While the overall new vehicle market is down this year, sales of electric vehicles continue to rise, benefitting credit unions that cater to the market and creating openings for fintechs.
Cox Automotive on Wednesday reported that while new car sales have fallen this year, sales of battery-powered electric vehicles – which it calls “pure EVs” – jumped to 196,788, a record high and a 13% increase from the first quarter.
Americans bought 370,726 new electric vehicles in the first six months of 2022, up 76% from 2021′s first half. Second-quarter EV sales accounted for 5.6% of the total US new vehicle market, up from 2.7% a year earlier, according to Cox Automotive’s Electrified Light Vehicle Sales Report.
Redwood Credit Union, Santa Rosa, Calif. ($7.6 billion in assets, 320,708 members) has been offering a 0.25% discount on loans for qualifying hybrid and electric vehicles since the early 2000s.
Michelle Anderson, CLO for Redwood Credit Union, said the interest in electric and hybrid vehicles rose this year with rising gas prices, but they were increasing even before then.
“Hybrid and electric vehicles are very popular and common in California, so we’ve had steady interest in them for many years. Many Californians are environmentally conscious, and choose to drive hybrid and/or electric vehicles,” Anderson said.
Redwood CU’s electric and hybrid vehicle loans are accounting for a larger share of a growing balance sheet. NCUA data shows Redwood CU held $538.1 million in new car loans on March 31, up 11.8% from a year earlier, and $949.3 million in used car loans, up 14.3%.
Hybrid and electric vehicles accounted for 8% of the number of loans in 2020, 10.6% in 2021 and 14% in the first quarter, Anderson said.
Experian’s “State of the Automotive Finance Market” released in February showed credit unions generated 13.7% of new car loans and leases of all types in the three months that ended Dec. 31, and 12.1% of electric vehicle financing.
The 0.25% discount applies to both new and used vehicles. “Members also purchase used—often from friends and neighbors,” she said. “We live in a region where hybrid/EVs are quite common.”
Cox Automotive said Tesla continues to dominate the market. The Austin, Texas-based company’s share of EVs rose from 67% in 2021′s first half to 70% in this year’s first half.
However, Cox Automotive expects Tesla’s share of the EV market to shrink as other manufacturers expand production. There were 33 EV models for sale in the second quarter, up from 19 a year earlier.
High prices are allowing Tesla’s dominance in the EV market to make it a force in the luxury market. “The average price for a new electric vehicle in June was more than $66,000, well above the industry average and more aligned with luxury prices than mainstream prices,” according to Cox Automotive.
Besides higher gasoline prices and an environmentally conscious membership, Redwood CU is cultivating more EV interest through a recent partnership with local Tesla dealerships in the northern San Francisco Bay area by providing a concierge experience for both its members and Tesla through co-hosted community client events providing private test drives.
“This has generated a lot of interest,” Anderson said.
Redwood CU also owns a brokering service that allows it to help people find their ideal cars. “Requests for hybrid/EVs has notably increased since the beginning of this year,” she said.
“We recently tested an outdoor ad promoting our hybrid/EV loans and saw a significant increase in traffic to the hybrid/EV page on our website as a result,” she said.
For lenders not interested in electric vehicles, or who see them as no different than other auto loans, a startup fintech called Tenet hopes to relieve them of the need to bother.
On June 28 Tenet announced an online lending platform that it says lowers the cost of EV loans by rejecting “standard car depreciation models.”
The New York fintech’s news release said it leverages EVs’ residual value, “which is far better than gasoline-powered cars.”
“Today’s traditional auto financing options don’t account for the long-term value that EVs retain, resulting in unnecessarily high monthly payments and a disconnect between the smart decision and the sustainable one financial,” it said.
The company announced it had raised seed funding of $18 million, led by Human Capital and Giant Ventures with participation from Breyer Capital, Global Founders Capital, Firstminute Capital, and angel investors including Michael Tannenbaum, Gokul Rajaram and Michael Ovitz.
“While there has been tremendous innovation on improving the technology of the cars we drive, nothing has been done to improve how we buy them. That’s where we come in,” its website says.