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SAN FRANCISCO, 31 October 2023: In a significant stride towards accelerating the adoption of electric vehicles (EVs), Spring Free EV, a trailblazer in sustainable transportation, has introduced an innovative financing solution known as Residual Capital. This tax equity product is set to redefine the landscape of EV financing by substantially reducing financial obstacles.
Residual Capital: A Game-Changer in EV Financing
Collaborating with top-tier tax equity structuring experts and accountants, Spring Free EV has developed Residual Capital, offering a fresh perspective on EV tax credits, particularly the 45W credit applicable to commercial electric vehicles. The brains behind this product have extensive experience in solar finance and structured asset financing, hailing from renowned companies like Sunrun, Solar Mosaic, Morgan Stanley, and Robobank.
Drawing inspiration from traditional renewable energy financing structures, where tax equity constitutes over USD 20bn of total financing, the product gets its name, “Residual Capital,” from its core functions. It injects residual capital into the financing structure, acting as a safeguard against the residual value risk of electric vehicles. This approach enhances the capital efficiency of fleet financing while protecting the residual value of EVs, two critical facets of the EV financing industry.
Reshaping Fleet Financing
In the conventional fleet acquisition process, a company typically relies on senior debt to cover 80-90% of the vehicles’ cost. The burden of providing the remaining 10-20% and bearing the risk associated with the residual value of the vehicles can be quite capital-intensive, particularly for fleets comprising hundreds to hundreds of thousands of vehicles. Although the Inflation Reduction Act’s 45W tax credit offers some relief for electric vehicles, not all fleets and auto finance companies can leverage this credit.
Spring Free EV’s Residual Capital reimagines this system by supplementing corporate capital with Residual Capital, empowering fleet operators to optimize their financial resources. To safeguard the assets’ residual value, Spring Free EV incorporates a suite of intelligent technologies to monitor and proactively maintain battery health. Notably, the battery alone accounts for up to 40% of an EV’s residual value.
Already, Spring Free EV has successfully implemented this product in its own fleet leasing program, affirming its viability and necessity. With a robust pipeline of over USD 100m, there is a substantial capital supply available to assist other players in the auto finance and fleet industry.
Sunil Paul, CEO, and co-founder of Spring Free EV, commented on the remarkable demand for Residual Capital, emphasizing the urgency and enthusiasm for sustainable fleet electrification. Spring Free EV is eager to partner with like-minded fleet operators who share their vision of a cleaner, greener future.
Residual Capital: Paving the Way for a New Era
As the electric vehicle market continues to expand, Residual Capital promises to usher in a new era of accessibility and efficiency in the EV landscape. By addressing critical financial challenges and protecting the residual value of EVs, this innovative tax equity product is set to reshape the future of EV financing.
Conclusion
Spring Free EV’s Residual Capital is a game-changer in the world of electric vehicle financing, making cleaner, greener transportation more accessible to all. This innovative approach represents a crucial step forward in achieving a sustainable future with EVs at the forefront.
