How is the market managing the transition to EVs? What are you seeing in the market? And what stage are ORIX customers at?
We get a lot of inquiries. The passenger vehicle side is a little bit easier, because there’s just a lot of options out there, supply chain constraints notwithstanding. There’s more information. So we’re more comfortable being able to field those queries as they come in. Irrespective of whether it’s passenger or commercial vehicles, it’s always about asking, what are you using it for? And what’s the intended purpose?
So passenger vehicles, pretty straightforward. On the commercial space, and the commercial space for us would be both light and heavy commercial, it’s a little bit of a different story, because there’s not as many options. But we still get a lot of inquiries because a lot of people want to be able to try it in their own operations.
Though unlike a brown vehicle, again, supply chain issues notwithstanding, it is as easy as having the asset delivered; give somebody a fuel card; and you’re up and running. A little bit different with green, you’ve got to look at the overall ecosystem in which it’s going into.
So part of that is okay, well, if that’s the purpose, have you thought about this? Have you thought about that, specifically around charging infrastructure? Have you thought about, is the asset going to be taken home by the driver? So how are you going to reimburse the driver in terms of the charging component?
So, have you solved the home charging dilemma?
Well, part of that answer is, what’s the best practice? We’re trying to learn as well as we go along. The last thing I want to do is be able to prescribe, well, this is how it works. What we do, is say, well, some organisations are doing this, some organisations that doing that. You got to figure out what the right thing is for you as an organisation.
Can you give me some examples? What are different organisations doing? How are they handling it?
So what we’re seeing is, they provide their utility bill for a period of time before, and then after. Then there’s an element of what’s the difference? That’s one thing that’s happening. It’s very manual, but gives you a baseline to say, we’re going to reimburse you up to a certain amount. Okay, it’s not perfect. And I’m sure it’s going to improve as we get better with reporting.
It’s interesting, for example, with Tesla batteries, because you can actually do the monitoring online. So as most of those things become more available, potentially, you get more finite in terms of okay, the assets are on from this period to this period, this is what it looks like. So I think it’s the technology that’s also evolving in terms of measurement. So you get the better outcomes.
Do you think the traditional fuel card providers have a place in the home charging, or charging in public networks?
Great question. You’d like to think so because, you know, they’ve got to change their business model, because it’s basically at risk. If you don’t offer something, I think, you know, potentially on the EV space, it’s the fast charging. That will be one thing. Where does hydrogen fit in? And other alternatives, what does that look like? So I think it’s got a place, you just got to figure it out, you know, when do you get to saturation point before you pivot?
Our audience has been wanting to know about residual values on electric vehicles. You guys are doing that every day. How are you seeing residual values on EVs?
With passenger vehicles, we’re a lot more comfortable in the sense that there’s a lot more information available, globally, not just in Australia. So from our perspective, there’s enough information out there, that when we setup residual values, it’s with some comfort, because, you’re going to the next generation so you already know what’s in store.
Light commercial and heavy commercial is a different story. And so in large part, we tend to take a very conservative approach to that. And usually the journey, when we’ve got clients that are asking for it, and asking what it looks like, then we actually walk them through why, you know, the pricing is the way it is.
Most are very understanding, in large part, because it’s building up the knowledge and as we get more information, then we’re more comfortable about being able to take the pedal off the conservatism in terms of how we set it. An interesting thing sometimes, you know, when we discuss it internally, it could be that the parts are actually work more. Like the battery, for example, maybe worth a lot more than the sum of the parts at the end of the lifecycle. Well, that’s what we believe. So those are the kinds of things we have to factor in as we’re putting through residual values.
With residual values, I used to set them so I remember the secrecy around it within the industry, do you think this is making it more transparent with clients?
Well, there’s a lot of (secrecy) obviously, for commercial reasons, you tend to be more guarded about how you set it, because at the end of the day, you know, that’s you managing asset risk in the organisation.
I think with more information becomes better transparency. And certainly with ICE, that information is out there, then it’s just a matter of, as an organisation, how much risk are you willing to take in terms of your future position. We’ve got competitors, that set very aggressive RVs, where traditionally, because of our shareholder, we tend to take a more conservative approach. We lose business sometimes because we do that.
But for EVs, passenger vehicles, we’re comfortable with. Light commercial and heavy commercial, not so much. So when we’re faced with something unknown, then we take a defensive position and that’s really taking a very conservative one. And then we explain that to anybody, we don’t sugar-coat that.
Is there an opportunity for organisations that aren’t comfortable with the risk, to use your resources, and your expertise, to lease instead of own electric vehicles?
So instead of leasing; or even instead of owning; you can rent. Because we do have a hire business and we’ll put more of these type of vehicles on the rental fleet, so that you are in a position to trial it.
We’ve got three assets with ANC, and those assets are in our rental fleet. So that allows us to get comfortable with it. And ANC is perfect partner because we can understand the wear and tear on those assets.
What about comparing the EV journey in Australia to New Zealand? You’ve got business across both countries, what are you seeing as the differences?
So what’s interesting to me about NZ, is I think they are building on their green credentials. It makes sense to embrace green and EVs in general. I attended an event there pre-COVID, and the thing that I took away from the event was whether you were in government, or whether you’re in opposition, everybody was basically saying the same thing. We’re embracing EV, it’s part of our DNA, we will create a national infrastructure to do that. And it kind of makes sense. They have less government levels and bureaucracies. So that’s good, you get a kind of uniformity, regardless of whether you’re in government or not.
The practicalities though, is when you actually get to the bureaucracy that’s responsible for pushing it out. It always falls back to how do we fund it? And that’s where I think the policies need to align with the practicalities in terms of how we transition from ICE to non-ICE.
There’s different practices globally on how they’re doing that, and I don’t think anybody’s landed on a specific one yet that works. So I think that’s part of the exercise, finding that right balance in terms of how you transition? I think NZ will get there, just because there’s less levels of bureaucracy in a smaller country. I think their adoption rate will be a lot faster, both on the passenger vehicle and the commercial space.
Do you think the Clean Car Discount Scheme that NZ adopted earlier this year is accelerating the adoption of EVs?
I think it will, it just needs more saturation, because it’s doing it in steps. So I think the view is yes, that will help in the acceleration. So that’s something we’re following closely.
The other part of this is, as you get countries to have this acceleration in terms of adoption, we’re also then watching what happens in terms of residual values with non-ICE vehicles. So we’re also trying to follow to see what does that mean? If it’s an adoption rate like this? What is it looking like for the non-ICE vehicles? Or, the ICE vehicles? How does that look in our position? So that’s something that we closely follow.
We follow what’s happening in Norway and in the US. Norway, probably more because they got the high adoption. So there’s some comfort knowing that on the commercial space, they’re still pretty much reliant ICE (vehicles) to be able to transact in the commercial kind of sense.
