EV boom is opening three lucrative markets for financial services firms
The rapid shift to electric vehicles (EVs) is upending the global automotive industry. And financial services firms need to move quickly to secure a foothold in the lucrative mobility markets emerging from this disruption.
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Corporate Value Associates
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The rapid shift to electric vehicles (EVs) is upending the global automotive industry. And financial services firms need to move quickly to secure a foothold in the lucrative mobility markets emerging from this disruption.
Three fast-growing markets, or value chains, are rising in the wake of a boom in EV sales, says Markus Collet, Partner at consulting firm Corporate Value Associates (CVA). They will require a host of new finance products and services.
The emerging value chains will center on:
• EVs: Production, sales and distribution; vehicle and fleet finance; driver and owner insurance; third-party services; maintenance and repairs; asset-life management; subscription and sharing platforms; and mobility packages.
• Electricity charging: Private, business and public charging ports; energy management services; payment facilities; and resales into electricity grids.
• Batteries: On-board monitoring of battery health; repairs, recycling and salvage.
Speaking at an online event organized by the Qorus Mobility Community and CVA, Collet stated that the switch to EVs and away from internal combustion engine (ICE) vehicles is now the “dominant assumption” in the automotive industry. EV sales have accelerated since 2019. More than 100 million EVs are expected to be on the roads in Europe by 2035.
Sales of EVs are being driven by regulatory pressure, government incentives, consumer demand, technology advances, and cuts in purchase and operating costs.
“By 2030 battery-powered electric vehicles will account for more than 50% of our global sales,” says Stefan Schlipf, Head of Strategy at BMW Group Financial Services. He adds that BMW expects a big uptick in sales after the 2025 launch of its Neue Klasse platform which will support a new generation of EVs.
Speakers at the event highlighted the opportunities and threats financial services firms are likely to encounter as the new value chains become increasingly influential.
Opportunities
Major opportunities include:
EVs: Flexible finance for mobility platforms, multimodal hubs, shared vehicle pools and subscription services; on-board risk control and insurance offerings; improved telematics; second-life asset management; and automated on-board accident alerts and damage assessment.
“In future, a car that's involved in an accident will be able to notify its insurer, provide confirmation through the video cameras on the vehicle of what's happened and use artificial intelligence to determine who’s at fault – all before the driver gets out of the car,” says Steven Williams, Head of EV Strategy at UK insurer Direct Line Group.
Electricity charging: Energy management services for homes, businesses and independent charge-point operators; energy offerings bundled with vehicle sales and financing; and payments facilities.
“The way we're fuelling vehicles with electricity is changing dramatically,” says Kevin Spangenberg, Expansion Manager at software firm Monta. Headquartered in Denmark, Monta provides electricity charging management software and services to companies across much of Europe. Its growing cross-border payments services and popular digital wallet facilities are transforming Monta into a fintech business.
Batteries: Battery health monitoring for maintenance, post-accident, resale and salvage assessments.
“Even if a battery is damaged, we know there's an afterlife for it. Insurers need to make the most of that recycling value, keep their repair costs down and pass savings on to their customers,” says Direct Line’s Williams.
Threats
Among the threats identified by the speakers at the event are:
EVs: Increased competition from new vehicle manufacturers that’s eroding the revenues and profit margins of incumbent suppliers as well as their distributors and financial services partners; limited driver behavior history and vehicle asset-life data; and frequent software upgrades with multiple options that are increasing the complexity of asset financing and insurance.
“Tesla performed more than 80 over-the-air updates last year,” comments Williams.
Electricity charging: Rising regulatory requirements; higher complexity due to diverse national markets and varied legislation.
“Australia is 14 times the land mass of France, which is not insignificant when discussing charging infrastructure requirements,” says Chris Moldrich, General Manager of Asset Finance at Commonwealth Bank of Australia. Monta’s Spangenberg adds that governments around the world are unlikely to let charging infrastructure roll out without introducing regulatory controls, and cites France’s Advenir program as an example.
Batteries: High asset value of a single vehicle component; new repair-shop equipment and skills requirements; and regulatory resale controls.
“The battery accounts for a third to a half of the value of an EV. It’s important for an insurer to understand how the battery is managed by the driver,” says Williams. Schlipf at BMW Group Financial Services adds that the European Union may require vehicle manufacturers to recover batteries once EVs have come to the end of their lives to ensure access to the valuable raw materials they contain.
Responses
How can financial services firms best respond to the opportunities and threats posed by the rise of EVs?
Collet at CVA points out that few banks or insurers will be able to navigate the changes on their own. For most firms, partnerships with specialists in sectors such as mobility, energy and home management will be essential.
“Companies operating in the vehicle value chain now need to reach out into adjacent ecosystems,” says Collet. He points to several major organizations that have extended their businesses into the electricity charging or battery sectors. General Motors, for example, has formed an energy business unit to sell products and services to EV owners and utilities; European retailing group Schwarz is rolling out an extensive network of EV charging stations; and Chinese EV manufacturer BYD has teamed up with Japanese firm Itochu in a battery recycling venture.
Soaring EV sales are set to trigger a scramble for partners among financial services firms eager to secure a presence in the new automotive value chains.
Interested in joining the Mobility Community? Contact Mirka at mirka@qorusglobal.com
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