Can EVs Help Credit Unions Win Back Auto Market Share?

After years of gaining market share in auto lending, credit unions’ market share has fallen for the third consecutive quarter, remaining at No. 3 behind captives and banks. To win auto lending back, credit unions should invest in a comprehensive strategy to serve the fastest growing segment of the auto market: Electric vehicles.

The Opportunity

EVs represent only around 7.2% of new cars sold today, according to Cox Automotive, but BCG forecasts that EVs will represent 53% of new vehicles sold by 2030 – representing nearly half a trillion dollars in new auto loan originations up for grabs. (Note: If you finance in California, EVs already represent 25% of new vehicles sold, according to InsideEVs.)

Notably, big banks and captive lenders are largely ignoring the needs of EV buyers. They are financing EVs just like gas vehicles, and by doing so, ignoring a $10,000 to $20,000 green premium and a unique customer journey that includes new hurdles like understanding battery range and installing EV chargers. EV customers also prefer financing online outside the dealership.

Additionally, most EV buyers are prime or super prime borrowers who skew millennial and Gen Z. According to a JD Power survey, millennials and Gen Zers strongly prefer electric vehicles over gas vehicles, making EVs an attractive acquisition strategy for obtaining new, younger, upwardly mobile members.

By developing a differentiated EV finance approach while building on decades of expertise in auto lending, credit unions are uniquely positioned to win back market share from big banks and captives through electric vehicles.

Here are five strategies lenders are using to win EV market share:

Develop Educational Content

Customer research from EV Life shows that EV shoppers spend more than four times the amount of time researching electric vehicles online than gas vehicles. This is understandable given the need to understand new makes and models, battery range, how to charge at home and where to access public chargers.

One place where bigger banks have made notable investments in electric vehicles is in content. To attract new EV customers, larger banks like Chase Auto, Bank of America and Capital One have built microsites and educational content to help EV shoppers answer key questions at the beginning of their journeys. Even if a credit union begins by posting a few blog articles on popular EV topics, this can be a start to attracting new members by answering their EV questions. Targeted outreach to existing members can also be a great opportunity to support members on their EV buying journey.

Support EV Incentives

Unlike gas cars, EVs also include tax credits and rebates that have complex qualification criteria but can be worth between $0 to $20,000 depending on a customer’s vehicle, manufacturing location, battery mineral sourcing, income, household size, zip code and other factors.

Helping customers navigate what EV tax credits, rebates and other incentives they qualify for can be an opportunity to attract new EV borrowers. In fact, EV Life started out as an incentive tool provider for Toyota and Nissan, and there are many other great tools including those from non-profits like PlugStar and Rewiring America.

Bundle EV Chargers

As we enter a phase of rapid EV adoption, demand for home charging stations is expected to grow by 2000%-plus, according to Statista, from just 1.3 million units in 2021 to nearly 27.5 million in 2030. Consumers consider EV chargers a critical accessory that they want to purchase alongside their electric vehicle. Credit unions that can help members navigate and bundle EV charger installation alongside their EV financing will win more EV borrowers.

Many automakers partner with charger installation companies like Qmerit to install EVs for their EV purchasers. Credit unions might also consider linking out to installer platforms like Angi or Treehouse.

Additionally, Bank of America became the first major bank to bundle EV chargers into EV auto financing early this year. However, EV charging equipment only represents around a quarter of the total costs of installing home charging. Credit unions could offer more to members by bundling in the cost of EV chargers and installation costs while still maintaining attractive loan-to-value ratios.

Lenders that develop an EV charger strategy will be well positioned to win the market.

Go Direct-to-Consumer

EV purchases are increasingly shifting to online and direct-to-consumer. According to TransUnion research, 32% of EV buyers would prefer to finance online before visiting a dealership – that’s two times times the rate for gas vehicles.

Additionally, according to Kelley Blue Book data, 65% of 2023 EV sales were direct-to-consumer purchases from Tesla and Rivian, which do not have franchise dealerships. While many credit unions have a strong indirect finance presence at franchise dealerships, dealerships are not where the majority of EVs are being financed. The good news is that direct-to-consumer EV loans offer a higher profit margin than competing for indirect loan business at dealerships.

With EVs driving a digital transformation of the purchase process, credit unions offering compelling digital financing solutions have new opportunities to win EV market share much more easily before consumers reach the dealership – if they ever visit a dealership at all.

Eliminate the EV Price Barrier

Study after study from Cox Auto to Deloitte reinforces the same message: Upfront price is the No. 1 barrier to consumer EV adoption.

Many credit unions already offer an interest rate discount (e.g. 0.25%) for EVs and hybrids. While rate discounts might have some positive appeal with existing members, it’s unlikely to move the needle on attracting new credit union members.

To make a bigger impact, credit unions should also explore partnering with new EV-focused fintechs to drive EV loan payments to parity with gas vehicles. In auto refinance, fintech startups like UpStart and Caribou (formerly Motorefi) have helped credit unions acquire high value members through their platforms by helping consumers save big on finance payments.

Today, a new generation of EV-focused fintechs are enabling borrowers to save up to $200 per month by factoring their EV incentives, fuel savings and residual values into underwriting – and also creating a powerful new member acquisition channel for credit unions to acquire EV borrowers.

When it comes to EVs, credit unions can’t afford to sit on the sidelines; they need to take an active approach to creating an EV strategy. For credit unions that act now, they can win the electric vehicle market – and the future of auto lending.

Peter Glenn is Founder & Co-CEO of the Folsom, Calif-based fintech EV Life, a fintech lending platform provider that enables banks and credit unions to acquire and fund new EV auto loans leveraging qualified EV tax credits and rebates.