The global EV market has seen significant shifts in recent years. Its unsteady expansion continues to fox analysts. While battery electric vehicle (BEV) sales continued to grow in 2024, the pace slowed compared to previous years. According to GlobalData, global BEV sales reached 11.12 million units last year, reflecting a 14% year-over-year (YoY) increase. This marked a deceleration from the 30% YoY growth witnessed in 2023.
Regional disparities highlight varying levels of EV adoption. GlobalData figures point to anemic BEV growth of just 0.9% in Europe in 2024, with Germany actually experiencing a severe 27% decline due to withdrawal of certain government incentives. Meanwhile, the UK emerged as the largest BEV market in the region. China remains a dominant force, with BEV sales rising by 19% to 6.2 million units, driven by strong demand for plug-in hybrid electric vehicles (PHEVs) and extended-range electric vehicles (EREVs).
Zooming in on the United States, BEV sales grew by 8.7% – but this represented a sharp decline from the 58% YoY growth seen in 2023, largely due to vehicle costs. Q3 2024, the period for which data is most recently available, saw EV ownership hit a market share of 8.9% and 346,309 EVs sold, marking a 5% increase from Q2 and an 11% year-over-year gain. Challenges remain, including high EV prices (the average transaction price exceeds $57,000, a 19% premium over the industry average), limited charging infrastructure (as of the middle of 2024, only 8 federally funded chargers had been built out of a planned 500,000) and supply chain constraints tied to foreign dependencies. Incentives played a crucial role in boosting sales, with discounts averaging over 12% of the transaction price and leasing loopholes allowing buyers to tap into government-supported benefits. Tesla maintained its dominance with a 6.6% sales increase, driven by the Cybertruck’s debut (16,000 units sold), while GM surged 60% to 32,095 sales, overtaking Hyundai, as the US EV market moves towards a 10% total share in the near future.
Looking ahead, GlobalData projects that BEV sales are projected to rise to 13.7 million units in 2025, representing a 23% YoY increase. Key factors influencing future growth include regulatory policies, battery price reductions and hopes around increased affordability of new EV models. In China, government incentives and tax exemptions are expected to further boost EV adoption. Similarly tempting new incentives have been mooted in the UK, while regulatory requirements around CO2 are nudging European automakers towards developing newer, more efficient BEV models that also promise greater up-front affordability.
The Evolution of EV Financing
As EVs become more mainstream, financing options will need to adapt. To date, EV financing largely follows the same principles as traditional car financing, with loaning and leasing options among the most popular. But there are additional considerations in the EV market influencing price dynamics. These include battery depreciation, charging infrastructure investments and insurance premiums. Taken together, they point to the need for more sophisticated solutions from financers.
Recent research found that new EV financing grew by over 30% YoY in 2024. Nearly 45% of all new EV transactions were leases, compared to just under a quarter in the previous year. Lower monthly payments and reduced risks from depreciating value have made leasing EVs a particularly attractive option for many consumers.
Used EV financing options are also on the rise; financing on used EVs rose among both prime and super-prime borrowers in Q3 of 2024. But this creates other considerations associated with the wear-and-tear of older models; some entry-level used EVs do not include batteries in the purchase price, for example, requiring financers to make separate battery leasing agreements.
There are a number of considerations for EV financers looking to offer competitive options. First, depending on the type of financing, substantial deposits may be required. This will also dictate monthly costs: loans typically have higher monthly payments, while leases often offer lower payments but come with restrictions such as mileage caps. There are also long-term variables, like insurance and potential battery lease costs, that must be factored into overall affordability. Approaches to financing must also be tweaked based on location. For example, in the US, while the Inflation Reduction Act of 2022 extended the $7,500 credit for new EVs, PHEVs, and hydrogen fuel cell vehicles (within certain eligibility requirements), state-level incentives vary widely. With no one-size-fits-all approach to mileage restrictions and leasing rules, financers must prepare to be flexible.
There is clearly major activity in the EV financing market, and it is continuing to evolve. But challenges remain. For example, interest rates on EV loans tend to be higher than those for combustion engine vehicles, which may continue to suppress demand. Loans for EVs carry 0.29 percentage points higher interest rates, 4.7 percentage points lower loan-to-value ratios and 2.5-month shorter loan durations on average. Many lenders perceive higher risk in rapid EV technology advancements; the possibility of faster depreciation and lower resale values makes them more cautious about offering favorable loan terms. Additionally, evolving regulations around PHEVs and their CO2 ratings in Europe may impact their financing attractiveness in the coming years. How can financers futureproof themselves?
Adapting to the Future of EV Financing
With the rapid evolution of the EV market, financial institutions must adopt agile, data-driven strategies to stay competitive. Meeting the accelerating pace of these changes necessitates new analytical technology that can live up to modern-day tasks. The rise of advanced analytics, machine learning (ML) and AI means next-generation platforms are emerging as revolutionary new tools for automotive financers, enabling them to optimize pricing, enhance risk assessment and improve customer experience.
Direct-to-consumer sales models, EV-only lenders and digital-first buying experiences are all trends on the rise alongside battery power in the automotive world. 76% of EV buyers now use digital tools for financing, inventory searches, and insurance. Consumers increasingly expect digital billing and self-service tools, with 79% wanting electronic loan access and 72% seeking online payment history. Yet only 2% of auto finance apps and websites offer a fully modern digital experience. As competition from new EV-focused lenders grows, traditional financers must adapt by integrating seamless digital solutions. Success will help them reach new combustion engine customers too; failure could mean they risk losing relevance in the changing market.
A huge part of EV financing is about managing risk. This includes not only credit risk but also risk associated with diminishing resale values, supporting technology infrastructure, charging stations availability and such. Managing loan risk through price optimization is one of the key advantages offered by ML-powered analytical platforms.
These new platforms can provide real-time pricing, analytics and digital decision-making solutions for financial institutions to help them navigate and succeed in financing electrical vehicles, often winning new market segments from the competition. For example, a pricing analytics solution can help a lender influence demand and loan bookings across targeted consumer segments or for a specific vehicle model, in a specific geographic location.
For another lender desiring to optimize the shape of their auto lending portfolio to include more EV loans, such pricing analytics solution can help too. A lender could control the shape of an auto lending portfolio by understanding what type of loans should be booked and the volume of each loan type to achieve the desired results.
When it comes to managing risk, joint simulation capabilities help forecast the impact of decisioning logic changes before they are implemented. Each lending decision is optimized for risk, profitability, volume, or other combination of KPIs.
Whatever the bumps along the way, the global EV market will continue to grow, with new models, regulatory shifts and changing consumer preferences shaping the industry. By leveraging real-time AI-driven analytics and pricing models, financial providers can stay ahead of market shifts and deliver the seamless, cost-effective solutions that EV buyers need. As the industry moves forward, those who embrace these next-generation technologies will be best positioned to capitalize on the growing demand for EV financing.
To learn more about how new AI-driven platforms are helping accelerate operational efficiency for financers, and why this is so crucial for the EV market, leading industry software providers Earnix have prepared a report unpacking key trends around the topic. Fill in your details on this page to find out more.
