Summary
- IDEX works with its S2F2C model to bridge together fleet operators, EV manufacturers and lease financing companies to facilitate commercial EV adoption.
- Revenues are still small, but growth in deliveries has been strong and future prospects look promising.
- Chinese government deadlines and incentives could accelerate EV adoption commercially in the future.
As the Chinese new EV landscape is showing a recovery in consumer demand during August, the nation still remains dedicated to building out EV fleets for commercial (such as ride-sharing) purposes. Traditional EV manufacturers will find shares of growth in the upcoming decade as China likely remains the global leader in EV sales and infrastructure. However, that growth will extend to other segments, like commercial EV, where the S2F2C (sales-to-financing-to-charging) model that Ideanomics (IDEX) is developing could find a niche to fill. Ideanomics' MEG segment focuses primarily on the commercial EV realm, and utilizes the S2F2C model to facilitate the switch to EV for fleet operators, and a multi-billion dollar TAM in the upcoming years could provide opportunities for growth.
The S2F2C model provides a unique advantage in a more specialized corporate structure in China. Ideanomics bridges together charging stations and vehicle manufacturers to fleet operators and financing groups. In the Chinese market, there's over 100 different EV manufacturers for fleet operators to choose from; Ideanomics streamlines that selection process through its network of preferred relationships with vehicle manufacturers to find exact models with desired specifications. Once vehicles are selected, Ideanomics helps to facilitate the financing of the purchase.
Ideanomics works with budgets provided from the fleet operators to secure financing for the purchases. Typically, when purchasing ICE vehicles, lease financing companies would want a 10% to 20% deposit in cash (which can vary based on other factors such as vehicle type), and then offer a loan for the rest, based on the blue book value of the vehicle.
However, EV vehicles don’t have a true blue book value yet, as the battery can range up to 50% of the cost. This leaves lease financing companies unable to determine residual values of a vehicle especially when that value is contingent on a removable/swappable battery [which looks to be gaining more traction and government support, with a recent BaaS announcement from Nio (NIO)] Therefore, when purchasing EV vehicles in bulk, a lease financing company would require a much higher deposit before loaning the rest, creating a problematic situation where fleet operators might not be able to afford a fleet overhaul to EV.
