Thirsty EV leasing firms hunt for more funding
Thirsty EV leasing firms hunt for more funding
The latest news from the world of EVs
Hello, I’m Tom Riley and welcome back to The Fast Charge, a British EV newsletter.
Top story in today’s edition… Are EV leasing schemes under pressure for more capital, the EU won’t back down on battery tariffs, and new statistics suggest an 80% increase in charger rollout pace.
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EV leasing firms under pressure to raise
Background: Last week Sky News reported that Legal & General decided not to invest any further into the EV subscription company Onto. Previously, L&G invested tens of millions into Onto – £22.5 million being injected as recently as last month – though it remains a large shareholder in the company.
Mounting losses… Taking a look at Onto’s accounts, it seems L&G’s decision could have big consequences. In their most recent annual report up to December 2021, it indicated a loss of nearly £16 million – nearly five times larger than the previous year.
Big costs… All start-ups often burn through cash, and particularly when you’re dealing with high-price and new products such as the EVs on offer by Onto, the sums were naturally going to be bigger. Their accounts noted this saying growth would need to be “supported through additional funding or equity raises” – which Onto has since done, raising more than £300 million since launching.
However… Despite the continued demand in EVs, the past year has been very challenging. From vehicle supply, stubbornly high inflation, interest rates rising, and then the price cuts amongst major manufacturers like Tesla and Ford which seriously impacted EV residual values. All these factors have created a difficult environment for start-ups like Onto.
Crunch point…The CEO of Onto, Rob Jolly, has recognised this state of affairs, telling Sky that: “It has been a challenging period for the electric vehicle industry given the recent drop in residual values, however we believe that Onto's proposition is well placed as electric car demand continues to grow.” However, while Rob looks for new funding, plans are reportedly being prepared should Onto go into administration – there are more than 7,000 cars in its fleet.
Not alone… A similar company needing new capital to continue its mission is Octopus Electric Vehicles – probably one of the UK’s largest solely EV focussed leasing companies. While OEV has had great success at getting thousands of people into EVs, according to their most recent accounts up to October 2022, OEV had losses of more than £11 million – four times larger than the loss the previous year.
Totally understandable… As already mentioned, losses at start-ups are expected. And, with OEV’s parent company Octopus Energy standing behind it, it’s no surprise that investors have been ready to open their chequebooks to keep it fuelled up. In just two years, the company has raised £650 million. Only in June, OEV announced it had received £150 million in new funding from Pollen Street Capital to expand.
However… In the current economy, and as we continue to see negative stories about EVs, is OEV exposed? Like many EV leasing firms, OEV’s main bulk of sales is through its salary sacrifice programme. But, unlike other companies in the EV sector that merely act as a middle-men, Octopus stocks vehicles from manufacturers – such as recently when they signed a 5,000-car deal with BYD – and handles financing in-house.
Little risky? Given the shock to EV residual values this year, the bleak economic picture, and a government already sliding away from taxpayer-backed support for EVs, it certainly seems like a challenging picture. Fiona Howarth, CEO of OEV disagrees, saying to The Fast Charge: “We’re seeing a lot of negativity from sections of the media about electric cars, but those who drive them know the reality of making the switch.” Fiona notes that EVs are fun to drive, and that OEV now has over 100 models to choose from.
Counter strategy… Long-time readers will recall that last year I interviewed Oliver Boots, Chief Commercial Officer, from OEV. This was just ahead of the company launching a new ‘consumer proposition’. Aka, personal leasing and not company cars. Though, the impact of this service is unknown, and when I asked OEV for an update they did not address it.
Next steps… In a suggestion that further cash may be needed by OEV, when asked if they would need to raise further capital this year, Howarth did not deny, commenting: “We have doubled our fleet size in the last six months and will continue to grow and explore ways to best finance electric cars for the queues of drivers that want them.” This comes as rumours in the EV community suggest OEV is looking.
The future? EV leasing and subscription services have been vital ways to give people an accessible step into electric cars. Company schemes in particular now make up a huge bulk of ownership. However, without more money, EV schemes like the two above look set to be challenged. Hopefully the capital keeps flowing.
Latest EV news…
🙌 Beginning with some very positive news (which I only recently saw), one of the country’s busiest rapid charging hubs – the Ionity stop at Cobham – is due to be expanded from six to 20 charging spaces. The blueprint suggests there will also be better queue management.
☝️ Registrations for new EVs increased 39.4% in June compared to the same period last year, new stats by SMMT last week revealed. See here.
🚘 SMMT figures also showed that the Tesla Model Y was the most popular new car in the UK for June – albeit it’s known that Tesla sends registration through in bunches.
🚢 The European Commission has said it will stick by plans to impose tariffs on EV shipped between the UK and EU from next year in a blow to Whitehall who want it changed. Read more (paywall).
🚶 The London Borough of Bromley is going to be rolling out the ‘Gul-e’, Oxford Council’s cable through pavement solution for residents. Read more.
🔌 West Berkshire Council has appointed ubitricity to provide 250 EV chargers in a contract that will last four years. Learn more.
👍 Fresh statistics from Zap-Map have found that the rate of new charger installations has increased by 82% compared to the first six months of 2022. Bravo.
💣 Automotive risk company, Thatcham Research, has said that EVs that sustain bumps are being kept 15 meters apart in repair shops from other cars… as they might explode. Read more (paywall).
⛽ Manchester City Council has approved a plan by charging network Be.EV to transform an old petrol station into a green charging hub. See mockup.
📈 A new EV strategy published by Lancashire Council has suggested the area needs a 12-fold increase in chargers by 2030. Read more.
🔋 Toyota has revealed that it’s made a leap forward in the development of better batteries, which will mean it can halve the weight, size, and cost. Read more.
📰 Interesting change in approach by the Daily Mail as its anti-EV rhetoric begins to focus on the flood of Chinese cars. Read more, if you want.
🔽 The value of second-hand EVs are falling, according to new research by car valuation firm hpi. Read more.
💰 The popular Fully Charged Show, which runs live events around the world, is soon going to be crowdfunding between £1-1.5 million. Learn more.
🏎️ An interesting throwback for some as the Tamiya Wild One, which was a radio-controlled toy car during the 80s, has been made into an EV – available to order for £35,000. See here.
🙏 Finally, it was great to join a roundtable with many familiar faces in the EV sector last week hosted by Grant Thornton – thanks for the invite!
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