Commercial truck lenders may be reluctant to provide financing for EVs due to a lack of data and higher upfront costs, compounding regulatory challenges facing dealers.
The global EV finance market is projected to grow 32.6% annually, reaching $675.6 billion in 2033 from $53.4 billion in 2024, according to research firm Towards Automotive. The estimate highlights the regulatory push for increased EV production and sales to meet sustainability goals.
Thus, lenders may be growing their commercial EV portfolios as an obligation rather than a preferred investment, Huntington Equipment Finance President Jeff Elliott told Equipment Finance News last month at the Equipment Leasing and Finance Association convention in Austin, Texas.
“Our regulators are pushing us toward more [environmental, social and governance] initiatives and carbon reduction,” he said. “There are certain rules coming down the pipe for us to measure our portfolio of customers and how much carbon they’re emitting. … So, EVs would fall into that.”
A federal rule finalized in March will require more truck manufacturers to sell zero-emission vehicles starting in model year 2027, according to the Environmental Protection Agency. Plus, 10 states have adopted at least some of the California Air Resources Board’s (CARB) EV truck mandates, which include the Advanced Clean Trucks rule aimed at manufacturers and the Advanced Clean Fleets rule aimed at fleet owners, according to CARB’s website.
Unproven economics
Despite some financial incentives available to customers, commercial truck dealers are leaning on lending partners as they face pressure to prioritize selling EVs. However, some truck lenders remain wary due to higher risk associated with EVs, including depreciation uncertainty, Duane Welty, head of zero-emission vehicles and transportation technology strategy at San Leandro, Calif.-based dealership Peterson Trucks, told EFN.
Lenders “are not sure, and it all hinges around finding data that will justify a residual value that makes sense,” he said. “A five-year lease versus a 20-year note is definitely more palatable, but after those five years, what is the [electric] vehicle really worth? Well, we don’t know because they haven’t been on the market that long.”
There also “aren’t enough deals out there” for truck lenders to feel fully confident, Welty said.
Higher upfront costs of EVs — typically more than twice as much as a comparable diesel — also hinder lenders when trying to determine loan terms, Wayne Hammond, vice president of strategic initiatives at Portland, Ore.-based dealership TEC Equipment, told EFN.
“Lenders and insurers, they run on actuarial payables and known risks,” he said. “At first, it was very difficult to get lenders to understand that the [EV] truck really does cost $400,000. So, that’s a challenge for the lender and the insurers that have to underwrite a physical damage policy on a truck for $400,000.”
While a dearth of data initially contributed to financing difficulties, TEC has been selling EVs long enough to ease some concerns from its lending partners, including Volvo Financial Services, he said.
Financing concerns for newer companies
The EV commercial truck market is projected to grow 14.5% annually to roughly $78 billion by the end of 2033, according to market research firm Fact.MR. As EV truck production increases, lenders may steer clear of startups or manufacturers that are new to the game, Huntington’s Elliott said.
“You have a lot of early-stage companies out there that just aren’t bankable at this stage, and so that’s hard for the banks to lend into that scenario,” he said. “Even though they’d like to from the green perspective, they can’t get there from a credit perspective.”
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