Leasing Electric: U.S. Follows China's Lead on Electric and Hybrid Vehicles
2019-06-04 10:48 Tuesday
Auto finance penetration rates in the United States have reached 86% with finance leasing accounting for half of that figure. China, on the other hand (where finance leasing only became legal in 2007) is projected to expand at a 25% CAGR over the next 3 years, with a penetration rate of in excess of 50% by 2020. Analysts noted that the market value of passenger car finance in the Chinese leasing industry will reach 350 billion RMB by the end of 2020, indicating the enormous potential of China's automotive finance market.
The auto leasing and sales industry has many nuanced layers which need to be peeled back one at a time to fully grasp what's happening in the world of auto finance. One must consider sub-sectors of the industry such as second-hand auto, and auto insurance, and of course, the emerging world of electric and hybrid vehicles. While perhaps many in the older generations tend to shy away from modern concepts and terms such as "hybrid" or "artificial intelligence" and will always prefer tradition – i.e., heading down to the local dealership for a reliable gas car with an extended auto warranty – younger generations of consumers understand that electric and hybrid models are only going to become more relevant, not less.
While China clearly leads the world in terms of sheer numbers where electric vehicles and plug-in hybrids are concerned, the U.S. is also a major leader in the electric vehicle space with companies like Ford Motor Co. and General Motors investing in new electric models. But with all of the hype surrounding new energy vehicles and their positive outlook for future growth, the actual percentage of electric vehicles that consumers are purchasing or leasing currently hovers just over 1 percent in the United States, according to statistics from the International Energy Agency, and growing that percentage is likely to be a difficult task.
New polling shows that while almost half of American adults say if they were to purchase a car in the next decade, they would be somewhat likely to buy or lease a hybrid; however, even as battery costs continue to drop and charging stations become easier to find, only one-third said they would consider purchasing an all-electric vehicle. The poll administrators gave descriptions of several types of new energy vehicles – all-electric, hybrid electric, and plug-in hybrid electric, and asked consumers about what factors would influence their decision when it comes to potentially driving electric. Over 60 percent state their primary causes for hesitation are concern over the unavailability of charging stations and high upfront costs. The results of this survey of over 2200 adults suggests that electric car makers need to focus their attention in two directions: First, educating potential customers on government incentives that are available to them. And second, addressing consumers' false perceptions of infrastructure related disadvantages.
While studies have indicated that the distance that a majority of trips can be completed with an electric vehicle, many drivers still maintain anxiety that their electric vehicle may run out of power before reaching their destination. Anyone who has ever been stranded on the highway after running out of gas can relate to this well-researched worry. Out of 733 adults who identified as likely to consider leasing or purchasing an electric vehicle, 66 percent named the charging issue as their major cause for hesitation. Of the 1,117 people who identified as open to purchasing or leasing a hybrid, 73 percent gave the same reason, charging, as cause for their concern.
According to the Energy Department, over 80 percent of plug-in electric vehicle drivers perform their charging at their home. This means that Americans do not uniformly have the ability to charge these cars at home. For starters, not all homeowners have a garage, and those that do may use it for other purposes than parking their car. Those consumers more than likely need to find public charging stations, which are not universally available and generally more expensive. Installation of public charging stations has been growing at varying rates nationwide. According to the Energy Department, California leads the states with over 20,000 public charging outlets.
Key Words: Leasing, Auto Finance, Auto Leasing, Fleet Leasing, Fleet Management, Chinese Leasing Industry, Finance Leasing, Operation Leasing, Extended Auto Warranty, Equipment Finance, Residual Value, New Energy Vehicles, Fintech, Auto Consumption Credit, Tianjin Free Trade Zone, MOFCOM, Consumer Finance, Secondhand Auto, Auto Dealership, Financing Channels, VAT Reform, IFRS 16, Artificial Intelligence, Auto Insurance