Electric Vehicle Value Chain: How It Is Changing for Lenders

While financing is well-established for conventional fuel-powered vehicles, lenders must look at ways to provide financing for those purchasing an electric vehicle. Lending value chains have yet to be fully established for this quickly emerging sector. However, most major auto manufacturers are looking to transform their businesses into all-electric over the next few decades.
By 2025, Jaguar intends to sell only electric cars, with Volvo following in 2030 and General Motors in 2035. Meanwhile, Volkswagen aims to make 70 percent of the cars they sell electric by 2030, while Ford intends to sell only electric vehicles in Europe by 2030. Much has changed over this past century, and the electric vehicle value chain now needs to change along with the technological advancements driven by this burgeoning new market.
Financing Mobility: Future of the Electric Vehicle Value Chain
The US auto industry relies on a well-functioning lending value chain to make financing readily available to consumers, more so than just about any other economic sector.
New Car Financing Facts (as of 1st quarter of 2024) |
|
---|---|
$1.6 trillion |
Outstanding vehicle loans |
$40,634 |
Average loan balance for a new car |
68 months |
Average term for new car loan |
$735 per month |
Average car payment for new vehicles |
Source: LendingTree
Electric vehicles accounted for 18 percent of all cars sold in 2023, up from 14 percent in 2022 and 2 percent in 2018. As with conventional vehicles, auto financing will be a necessity for most consumers wishing to purchase an electric vehicle. Lending value chains also need to consider the higher upfront costs of purchasing an electric vehicle versus a gas-powered vehicle.
The well-established financing arrangement for the auto industry will be challenged by technological and social developments resulting from the influx of electric vehicles into the market. Lenders will need to adjust accordingly, following shifting consumer preferences to continue performing their role in support of transporting people and goods. The rapid changes in the automotive industry will spur changes in all associated industries, including those financing mobility companies.
Developing Ford’s Electric Vehicle Lending Value Chain
As a response to the quickly growing market for autonomous and electric vehicles, lending value chains need to take note. Though Tesla is currently the giant in electric vehicle manufacturing, traditional automakers aren’t ignoring this important segment of the auto industry. This includes OEMs like Ford, which began strategizing in 2021 about how to move forward. Seeking to adjust its manufacturing capabilities toward making more electric vehicles, Ford is also promoting the integration of connected vehicle technologies and focusing on customer relationships.
The company expects that electric vehicles will be 50 percent of the vehicles it manufactures worldwide by 2030. It also plans to spend over $50 billion on electric vehicle development, including battery technology. In conjunction, plans are in the works to incorporate cloud-based platforms to integrate new vehicle technologies into all of Ford’s vehicles. Like many players in the nascent electric vehicle market, the company plans to change its business model from a transactional build-for-sale model to one centered on customer relationships and providing technology-based services.
The Plight of OEM Auto Suppliers
In all economic revolutions, there are winners and losers. With the influx of electric vehicles onto the roads, OEM auto suppliers will be providing fewer transmissions, fuel systems, exhausts, and other major components not used by an electric vehicle. Lending value chains need to take heed, fostering new lending technologies that will better serve electric vehicle buyers.
If lenders don’t follow suit in much the same way as Ford and other major motor vehicle manufacturers, they’re likely to lose market share to those who better understand electric vehicle lending. Value chains like these must refocus their efforts on parts, services, and technologies for this growing market.
The Future of Auto Financing

In the future, auto financing will need to change to suit customers’ needs. Vehicles will be more intelligent and connected, as many other devices like phones and cameras have become. Traditional auto finance will likely still be offered to individual customers, but ownership standards may change, with more people co-owning and sharing vehicles. While traditional loans and leases are unlikely to go away completely, financing will likely have several different models. For example, emphasis may be on commercial lending with tighter margins and lower residual values for certain vehicles.
Autonomous Vehicles
With the emergence of autonomous driving, human drivers may become much less common. As a computer replaces a human in a driverless vehicle, lending value chains could see customers look more at modular and customized options, with lenders financing these additional modules.
These options may even depend on the reason for the journey. A family going on vacation may require individualized entertainment consoles, much like those common on international flights. A person going shopping may want a larger storage area for their goods or groceries. Or perhaps a professional on their way to work may want a customized workstation for their hour-long commute to work.
Shared Mobility
Auto finance for taxi services, limousines, or rental cars could change markedly with a shared autonomous transport. As a business-to-business lending model focusing on fleet owners, lenders would incorporate services like maintenance, recharging, insurance, and even parking in their loan payments.
Used Cars
Financing for the used car market is likely to change as well. For less advanced, non-autonomous vehicles, prices could drop sharply, with correspondingly shorter terms. For more expensive used autonomous vehicles, however, significantly larger loans would be needed.
The Need for Speed in Lending Value Chains
Regardless of whether it’s for a traditional gas-powered or electric vehicle, lending value chains need to utilize technology to improve how they perform their roles. It’s not just the electric auto market driving this digital transformation either. Many consumer lenders are streamlining how they communicate with customers, suppliers, and others along the auto financing value chain.
The electric vehicle lending value chain will require even more trust when developing relationships as new actors enter the market with forward-looking financial technology. New financial products will offer customers innovative products and services to make the borrowing experience more accessible, flexible, reliable, and transparent for borrowers and lenders.
Using technology to allow easy access via mobile devices, fintech providers will help provide a bridge for lenders to reach out to their customers while making the experience easier and quicker for borrowers. This will include fintech operating on internet-connected cloud platforms, which will level the playing field for small, medium, and large lenders.
The Evolving Electric Vehicle Market for Lenders
All lenders will need to adapt to the evolving electric vehicle market. When servicing an auto loan for a connected, driver-assisted, or electric vehicle, lending value chains must innovate to provide the best support and service for each customer. For those lenders looking to position themselves advantageously in this evolving financing market, there are a few things to consider.
Lenders and others along this lending value chain should consider:
- Adopting a business model that focuses on recurring revenue over the lifetime of a loan rather than singular asset sales.
- Building an ecosystem made up of service providers for various solutions and services, including managed servicing that enables cost reductions and increases scalability.
- Building an ecosystem of service providers for various solutions and services, including managed servicing that enables cost reductions and increases scalability.
- Incorporating and encouraging add-ons for customers and their vehicles, such as bundled services, car subscriptions, co-ownership, and insurance.
- Partnering with fintech companies to provide analytical and other services that help improve customer relations and reduce costs.
To achieve these goals, lenders must abandon outdated technology and IT systems, which are ill-equipped to deal with borrowers’ changing needs. Improving lenders’ capabilities will also enhance their customers’ user experience.
Getting Started
defi SOLUTIONS is redefining loan origination with software solutions and services that enable lenders to automate, streamline, and deliver on their complete end-to-end lending lifecycle. Borrowers want a quick turnaround on their loan applications, and lenders want quick decisions that satisfy borrowers and hold up under scrutiny. With defi’s originations solutions, lenders can increase revenue and productivity through automation, configuration, and integrations and incorporate data and services that meet unique needs. For more information on the electric vehicle value chain, contact our team today and learn how our cloud-based loan origination products can transform your business.