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Emerging Finance Trends Shaping Four-Wheeled EV Adoption

David Zhang Profile Picture
David Zhang Bio
Fransua Vytautas Razvadauskas Profile Picture
Fransua Vytautas Razvadauskas Bio

Driven by a declining electric vehicle (EV) price and growing charging network, global new EV passenger car registrations reached 14 million units in 2023, registering a 46% CAGR during 2018-2023.Chart showing Global Volume of New EV Passenger Car Registrations 2018/2023/2028

Despite slowing growth, EVs are still expected to become more widespread as governments promote sustainable mobility, but this requires financial development throughout the customer journey.Graphc showing EV consumer considerations

Discovery: Emerging marketing innovations

Attracting and educating consumers on EVs, manufacturers have been investing in digital marketing innovations, while addressing limits of physical branches and human influencers. Tesla leverages e-commerce to enable configuration and sales to customers directly. In 2023, BYD partnered with fintech MeetKai to launch a metaverse showroom in Ecuador, planning to expand across Latin America. Partnering with fintechs including FullPeace, Guazi (resale platform) and Geely, iCar in China has been exploring AI avatars for livestream marketing. On 22 September 2023, the iCar avatar received 1.2 million likes and contributed sales of 114 EVs. Meanwhile, banks including CommBank provide online cost calculators helping customers in making informed decisions.

Purchase: Acceleration in EV finance development required

Lending coverage limitation, high insurance premium and renewal risks have been key consumer concerns on EV purchase.

A quarter of respondents globally finance cars via loans in 2024. Leading banks globally (Wells Fargo and JP Morgan in the US, Santander in Europe) have rolled out EV loans with lower interest than for internal combustion engine (ICE) cars, eg 0.3-0.5% per annum lower in Singapore. OCBC’s EV car loan grew six times in 2021-2023, but with limited model coverage. In the US, Tenet also powers banks for loan underwriting with alternative data, while for bundling financing and charger installation. Also, almost 20%of respondents globally finance by credit cards for rewards, but a few manufacturers/distributors, including Tesla, only allow credit cards for deposit with around a 2% processing fee.Chart showing car financing options

Globally, insurance firms lack experienced EV teams. According to China Banking and Insurance Information Tech, the claim rate for EV power failures is three times that of ICE cars in China. Meanwhile, premium calculation has not been separated between family cars and ride-hailing cars. Upon failures, EV repair is also expensive with integrated design, battery change.

Claiming better understanding of EV risks, manufacturers have been expanding into insurance. Tesla operates behaviour-based dynamic pricing in the US, based on how safely, how much and what vehicle the customer drives.

Globally, 27% of respondents prefer behaviour-based dynamic pricing, with higher preference in regions including Asia Pacific

Source: Euromonitor Voice of the Consumer: Mobility Survey, fielded January to February 2024

In 2023, in China, BYD acquired Yi’An Insurance, while Li Auto purchased Yinjian Insurance.Chart showing Preferred Connected Car Feature in Behaviour-based Dynamic Pricing of Insurance

Usage: Simplified payments can improve the customer experience

EV usage depends on a well-functioning charging network, capable of satisfying consumer and industry demand. However, challenges in EV charging, especially payment processing, are hurting EV adoption. According to the National Charging Experience Consortium, limited software integration, persistent hardware degradation and a complicated payment experience have hampered EV charging in the US.

For example, the varying sequence of payments at different public charging stations increases consumer confusion. This partly underscores the popularity of home charging due to its convenience. According to Euromonitor’s Voice of the Consumer: Mobility Survey (fielded January to February 2024), 73% of global respondents typically charged their vehicles at home compared with 55% who did so at public locations.

Charging payment locations

Nevertheless, charge point operators (CPOs) seek to overcome payment challenges through payment partnerships. For example, Virta and Mastercard, in collaboration with Worldpay, developed the Virta Payment Kiosks for seamless card payments at charging stations in Europe.

Others also follow suit amid new regulations being passed. In 2024, all CPOs in the EU must accept contactless payments and payment cards. This will improve the user experience of cross-border travel through seamless payment integration. In China, UnionPay partnered with Huawei on automated charging payment by IoT car identification by the CPO, and bundling of the car number and credit card.

Servicing: More affordable maintenance solutions to drive EV appeal

Despite EVs requiring less maintenance due to fewer moving parts, OEMs have encouraged sales through attractive servicing conditions. For example, in Australia, the Audi E-Tron has free servicing for the first six years or 90,000km.

Nonetheless, concerns have been raised about the cost of EV repairs following car accidents. In 2024, Hertz announced that it is selling 20,000 EVs, about a third of its EV fleet, citing high repair costs.

Insurance premiums were an estimated 26% higher for EVs than for ICE 

Source: The Association of British Insurers

Development of more affordable maintenance solutions and insurance policies is needed. For example, some insurance providers provide specialised coverage for EV batteries only, while others, including Bajaj Allianz, offer zero depreciation cover for EVs, meaning customers can get a full claim on the damaged parts without a downgrade for wear and tear.

Resale and recycling: Nascent but with potential

Challenges leading to low acceptance of EVs in the resale market include EV valuation, especially batteries, and fast depreciation amid frequent price cuts of new models. As batteries costs half of an EV typically, inaccurate battery valuation leads to unfair pricing in lending and insurance. Backed by softbank, GIC etc, Guazi partnered with manufacturers to improve loan underwriting.

Besides battery valuation, nascent infrastructure development constrained battery recycling outside China. While Europe and the US ramp up capacity, the majority of global battery recycling businesses were built near battery production plants, as CATL and BYD produced more than half of global EV batteries in 2023.

Challenges and opportunities

In conclusion, financial development is still at the growth stage, unmatching the EV sales growth. As finance is the critical component of overall journey satisfaction, partnerships should be strengthened between finance organisations and EV partners, to enhance customer value propositioning

Not everyone is comfortable to discover, purchase and resell EVs in digital channels. It merits research on target segments in specific markets to understand customer pain points, while benchmarking performance against competitors to design strategies.

Read our report, Embedded Finance Ecosystem: Mapping the Path to Services Industries’ Transformation, for more analysis.

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