Accelerating Adoption of EVs Where it is Needed Most

by Trent Yang, President and Co-founder of Galway Sustainable Capital

At Galway Sustainable Capital, our mission is to accelerate the transition to a more sustainable economy, and the transportation sector is one of our key areas of focus.

Transportation causes numerous negative environmental impacts. In the US, the sector is the leading contributor to climate change, responsible for 29% of domestic greenhouse gas emissions. More than half of those (55%) are from passenger and light-duty vehicles. The consensus on climate science is that global emissions need to fall by about 45% from 2010 levels by 2030, and reach net-zero by 2050. At the same time, tailpipe emissions from internal combustion engines contribute to local pollution and smog. Poor air quality plagues 150 million Americans, especially in disadvantaged communities, and contributes to health problems such as asthma and cancer. Pollution from vehicles is responsible for nearly 20,000 premature deaths in the US each year.

At this time, it is widely acknowledged that a primary pathway for addressing these issues in passenger and light-duty vehicles is electrification, combined with renewable energy.?

Zero-emissions vehicles are not a new concept. Electric models date back to the advent of the automobile, and a host of other technologies have been experimented with over time. Consumer interest in electric cars has waxed and waned, but these vehicles failed to take off earlier for many reasons, including high battery cost and the short distance earlier EVs could travel before being recharged, known as range anxiety.

Over the last 10 years, the focus has been on developing models (Tesla, Bolt, Leaf, etc.) for mass appeal. Better comfort and technology (including lengthier battery life, and therefore, range) have been aimed at increasing consumer confidence and demand.??Today, dozens of new vehicle models are being announced. GM has a plan to introduce 30 new models by 2035. Meanwhile, some of the highest valued publicly traded companies in the US are focused on electric vehicles (Tesla, Rivian, Nio, etc.).?

Some of this momentum is coming from expanded public and private commitments. California has a goal of 5M EVs in use by 2030 and is requiring all vehicles sold after 2035 to be zero-emissions. In August 2021, President Biden signed an Executive Order setting a target for 50% of new vehicles sold in 2030 to be zero-emissions and committing to 100% zero-emissions purchases for the US Government fleet by 2035.?At the UN Climate Conference (COP-26) in Glasgow in 2021, dozens of city, state, and national governments, auto manufacturers and fleet owners, and other organizations with influence in the automotive industry also pledged to transition to zero-emissions vehicles. The bipartisan Infrastructure Bill included $7.5B to support the creation of a national EV charging network, and the Build Back Better proposal included billions more for domestic manufacturing, consumer tax credits, and more.

Still, the number of electric vehicles sold in the US is a tiny fraction of total sales (~3% as of Q4, 2021).?And current EV ownership is highly concentrated amongst whiter, older, wealthier consumers. Adoption will need to increase exponentially in the next decade – and move into more diverse communities. This will be critical to hitting the ambitious vehicle goals and carbon reduction targets that are being set, while also addressing equity issues.

Galway believes that availability of vehicles is not enough to cause a massive adoption shift.?Today, an EV requires a higher (up front) investment than an internal combustion engine (“ICE”) vehicle, charging stations are not widely available, especially for apartment-dwellers, and many consumers are not aware of the benefits of electric vehicles.?

Part of this challenge will be solved by increasing the variety and affordability of new models coming to market. At the same time, Galway believes that innovative ownership and financing solutions are required.?Consumers need up-front monetary support and peace of mind that an EV will be a smart financial choice and not an operational burden (in terms of charging, range anxiety, etc.).?These offerings should ?serve a variety of driver types, with a range of financial circumstances. Galway is committed to finding companies that are trying to overcome these barriers to adoption, while also providing social benefits. ??

To those ends, Galway has committed more than $25M+ to Hive, one of the most innovative companies focused on increasing adoption of EVs.?Hive combines an affordable leasing structure with charging convenience and other services that create a “no-brainer” solution, especially for gig-economy and other high-volume drivers.?

Not only will Hive deliver carbon emissions reductions (40,600 tons estimated from its initial fleet), it will help address the equity gap in EVs. By bringing the entry cost of an EV on par with a gas car, Hive can make clean-driving vehicles more accessible to lower-income drivers, bringing these cars to places where they are rare today (86% of current Hive members are in disadvantaged communities). Access to EVs – especially for gig use – will help offer economic opportunities in these neighborhoods, while addressing the health inequities they face from air pollution. Not only is Hive expanding access, but they are committed to a low-carbon strategy.?Since EVs are only as clean as the electrons going into them, Hive is also building an EV charging network for their drivers that is powered with 100% renewable energy, converting the largest utilization drivers to truly zero-emission vehicles.

Galway worked with Hive to structure an equity and asset-based financing approach that matches Hive’s business model and serve as a foundation for the company’s future growth.?While currently operating in the Los Angeles area, Galway’s investment will accelerate Hive’s business by enabling Hive to grow its userbase and start planning for future market expansions.?

We believe business models like Hive’s are imperative to accelerate ownership at municipal, corporate and individual levels, too.?Municipalities typically do not have enough cash to transition their fleets quickly and corporations may also lack the expertise, time (and quite often the capital, too) to shift their entire operating infrastructure from an ICE platform to EVs.

Many more of these innovative companies are needed if we are to achieve our net-zero targets by 2030 and 2050, abate the worst impacts of climate change, and improve equity and access.?Galway hopes to be along for the ride with Hive and others in the coming years.