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You might have noticed electric commercial vehicles making rapid inroads into the local automobile industry of late, with the charge being led by companies such as BYD, Citroen and DFSK1 (Dongfeng Sokon Automobile) amongst others. Models such as the T3, e-Dispatch van and EC35 have become popular with businesses and are an increasingly common sight on the roads. Even large companies like DHL2 have switched to an eco-friendly delivery fleet, replacing their ICE (Internal Combustion Engine) vans with electric ones.
The recent presence and prevalence of electric vehicles is neither an accident nor a modern phenomenon. Electric vehicles were already available at the dawn of the automobile age, with its invention going as far back as the 1830s3 and its commercial debut in the 1890s. These days, government incentives, lowered cost of ownership and heightened social consciousness are propelling this new phase of automobile electrification further and faster than ever before.
In Singapore, the long term goal4 is to achieve 100% of vehicles running on cleaner energy by 2040, and reduce peak emission levels by 80% within the next 10 years. The road map towards this objective has already begun with the installation of infrastructure such as charging stations across the island and a raft of financial inducements such as lower road tax and incentives like the EV Early Adoption Incentive (EEAI) and Vehicular Emissions Scheme (VES). There are also campaigns to educate the public on the benefits of Electric Vehicles (EVs) and the positive effects on the environment. Though the commercial sector has been slower in adoption, even here, the paradigm shift is underway.
For businesses, the impetus for change has always had a strong correlation with costs. The cost of petrol in Singapore has always been relatively high because of import costs as well as duties which range from 66 cents to 79 cents per litre for premium petrol (RON98 and up) and ‘regular’ petrol (RON 92 and 95) respectively5. Comparing the average cost of running an ICE and EV of a similar make, EVs can be up to 4 times cheaper to run6. According to studies by the LTA (Land Transport Authority), the average annual mileage of commercial vehicles is 40,000km.
Factoring in the current fuel rate of $2.71, and an average consumption of 1 litre for every 11.5km the annual running cost is $9,426.
40,000km / 11.5 (average L/km) x $2.71
Similarly for EVs, we consider that it can travel 6.4km per kWh, then multiply this with the current cost of $0.52 per kWh. The running cost is $3,250 annually.
40,000km / 6.4 (average kWh) x $0.52
This difference means that a savings of 65% in annual running costs is possible by replacing petrol or diesel vehicles with electric ones.
Another concern of most would-be EV owners is the availability of charging options, as well as the time needed to exchange EV batteries. Fleet managers would be worrying about whether time would be wasted searching for a suitable charging station or waiting many hours for an EV to be adequately charged. To businesses, any down time imposes an opportunity cost as these resources could have otherwise been productively deployed. In anticipation of future needs, a robust network of EV facilities and services is rapidly being set up. The current number of petrol stations stands at about 180 around the island. Planned EV charging points far outnumber this figure many times over. In HDB (Housing Development Board) estates, nearly 2,000 HDB car parks will each have a minimum of three charging points by 20259. By 2030, a total of 60,000 EV charging points are planned to be installed. A variety of different charging stations have also been installed.
Level 1 chargers
These charging points supply a 120 volt AC through a standard electrical outlet. A Level 1 EVSE (Electric Vehicle Supply Equipment) cable which uses a regular 3-pin household plug on one end for the outlet. Level 1 chargers supply between 1.4kW to 3kW and would take between 8 to 12 hours to fully charge vehicle batteries.
Level 2 chargers
Level 2 chargers supply 240 volts AC and are referred to as public charging. These require specialised equipment to set up at home. Most Level 2 chargers are found in residential areas, public parking lots, and places of work or commercial settings. A charging session generally requires 1 to 11 hours with a charging rate of 7kW to 22kW with a Type 2 connector.
Level 3 chargers
Getting a full battery from a level 3 charger is the fastest among the 3 options and can take as little as 20 minutes to 1 hour with a charging rate of 43kW to 100+kW. Level 3 chargers also require installation and offer charging through 480V AC or DC plugs. The downside is that not all EVs are equipped with the required connectors so not everyone can make use of these charging points.
Making the switch to EVs may be daunting for individuals but make perfect sense for companies with a vehicle fleet. Assuming a commercial EV has a range of 300km11 and a commercial vehicle averages a daily mileage of a distance somewhere between that of a regular driver and a Grab driver of between 200-300km12, the commercial EV only needs to recharge its batteries fully at the end of a work day. This is the perfect arrangement for vehicles that are mostly used during office hours and returned to the same location afterwards. They can then be charged up ready for use the next day.
Factoring TCO (Total Operating Costs) for EVs over ICE vehicles, makes another compelling argument. Over the 10-year period of acquiring and operating a vehicle, the TCO is lower for EVs12. How much depends on the usage whereby the cost savings become greater with higher utilisation.
Adopting EVs also has the ancillary benefit of future-proofing a company’s fleet before ICEs are inevitably made obsolete. The UNDP Global sustainability goals, to which Singapore is a party to, lists climate change and a governmental commitment to limit global warming to below 2 degrees celsius. Moving away from ICEs is listed as one of the steps to achieve this. For a company to pro-actively support these efforts, the options can range from positive brand perception to stronger brand loyalty or growing customer base.
However, this change does not come without disadvantages. Higher upfront costs to purchase a new EV is one such factor to consider. Maintenance costs, servicing or just general unfamiliarity also make it daunting to make the switch.
For those facing such reservations, a growing number of car leasing companies such as ETHOZ makes acquiring a commercial EV with confidence much easier. ETHOZ started offering EV for rent in 2021, right after Budget 2020 (on push to promote EV) was released. Renting or leasing an EV takes away the financial burden of having to fork out a large amount of cash in the beginning or taking a loan. Best of all, ETHOZ will take care of all EV-related operational and maintenance costs which are bundled as part of the monthly cost. Contact us to find out more of what we can provide you, customisation options are also available!
Reference:
3) https://www.energy.gov/timeline-history-electric-car
4) https://www.lta.gov.sg/content/ltagov/en/industry_innovations/technologies/electric_vehicles.html
5) https://www.motorist.sg/article/1394/why-is-petrol-so-expensive-in-singapore
6) https://www.lhnparking.com.sg/articles/2/IsCharginganElectricCarCheaperthanRefuelingPetrol
7) https://www.sgcarmart.com/news/events_features.php?AID=4307&GASRC=sgcm
11) https://sg.byd.com/wp-content/uploads/2021/04/STE-updated-T3-Brochure.pdf
12) https://www.motorist.sg/ask-motorists/109/how-much-mileage-is-considered-as-a-39-high-39-mileage
14) https://val-byd.com.sg/cost-of-owning-an-electric-vehicle-in-singapore/
17) https://higer.sg/news-list/Which-EV-Commercial-Van-in-Singapore-Is-Right-For-You.html
There comes a time when every company is faced with the need for additional financing that is beyond what the business is able to generate through its operations, within the timeframe it is required. The reasons why additional funds are necessary can vary widely; capital financing, working capital shortfalls, capitalising on investments, ramping up production or making acquisitions, just to name a few possibilities. Having spare cash at these crucial times enables a company to ride out lean times, take advantage of current business opportunities or to ramp up capacity and capabilities for future prospects.
The most common scenario for a company seeking a corporate loan is to bridge the gap in cash flow. Cash inflows due from sales or divestments may be late whereas payments due to suppliers cannot be delayed. To have enough cash to fulfill the company’s obligations while waiting for invoices to be paid by clients, a corporate loan may have to be availed. Similarly, paying salaries on time in order to retain staff and to keep the company going is also an equally pressing reason. Another significant basis for taking advantage of loans is for making capital investments that allow a company to expand or extend its operations, thereby growing its existing business by being able to supply its clients at a greater quantity or even diversifying its scope of activities by producing complementary services and products. To serve these markets, financing companies such as ETHOZ have a great portfolio of facilities to offer.
Corporate Term Loans as the name suggests involves specific lending terms in exchange for an offer of a lump sum of money. This is a one-time disbursement and typically for a large amount. As such, it is suitable for investments that are front-loaded in nature or require a substantial deposit such as purchasing equipment, real estate or to realise expansion plans.
Equipment Leasing is one way of a quick procurement of machinery and equipment necessary to maintain or boost production. The benefit of equipment leasing is that no initial large payment is required and the burden on cash flow is alleviated by many periodic payments over the length of the contract.
Hire Purchase on the other hand, ends with transfer in ownership of the asset. Car ownership in Singapore often follows this model of financing. Upon completion of the contract, the Hirer is given an option to pay an ownership fee to take possession of the asset.
Enterprise Singapore Loans are exclusive to 15 financial institutions which work in partnership with the government’s Enterprise Scheme (EFS)1 to provide government aided loans to foster the growth of locally owned enterprises. The hurdles to clear in order to secure this form of financing are relatively high, with stringent vetting and usage of funds tightly controlled.
With such high stakes riding on applying for and successfully obtaining a loan, the process can seem rather daunting, if not downright intimidating. However, being familiar with financial institutions when grating such facilities can help smoothen the whole exercise. The objective of a financial institution needing to peruse a company’s financial and organisational information is to assess the company’s credit worthiness, business viability, risk of default, in order to price the financial products offered in line with the exposure it opens itself to2.
Minimum Documents required:
The list of documents requested by financial institutions when appraising a loan request normally includes the items noted above. Past years’ financial reports give a good sense of how well the business has performed in the past and gives an insight into business cycles, trends and pattern of expenses such as repayments on other loans. A growing top and bottom line would be a good indicator of stability and thus the ability to repay its loan obligations. Likewise, a shrinking profit before tax amount might have to be explained or it would be seen as a potential risk, thereby potentially affecting the loan offer.
A historical record of bank statement is also important to quickly showcase the real net cash flow of the company. This signal of liquidity tells an accessor how much cash is normally available on a short notice period and can be used for the loan repayment.
Debtor aging essentially shows how long a company takes to collect its account receivables. A quick turn-around means that a company has less or low risk that it cannot collect payments from its clients. On the other hand, if the aging reports show many accounts that are overdue, bad debts might be possible. This is a red flag that threatens the sustainability of a business.
Letters of award and project listings delves into the future outlook of the company. It shows the pipeline of work that the company will embark on. Letters of award are binding contracts. These, together with a project listing then gives some certainty of future cash flow.
A financial institution is also interested to know how many creditors a potential client already has. This might prejudice its claim in case of default or insolvency. If there are no other creditors, it also means that there is no hierarchy of claimants, making any recovery process easier.
Lastly, guarantors reduce the risk that creditors have to bear because the individuals are personally liable for the loan. Further checks into their creditworthiness and assets will also be conducted.
Taking loans is often a vital step in a company’s journey, especially if it puts the business in a better stead to tackle the challenges of the future. With this fair bit of insight, the process is actually quite straightforward and with the right partner, it can also be a very friendly and pleasant experience.
Reference:
2) https://corporatefinanceinstitute.com/resources/commercial-lending/credit-risk-analysis/
