Can EVs help credit unions win back auto market share?

With auto market share declining, developing a comprehensive EV strategy could be the secret for credit unions to win it back.

After years of gaining market share in auto lending, credit unions’ market share has fallen for the third consecutive quarter, remaining #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, but the Boston Consulting Group (BCG) forecasts that EV sales will jump to 53% of new vehicles sold by 2030. This represents nearly half a trillion dollars in new auto loan originations up for grabs. (If you finance in California, EVs already represent 25% of new vehicles sold.)

Notably, big banks and captive lenders are largely ignoring the needs of EV buyers. By financing EVs just like gas vehicles, they ignore a $10,000 to $20,000 “green premium” and unique customer needs that include understanding battery range and installing EV chargers. Accustomed to self-serving with online tools, many 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 5 strategies lenders are using to win EV market share:

Develop Educational Content

Our customer research shows that EV shoppers spend more than 4x the amount of time researching electric vehicles online than gas vehicles. This is understandable given the need for these customers to familiarize themselves with new makes and models, battery range, how to charge at home, and where to access public chargers.

Some large banks like Chase Auto, Bank of America, and Capital One have made notable investments in electric vehicle content to attract new EV customers, with. microsites and educational content that help EV shoppers answer key questions at the beginning of their journeys. Even a few blog articles on popular EV topics can be a great start for smaller lenders like credit unions to attract new members. 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 up 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 which EV tax credits, rebates, and other incentives they qualify can be an opportunity to attract new EV borrowers. Our company specializes in EV incentives, providing tools for Nissan and Mercedes-Benz, and there are many other great online resources, 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%, 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, and Credit unions who help customers navigate and bundle EV charger installation alongside their EV financing will win more EV customers.

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.

Last year, Bank of America became the first major bank to bundle EV chargers into EV auto financing. But since EV charging equipment only represents around a quarter of the total costs of installing home charging, credit unions could bundle the cost of EV chargers and installation costs into a loan while still maintaining attractive loan-to-value ratios.

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

Go Direct-To-Consumer

EV purchases are increasingly shifting online, going direct-to-consumer. According to TransUnion research, 32 percent of EV buyers would prefer to finance online before visiting a dealership – that’s 2x times the rate for gas vehicles.

Additionally, 65 percent of 2023 EV sales were direct-to-consumer purchases from Tesla and Rivian, who do not have franchise dealerships. While many credit unions have a strong indirect finance presence at franchise dealerships, the majority of EVs are not financed at dealerships. The good news is that direct-to-consumer EV loans offer a higher profit margin than indirect loans originating 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 before customers even reach the dealership – if they ever visit a dealership at all.

Eliminate The EV Price Barrier

Study after study from Cox Auto to Deloitte reinforce the same message: Upfront price is the #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 lower 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 (including EV Life) enable borrowers to save up to $200/month by factoring their EV incentives, fuel savings, and residual values into underwriting, all while 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 who act now, they can win the electric vehicle market – and the future of auto lending.

EV Life's software helps credit unions increase loans to EV buyers. If you're looking to grow market share, we're ready to help. Let's talk.

Peter Glenn is Founder & Co-CEO of EV Life, a fintech lending platform that enables banks and credit unions to acquire and fund new EV auto loan customers.

A modified version of this article was originally published in the Credit Union Times.