Financing the Global Shift to Electric Mobility

76 Pages Posted: 2 Aug 2023 Last revised: 24 May 2024

See all articles by Jan Bena

Jan Bena

University of British Columbia - Sauder School of Business

Bo Bian

University of British Columbia

Huan Tang

University of Pennsylvania - The Wharton School

Date Written: July 11, 2023

Abstract

Using comprehensive auto loan data, we identify a gap in financing terms between Electric Vehicles (EVs) and non-EVs. EVs, compared to their non-electric counterparts in the same make-model or make-model-power category, are financed with higher interest rates, lower loan-to-value ratios, and shorter loan durations. The primary driver of this financing gap is the risk associated with EVs. The rapid and uncertain progress in EV-specific technologies accelerates obsolescence, reducing EVs' resale value and thus increasing the cost associated with loans for these vehicles. Factors such as car buyers' willingness to pay, socioeconomic characteristics, government incentives for EVs, lenders' market power, and macroeconomic conditions play minimal roles in explaining the higher cost of EV loans. Our findings highlight that technological carbon-transition risk is priced in financing terms of green durable assets consumption.

Keywords: Green financing, Car loans, Electric vehicle, Electric vehicle battery, Carbon-transition risk, Technological risk, Technological obsolescence

JEL Classification: G21, G23, G50, O33

Suggested Citation

Bena, Jan and Bian, Bo and Tang, Huan, Financing the Global Shift to Electric Mobility (July 11, 2023). Jacobs Levy Equity Management Center for Quantitative Financial Research Paper , The Wharton School Research Paper Forthcoming, Available at SSRN: https://ssrn.com/abstract=4526150 or http://dx.doi.org/10.2139/ssrn.4526150

Jan Bena

University of British Columbia - Sauder School of Business ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada
+1 604 822 8490 (Phone)

HOME PAGE: http://www.janbena.com

Bo Bian (Contact Author)

University of British Columbia ( email )

HA 865, UBC Sauder School of Business
2053 Main Mall, Vancouver, BC V6T 1Z2
Vancouver, British Columbia V6T 1Z2
Canada

HOME PAGE: http://bo-bian.com/

Huan Tang

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

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