Volatile EV asset values are a looming headache for banks and insurers
The switch to EVs will force financial services firms to rethink how they calculate and manage the residual value of the vehicle assets they finance.
The transition to electric vehicles (EVs) will offer banks and insurers lots of opportunities to deliver new products and services. But first they’ll need to overcome a major bump in the road.
The asset values of EVs are going to jump and slump time and again during the transition. And it’s a journey that could last another 10 years. Such volatility will be a big headache for financial services firms. Banks and leasing companies will have to work out how they’re going to value those volatile assets on their balance sheets. And insurers will need to get to grips with pricing the protection they provide for those vehicles.
EVs are at the core of the shift from traditional practices of vehicle ownership to new usage mobility models, says Markus Collet, Partner Corporate Value Associates (CVA). Most drivers in future will not buy EVs but will instead get them through operating leases or subscription services. Finance providers, as a result, will have to take those assets onto their balance sheets.
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