How to Finance India’s First 10,000 Zero-Emission Trucks #IndiaFinance

Unlocking capital for zero-emission trucks (ZETs) in India requires addressing key financing challenges, including high up-front costs, market risks, and uncertainty around residual value. This report presents a comprehensive approach to mitigating these risks and reducing potential losses in the event of default. Given the importance of early market adoption, the report focuses on financing the first 10,000 ZETs — an essential step to building confidence in the technology, demonstrating viability, and establishing a foundation for future scale.

To understand the financial case for ZETs, one must first consider four key risks:

• Product risk arises from limited real-world lifecycle data and rapid technological evolution.
• Customer risk stems from high up-front costs and uncertain revenue streams for fleet operators.
• Operational risk is driven by insufficient charging infrastructure and maintenance networks.
• Residual value risk results from the lack of an established secondary market for used ZETs.

Addressing these risks is essential to unlocking capital and accelerating ZET adoption.

Effectively financing ZETs requires a structured approach to managing risk. This report first examines strategies to manage product, customer, and operational risks, ultimately lowering the likelihood of default. Once the case for lending is established, the focus shifts to mitigating potential losses in the event of default, including strategies for managing residual value risk and distributing losses through structured mechanisms.

The insight brief outlines targeted financial interventions to address market risks and mobilize capital for ZET financing.

The transition to ZETs depends on collaboration among market actors and financiers, each playing a critical role in managing risks, expanding lending, and unlocking financing opportunities.

• Original equipment manufacturers: Provide warranties, service agreements, and buyback guarantees to instill lender confidence.
• Fleet operators: Leverage structured financing and secure revenue contracts with corporate clients to ensure long-term financial viability.
• Charge point operators: Develop charging-as-a-service models to minimize fleet downtime and ensure that charging infrastructure is readily accessible.
• Financiers (banks, non-bank financial companies): Deploy customized financial instruments while collaborating with DFIs to scale lending efforts.
• Development finance institutions and multilateral development banks: Offer concessional capital, risk-sharing facilities, and mezzanine financing to enable market growth and mitigate financial risks.

Financing India’s first 10,000 ZETs will set the foundation for long-term market expansion, improve air quality, and drive cost savings for fleet operators. By implementing strategic financial interventions and strengthening risk-sharing mechanisms, India can accelerate ZET adoption while ensuring economic sustainability.