Absa is mulling the roll-out of a finance mechanism for electric vehicles (EVs) that will incorporate a solar home installation to charge that vehicle, says Absa Vehicle and Asset Finance (AVAF) business analytics and strategy head Henry Botha.
However, before that can happen, South Africa’s EV car park needs to grow significantly, providing economies of scale to the banking sector for EV financing solutions.
The only likely way this will happen is through vehicle manufacturers bringing more affordable EVs, priced under R500 000, to South Africa, as indicated in the 2020 South Africa EV Car Buyer Survey, notes Botha.
Government assistance is also required to reach this price point, mainly through a variety of tax breaks, as suggested by the National Association of Automobile Manufacturers of South Africa, he adds.
“We can’t roll out this combined green finance product at the moment, as it wouldn’t make sense to do so for the small number of pricey EVs currently on the market.
“At around R500 000 for a vehicle, and R150 000 for a home solar installation, it would, however, be possible to provide an all-in-one finance package to consumers.”
It would also be possible to roll out the product to commercial fleet operators with charging facilities at the workplace, as electric drive trains gain traction in the truck, bakkie, panel van and minibus markets.
Botha says EVs priced at around R500 000 have the upper hand when it comes to total cost of ownership compared with similarly priced petrol or diesel vehicles.
When considering a R500 000 petrol or diesel vehicle, with a 40% balloon payment, financed over 60 months at 10% interest, the monthly instalment will be R8 000 a month. With maintenance and insurance costs of R2 500 a month and fuel costs at R1 500 a month, the total cost of ownership would be R12 000 a month, if the vehicles travels around 20 000 km a year, says Botha.
When considering an EV that costs 20% more, at the same finance terms, the EV should have reduced maintenance and fuel costs, which could potentially see a 3% saving in total cost of ownership a month even though the initial price point is higher.
“This is quite a significant saving, especially when considering that you are driving around in a zero-emission vehicle,” says Botha.
When adding a solar home installation to that EV sum, upfront costs will increase, but the combined green finance deal could still deliver a lower total cost of ownership compared with a diesel or petrol vehicle.
A future factor that could further boost the EV in this total cost of ownership comparison is when these vehicles become viable used vehicles with higher residual values than is currently the case. This could happen when the longevity of the EV as mobility solution is proved by batteries recording mileages similar to, but hopefully higher than, traditional internal combustion engines.