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E-Mobility: The Future of Cars and Debt

por Zac Fernandez
jueves, septiembre 23 2021



Cars have transformed society since they were first introduced back in the early 1900s. They’re synonymous with personal freedom, allowing people to get from A to B more quickly, easily, and independently than before—and they’re not going to disappear anytime soon.

Though actually, fossil-fuel cars might. To fight the climate crisis, the EU, UK, and US have all outlined plans to ban (or reduce) the sale of fossil-fuel cars. They’re encouraging people to replace them with new and emissions-saving electric cars.

  • According to the International Energy Agency, 145 million electric cars, buses, vans, and heavy trucks will hit the road by 2030.
  • Despite the global automobile market contracting by 16% in 2020 due to the impact of the pandemic, there was still a 41% rise in electric car sales.
  • But there’s a problem. In Europe, electric cars cost 52% more than fossil-fuel alternatives, while the prices have risen by 38% in the US over the past decade.

Around the world, people will soon have to ditch their existing fossil-fuel cars and replace them with more eco-friendly electric alternatives. If the prices remain as high as they currently are, however, many people will be forced to take out car loans.

This blog outlines the importance of E-mobility going forward, examines why recouping car loans will be a huge challenge for financial institutions, and explains the best method for tackling car loans in their early stage.

Why E-mobility is so important right now

Climate change is already upon us. Extreme weather conditions such as wildfires and floods have become increasingly common over the past few years. Some studies have even suggested that we’re already past the point of no return.

E-mobility isn’t the perfect solution—but it’s a massive step in the right direction. Private travel is one of the biggest sources of global greenhouse gas emissions, and it’s especially wasteful when you consider that many individuals travel alone in cars that could seat multiple people. Swapping fossil-fuel-based vehicles for electric alternatives will slash emissions significantly. As a result, this will help slow down the pace of further climate change.

Governments around the world have therefore introduced regulations aimed at banning the sale and use of fossil-fuel cars going forward. The EU has proposed an outright ban on sales of fossil-fuel cars from 2035 while the UK has introduced its own regulation but brought the deadline forward to 2030. In addition, the current US administration has introduced a 50% electric vehicle target by 2030.

Fortunately, massive technological advancements mean that these targets are all fairly realistic. It’s estimated that the electric vehicle industry has received approximately $400BN worth of investment over the last decade, with roughly $100BN alone of that investment coming since the beginning of 2020. Electric cars are rapidly becoming more powerful, more long-lasting, and more energy-efficient.

Where car loans come in

For most people, cars are big, one-off purchases. The average consumer buys a car once every few years at most. Given how large an expense this is, many consumers resort to car loans—and this is especially true if they’re buying new cars.

Recent estimates suggest that 90% of new cars are bought on finance (i.e. with a loan). In fact, some have even drawn comparisons between the scale and nature of the US’s current $1.3TN auto-lending market and the subprime lending practice that led to the 2008 financial crisis.

This might be a bit far-fetched, but one thing’s for certain: the rise of electric vehicles will lead to increased car loans.

How to tackle car loans in the early stage

To stop car loans from becoming non-performing, financial institutions need to tackle them as early as possible. To successfully do this at scale, they must leverage collections management software that contains the following 5 key functionalities.

  • Self-service

Modern consumers increasingly like to handle problems themselves. They don’t want to wait on hold to speak to the agent—or, in fact, to speak to another person at all. Some consumers might find debt embarrassing, especially if they’re unable to repay it.

Self-service functionality lets past-due customers take control over their own debt. They can handle all repayments themselves, at a time that suits them, on their preferred channel.

  • Omnichannel communication

Every past-due customer is an individual. They all have their own specific context, preferred channels, and favoured messaging strategies. This is why institutions that persist with one-size-fits-all strategies receive such poor results.

Financial institutions must therefore ditch sending out the same messages to all past-due consumers on one single channel. Emails might work well for some people, but others will prefer SMS messages or reminders on their favourite social media channel.

  • Flexibility

Collections is a dialogue, not an imposition of terms. If you’re inflexible and demanding, you might trigger past-due customers’ reactance (where they refuse to engage in the dunning process to assert a sense of control).

Give consumers the flexibility to set up instalment plans and to pay back what they can afford at a time that suits them. If you do, you’ll increase the chance that car loans don’t become non-performing.

  • Artificial intelligence (AI)

AI-based collections management software gives you must-know data at your fingertips. You can automatically use the most effective messaging strategies, see whether your landing page is performing (and if not, why not), and generally keep tabs on your entire collections strategy. Leverage AI-powered data management to stay in the know at all times.

  • Case management

Case management gives each agent a bird’s-eye view over every individual customer: their financial context, contact information, payment history, instalment plans, active claims, and more. Agents can quickly work out which cases are high/low-priority and direct their attention towards past-due customers that need the most help.

Electric vehicles are coming—and so is a wave of car loans

Electric cars are soon going to dominate our roads. The vast majority of new car owners already take out car loans, and given that electric cars are more expensive than traditional alternatives, this is only set to rise going forward.

Financial institutions need to adopt the smartest strategies to tackle these loans in their early stage. They need to use technology-powered collections approaches to take advantage of multiple channels, stay on top of key data, provide flexibility at all times, and give consumers control over their own debts. If they do, they’ll be able to meet the rise of electric car loans head-on.

To find out more about how receeve can help your institution do this, contact us for more information.