Asset Alliance Group’s director of asset management, Marc Mellon on how lenders are having to adapt.

Total cost of ownership might make a good business case but it doesn’t help cashflow or make credit lines more elastic. So how will operators finance these enormously expensive vehicles? Is there sufficient elasticity in the market, sufficient lending appetite?

“In terms of HGVs powered by electric, we are still some years away from these vehicles being a viable option for operators in terms of finance and payload efficiency. Lending appetite will exist if operators believe EVs work for them and lenders will take appropriate and heightened risk into the RV calculation and the operator’s credit status at the time. Ultimately, operators will need to believe the costs, infrastructure, payload, range and CSR benefits fit with their business to make this move. That’s when I believe lenders will recognise the business case around this and support as appropriate.”

Will new financing models emerge, or will there be ways to sweeten the sheer cost of these vehicles?

“It is highly likely that new models of finance will emerge and manufacturers as well as resellers, finance houses and government will all have a part to play whether it is in subsidies, extended contracts, or the second life market expectations. We already see this in the bus and coach sector where a large part of our own asset funding is already in electric and hydrogen powered vehicles.”

Do lenders have confidence in the residual values of EVs (RVs always being one of the key factors which determined the price of a lease).

“It’s still too early to say in the HGV sector as we have no data to work from.  The continuing technological advancements we can expect from EVs will change the residual value potential as we move forward with improving range, infrastructure, battery weights, configurations, lifespans and component costs and of course how they compare with other low or zero carbon drivetrains.”

At what point do we think used ICE vehicles will simply lose their value? Before or after 2040?

“The market will ultimately be driven by legislation and total cost of ownership. ICE remains strongest in total cost of ownership and we do not expect this to change soon. Clearly some early EV truck adopters are being driven by a greater CSR business need than others, but this remains niche especially in such a difficult economic situation. Legislation and phase-out dates will be the determining factors that influence final depreciation, as will supply and demand in the build up to these dates. No-one can accurately predict this given so many variables and more to come before 2040. Based on what we currently know, the challenges of EVs, hydrogen fuel cells, hybrid technologies, gas options, ICE alternatives to diesel and the routes the OEMs and fleet operators wish to take, it cannot be assumed which technology will eventually make the ICE disappear from UK roads, or when. At present, we believe that remains some distance away in the trunking, non-urban HGV sector. It is something we are closely monitoring.”