Seed-stage EV startup Tenet announced that it will be able to offer an EV-only consumer loan program. It is being financed through New York via $25 million in funding from NY Green Bank. The financing offered is something called warehouse financing, which is inventory financing. It is a loan that is made by a financial institution to a company, manufacturer or organization that processes goods.
Why does EV-only financing matter?
Tenet had already announced the first EV-only warehouse facility. NY Green Bank, which is part of the New York State Energy Research and Development Authority, will provide Tenet with a $10 million warehouse with up to $15 million in additional capital to achieve its goals of financing and warehousing EVs direct to consumers.
This is both the first time a startup has attempted to disrupt the way EVs are warehoused (similar but somewhat different to Carvana’s car delivery or vending machine model), and the first time a government body has fully funded an EV-only warehouse and financing program, suggesting that New York is getting serious about supporting companies that help it achieve its ambitious climate goals.
The idea is to make EV ownership more affordable by cutting out the middleman for EV sales and financing.
Andrew Kessler, president of NY Green Bank, said that Tenet’s model has potential to provide substantial savings that reward individuals for adopting a climate-friendly lifestyle. With the support from government entities to help ensure success, this may raise Tenet out of the usual mire involved in the competitive auto sales industry. It is also where everything from stiff competition to state laws can complicate how cars are sold and financed.
EV financing affects the climate
New York is betting on Tenet because they know that accelerating the adoption of EVs supports the state’s goal of reducing greenhouse gas emissions 85% by 2050. This is ambitious, but necessary given the late state of climate mitigation that has already failed to meet critical milestones to prevent global climate upheaval and mass extinction, in addition to worsening natural disasters.
Tenet plans to offer rates similar to other lenders, but with longer terms up to 84 months to make purchasing an EV more affordable in a monthly payment. A deferred payment option allows drivers to lower monthly payments by deferring up to 25% of the down payment on an EV until the end of a loan term. This won’t make EVs less expensive, but could remove the barrier of entry to people interested in purchasing all-electric vehicles. Tax credits and federal rebates on EV purchases can be used to pay down the final sum of a deferred down payment. Tenet said they expect many people to choose to refinance or trade in for another EV at the end of their loan term.
The logic behind this move beyond lowering monthly payments is that EVs retain value better over gas cars, indicating they should be eligible for better loan rates for longer terms since they can be traded in for more value later in their life cycle. New York announced a goal in September 2022 to make all new passenger cars and trucks sold in the state to be zero emissions by 2035. It is a drastic shift away from gas-powered cars. In order to make that feasible, it makes sense that the state would want to support companies making it more affordable, to prevent a new problem of access to affordable transportation becoming a major issue for low to middle-income residents.
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