Bank Australia has announced that it will phase out car loans for internal combustion engine vehicles by 2025.
Corresponding Fox businessBank Australia has announced that it will stop lending for ICE vehicles by 2025. The bank will continue to offer loans for used ICE vehicles until a more affordable power supply becomes available. Despite the unprecedented move in a country with just 2% EV adoption, there may be good reason for the switch.
Referring to the seismic policy change, the bank said it was done to reduce customers’ carbon footprint while promoting more affordable transportation options. And while this policy change could help the bank meet its goal of becoming carbon neutral by 2035, the bank didn’t discuss how the change could positively impact its business.
By continuing to not offer gas vehicle loans, the bank can achieve two things; Minimizing borrower default risk and potentially preventing future lost assets.
One possible reason for the bank’s new policy is that it believes electric vehicles are a cheaper mode of transport and require less maintenance. Electric vehicles limit the likelihood that the vehicle will require service that the owner cannot afford, leaving the customer with a loan and an out-of-service vehicle to pay for. Second, as electric vehicles become more widespread and the value of gasoline vehicles becomes too high, if the bank is forced to impound and sell the vehicle, the bank will end up with an asset that is worth less than the loan it took out. will get stuck (they lose money).
Despite these possible reasons for the new business policy, the change was branded “fascist” from “bad business practice”. Can other banks take similar steps in the future? And will this policy lead to more electric vehicles being bought by consumers?
Teslarati JPMorgan reached out to Chase and Bank of America to comment on whether they would consider such a change or whether the banks have broader EV policies. He didn’t react immediately.
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Bank Australia plans to end lending for ICE vehicles in 2025