Electric vehicle fleet adoption and stakeholder concerns | Insights from ALT Mobility
ALT Mobility is a leasing and lifecycle management company with a fleet of 5,000 EVs across 7 cities in India, primarily two-wheelers and three-wheelers. The company offers end-to-end solutions for fleet operators, covering vehicle costs, service, insurance, fleet monitoring, and telematics, all bundled into a single price. They are working with 11 OEMs, and their fleet partners include the likes of LetsTransport, Lithium Urban, Entoo, EVeeZ, and CABT.
In this chat with Dev Arora (CEO & Co-founder), we discuss their business model, stakeholder concerns, challenges with financing electric vehicles, residual value of EVs and effective asset management for an extended vehicle lifetime.
What is the business model of Alt Mobility, and which all stakeholders do you interact with?
ALT collaborates with fleet operators, offering comprehensive full-stack leasing and lifecycle management solutions for their fleets. With no upfront costs, fleet operators can scale up their fleets and pay a monthly lease rental that covers the vehicle cost, service, insurance, fleet monitoring, and telematics. We establish co-leasing partnerships with banks, non-banking financial companies (NBFCs), and leasing companies to address their concerns regarding residual value risk and reduce operating costs.
In close partnership with OEMs, we strive to provide the most competitive leasing rates and tenures in the market. We also collaborate with insurance providers, charge point operators, service garages, and roadside assistance teams across the cities where we operate, streamlining the entire user experience.
Our integrated ecosystem is designed to simplify fleet electrification at scale, ensuring maximum uptime and extending the overall lifespan of the vehicles. We reduce the total cost of ownership to unparalleled levels. Our seamless, cost-effective solution empowers fleet operators to embrace electrification and reap the benefits of sustainable mobility.
How are different stakeholders responding to the growing demand for EVs, and what are their apprehensions?
The lower capital expenditure cost associated with electric vehicles makes it easier for fleet operators to scale up their operations by adding a larger number of vehicles. Additionally, EVs offer the advantage of up to 20% lower monthly operating costs and overall total cost of ownership compared to traditional combustion engine vehicles. Among the adopters of EVs, B2B fleet operators and aggregators remain the largest segment, with new-age EV logistic companies leading the way, followed closely by established players. According to data shared by our original equipment manufacturer (OEM) and fleet partners, fleets account for 70-80% of the overall EV penetration, with over 90% of them opting for leasing instead of financing.
Fleet operators are looking for several key benefits, including an asset-light balance sheet, low monthly cash outflows, no upfront capital expenditure costs, the lowest total cost of ownership, flexible ownership options, and a fully managed experience to transition to electric vehicles. However, the adoption of EVs among drivers remains relatively low due to factors such as high financing costs, range anxiety, lack of understanding regarding vehicle repairs, and limited availability of charging and service infrastructure.
How are banks and financing institutions looking at this space?
Throughout this year, there has been a remarkable level of interest from financial institutions (FIs) to actively participate in the electric vehicle financing space. Currently, we are collaborating with more than 9 financing institutions, ranging from private banks and NBFCs to leasing companies. Each of these institutions acknowledges the enormous potential within this sector, but they are proceeding with cautious investments. The high premium associated with financing commercial EVs primarily stems from the lack of a secondary market and insufficient data on the residual value of these assets. Conventional players in the market lack the expertise to accurately evaluate EVs, and the limited availability of market sentiment data hinders the pricing of vehicles solely based on market conditions.
To address this challenge, a data-enabled approach becomes essential to comprehend the usable life of the battery pack, which constitutes 40% of the vehicle cost. By gaining insights into battery life, users and lenders can develop confidence in the redeployment and resale capabilities of EVs, thus mitigating risks associated with financing.
What is required to unlock access to finance and reduce the cost of financing for commercial electric fleets?
The risk premium associated with financing EV fleets is over 5% higher than combustion engine vehicles. CV finance has already been associated with the high cost of financing given the credit profile of borrowers, bankability of underlying income streams, high collection costs, and overall risk premium associated with the segment. With EVs, there’s an added layer of risk surrounding asset bankability. EVs, however, present the opportunity for data-driven underwriting – lenders which are able to leverage the ability to understand and underwrite the underlying asset and use those capabilities to reduce the operating cost and the risk premiums would be able to drive down their internal costs and provide more value to customers.
What can stakeholders do to increase the bankability of EV financing?
We are currently working with the first generation of electric vehicles in India, and we actively provide feedback to most original equipment manufacturers (OEMs) regarding the need for product improvements. Our suggestions encompass areas such as addressing product flaws, enhancing the longevity of the vehicles, expanding the service network, and ensuring the availability of spare parts. We anticipate that many of these changes will be implemented in the upcoming second-generation vehicles, scheduled to be launched in the coming months and years. It is crucial for vehicles to be built specifically for India, taking into account the unique road conditions and temperature variations experienced in the country.
In addition to product enhancements, we emphasize the importance of OEMs having greater control over the battery packs. We prefer working with OEMs that manufacture their own packs and are transparent in sharing data with us. An electric vehicle that lacks sufficient data hampers our ability to effectively support our fleets on the ground and fully leverage our capabilities to collaborate with our OEM partners in improving fleet uptime.
Furthermore, effective asset management is of utmost importance. Vehicles should not be designed or used with a limited lifespan of just three years. We firmly believe that with the expertise of a dedicated team that understands the underlying technology, the lifespan and performance of the vehicles can be significantly extended. This approach reduces the likelihood of default, as improved earnings for drivers and fleets contribute to enhanced asset bankability. Moreover, the vehicle’s resale value becomes sufficient to recover the outstanding amount owed to the financier. By prioritizing asset management, we aim to optimize vehicle performance, reduce risks, and ensure the long-term sustainability of the EV ecosystem.
What happens to the vehicle after the warranty period, and how does Alt Moblity manage the residual value risk?
At ALT, we have developed products that extend the warranty of the vehicle in collaboration with OEMs and insurance partners. During the second life of the vehicle, we work closely with our OEM partners to refurbish both the vehicle and the battery pack, preparing them for redeployment with a new driver or fleet operator. Our in-depth understanding of the underlying technology, combined with ongoing asset monitoring and maintenance, ensures that our fleets are in optimal condition and can be continuously redeployed.
When the battery pack reaches the end of its life, we replace it and continue leasing the vehicle, keeping it operational for as long as possible. Our primary objective is not to sell the vehicle but to operate it with a focus on continuous optimization of vehicle performance. Through alerts, recommendations, and promoting driving behavioural changes, we aim to reduce the overall monthly outflow and total cost of ownership for the fleet. By maximizing the lifespan and performance of the vehicles in our fleet, we deliver value to our customers while contributing to the sustainability and longevity of the EV ecosystem.
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