A Car Dealership As October Car Sales And Inventories RisePhotographer: Luke Sharrett/Bloomberg

EV equipment financing poses ‘huge opportunity’ for lenders

Financing energy equipment presents a potential opportunity for financiers as electric vehicles (EVs) gain traction, evidenced by General Motors’ launch this month of GM Energy, which will produce EV chargers and energy-management products for homes and businesses.  

GM Energy will manufacture stationary battery packs and solar panels along with EV chargers, according to an Oct. 11company release. And while it is not yet clear what role General Motors’ captive will play in the financing of these products, the budding EV ecosystem is ripe with opportunity for new product lines for lenders.  

Energy solutions such as EV chargers, stationary storage and hydrogen fuel cells — all of which GM Energy will offer — represent “a huge opportunity” for lessors in the equipment finance space, Jeff Elliott, president at Huntington Equipment Finance, said recently at the Equipment Leasing and Finance Association (ELFA) Convention in Orlando, Fla. 

“The exciting new areas, the capacity building … is most interesting for most lessors in this space because it’s more like traditional equipment finance,” Elliott said. “These areas are not super new, but they have financing challenges. We’re figuring out structures to financing … battery storage doesn’t generate power; it stores it, so you have something else feeding [the battery]. How do you get paid off this battery?” 

Batteries are “not a fixed contract to generate power … you’ve got variable streams — capacity payments, demand response, all kinds of different revenue streams. They’re neat transactions, it’s just a different way to finance it,” Elliott added, noting a variety of alternative energy equipment financing programs are likely to crop up in different states. 

Hydrogen-based renewable energy products also open “a huge potential market” for equipment financiers, Elliott said. “Electrolysis lasers are really a piece of equipment. We can finance those projects … that’s a huge opportunity,” he said, noting that underwriting energy projects can be a challenge since risk is based on the project’s performance. 

“Due diligence and underwriting on these are significant because that’s your only source of repayment. The project must work — it has to produce,” Elliott said. “It’s a different way of underwriting.” 

This story first appeared on Auto Finance News, a publication of Royal Media.