As the automotive industry moves toward electrification, lenders face an uncertain path forward. The successful transition to EVs will require substantial investment at all levels, from charging technology and coverage to dealership infrastructure. As the effect on total cost of ownership unfolds, the residual value models that underpin the entire industry will need to be redefined, impacting financing and leasing. Lenders to the mobility sector should be prepared for further disruption which will provide either opportunities or create credit challenges as companies navigate this dynamic landscape.

The global push for sustainable transportation has marked a significant shift toward embracing electric vehicles (EVs) as a pivotal solution in combatting climate change. In the United States, the government’s influence in creating a greener future is prominent, but the journey toward widespread EV adoption continues with many challenges, particularly regarding infrastructure and technological limitations.

The U.S. Environmental Protection Agency (EPA) proposed new emissions standards in May of this year that would effectively require that 67.5% of U.S. vehicles sold to be EVs by 2032. This new proposal outstrips the Administration’s 2021 executive order of 50% EV sales by 2030 and represents an ambitious path the government is taking towards a cleaner transportation solution. However, the move towards faster EV adoption presents many challenges, especially considering that last year, EV sales accounted for only 5.8% of new light-duty vehicle sales. Consumers are not buying EVs due to a myriad of factors, from accessibility to charging stations, battery range, pricing, and cost of ownership.

Perhaps the most visible obstacle to faster adoption of EVs is the significant disparity in the charging infrastructure in distinct parts of the country. It is estimated that by 2030, 1.2 million public chargers and twenty million private chargers will be needed to meet the growing need for EVs, about 20 times the number of chargers today. Limited charging sites, coupled with long charging times ranging from 8 to 30 hours at most public chargers, create barriers to market entry that must be urgently addressed to facilitate mass adoption. It is much easier to locate charging stations in urban areas than in rural areas, and portions of the country that have subzero winter temperatures will struggle to attract EV buyers due to technology limitations at lower temperatures. Apartment dwellers in colder climates may well be the last to purchase an EV, due to the inconvenience of longer charging times, especially during the winter, and the need to share chargers, if they exist, with other neighboring apartment dwellers. The ability to  establish a comprehensive and efficient charging network by 2032 will be key to EV adoption on a mass scale. 

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