’t really monitor the vehicle and usage. So if things are going wrong for the owner-operator they only find out when they default on a payment. Then it is the same call-centre and collection agency process. A high rate of missed payments, unintentional defaults and the need for large support operations — those all drive up interest rates.

But I also learned that there is a solution and well, that solution is also electric. So I have been following Exponent Energy for a while, and I have spent a lot of time with founder Arun Vinayak at his Bengaluru office where he patiently sat me down and explained the physics and chemistry of rapid charging. Exponent Energy has pioneered ‘Rapid Charging’ and commercial vehicles fitted with their solution, mainly three-wheelers can charge in just 15 minutes using their proprietary charger (although the ability to use regular charging remains).

But Arun doesn’t see his company as a charging-tech company, he sees them as an energy company. “Over 98 percent of vehicles with our technology use our chargers. And because our chargers are fast, they see very high throughput, in fact one charger in Bengaluru saw 67 charging sessions in a single day. This better utilisation means that we can charge a lower rate per unit of electricity, just INR 16.”

But there is more, because Exponent controls their chargers and their batteries are unique they have a wealth of data about the vehicles — and thus their owners as well. Arun told me that they could see internal migration trends such Chhat Puja or harvest seasons where vehicles wouldn’t charge for days on end.

“So that month the owner isn’t making money, but a traditional Bank or NBFC loan wouldn’t understand that. The owner would have to still make his monthly payment. And there was a chance of default,” Arun told me.

So with Sandeep D, the concept for Exponent ONE was born and this was a very unique concept for commercial vehicles. Since Exponent knows about their owners and their usage, they incentivised regular payments whenever an owner reached a charging station. “We know if the owner is having a good day or a bad day, if he is having a good day because he is charging a second or third time we will incentive him to pay. Also, many owner-operators only remember the EMI payment a week before it is due, and then go trying to work extra hours or discounting to raise cash, regular reminders because they’re using our app and we know how much they’re driving. At the same time we also know when they drop out of the system for an extended period and it could be that he has gone back to his village or that he has a family event or emergency. So we reach out and we also offer the option of skipping one monthly payment every year but we also incentivise them to not skip,” Sandeep tells me.

“It ist about the collateral that we have which is the battery and the vehicle, but the need to make our owner-operators more viable and successful. According to the data we have only two percent of all defaults in the commercial three-wheeler space are intentional. Most defaults just happen because of circumstances and we believe we have a solution to work around that,” Arun adds.

And the benefit for the parent company? Clearly not only will this interesting finance offering only work on Exponent Energy battery equipped vehicles, the company is rolling out the service initially only to those who get a retrofit kit from them. The retrofit kit converts a gas or petrol three-wheeler to one with an Exponent Energy 10.7 kilowatt hour battery that Arun says offers in excess of 100 kilometres of range in 24 hours. The cost? just INR 1.7 lakh.

“There is another objective here. I believe that the commercial light commercial vehicle space can easily go fully electric in India, it makes economic sense for operators. But if the current rate of conversion continues it could take as much as three decades. This finance scheme and an easy retrofit will help speed up the process,” Arun remarked.

One of Exponent Energy’s long-time investors and supporters is the AdvantEDGE venture capital fund run by Kunal Khattar. This fund specialises in investing in green energy and green mobility companies.

“This is proper fintech innovation” he says. “A lower default rate will not only drive more owner-operators to electric vehicles it will also offer them lower-priced loans because of the risk mitigation in the long-run and make them more financially responsible members of society.”

Will this Innovation work? That remains to be seen and the data in a couple of years time will show it. But if it does it can transform both electric mobility and personal finance. The latter for a section of society that has traditionally been forced to deal with high-cost finance.