Driving the transition: rethinking electric fleet financing solutions for the U.S.

The electrification transition: An opportunity for success while under pressure 

Fleet electrification across the U.S. continues to gain traction, driven by its tangible advantages and state-level mandates. However, recent shifts in federal policy and funding priorities are poised to decelerate this transition. As a result, school bus, transit and heavy-duty fleet operators face a disconnect between the urgency of their decarbonization goals and the financial tools available to achieve them. 

The higher up-front costs of electric vehicles and their associated infrastructure remain a hurdle. Competitive pricing for electric fleets doesn’t yet match that of its diesel-powered counterparts. Traditional lenders are hesitant to underwrite electric fleets due to those higher initial costs and perceived limited residual value, although the supporting data pool is growing with each passing day.  

In fact, in our battery management white paper we explain how to maximize residual value in a number of ways. CALSTART’s Innovative Financing Toolkit also includes an explainer on residual value that we contributed to, and which recommends an industry standard for residual value calculations that lenders can apply to make underwriting more viable and financing more affordable.   

State, local and utility programs offer partial support, yet many projects stall when funding falls short, or timelines stretch. 

Unlocking private financing

Backed by KKR and M&G Infracapital, as well as other major investors and lenders, we take the role of capital provider to operators to keep fleet electrification projects moving, even when grant funding is delayed, reduced or unavailable. The funding support includes electric fleet financing for vehicles, infrastructure and batteries, creating an approach that responds to the cost realities of electrification today and closes the capitalization or “cap” gap, the difference between the funding secured, and what is needed.   

In fact, we’ve developed a proprietary residual value model based on experience deploying retired electric bus batteries as second-life storage systems that has been successfully used at music festivals, worksites and on film sets. This turns batteries from liabilities to assets, and helps support long-term financing while reducing total cost of ownership. By factoring these savings into the initial planning stages, we make fleet electrification more affordable. 

A recent example is our CA$48 million financing for Canadian electrification provider 7Gen. The funding we provided lets 7Gen finance and deploy between 400 to 500 new electric trucks and buses bundled with charging solutions, while the company can refinance a portion of its current fleet. It’s a case that underscores our unique ability to deliver capital to electrification efforts and support scalable deployment when traditional funding avenues fall short. 

Start with smarter planning based on experience, not just spending 

And before funding needs can be properly assessed, successful fleet electrification projects need to be accurately planned. With more than 2,500 electric vehicles and more than 120 depots supported globally, our team has amassed the experience needed to help forward-looking operators and agencies plan, finance and advance their fleet electrification projects.  

We know operators need highly accurate assessments to inform their plans like vehicle type(s), charging needs, possible infrastructure constraints, future-proofing needs and more. Misjudging or overestimating any of these factors can significantly inflate costs and unnecessarily complicate projects. While careful planning helps optimize project scope and reduce unnecessary expenditures, making projects even more viable and ultimately, sustainable. 

After careful planning, you’re ready to look at financing needs and explore the best mix of public incentives, utility programs and private capital for your unique situation. Our role is to support this electrification journey rather than let funding limitations shape it.  

One use case of this strategy is Zenobē’s support for Oxford Bus Company. Zenobē provided roughly $24 million in funding to enable the launch of 104 electric buses as part of a broader $111 million project that included both public and private investment. Zenobē financed the batteries and charging infrastructure using our battery-as-a-service (BaaS) model, ensuring operational readiness while reducing capital pressure on the operator. Frequently, as in this case, the electric fleet financing complements public funding to accelerate zero-emission transport at scale. 

Flexible financing for predictable operations  

The Battery-as-a-Service (BaaS) approach mentioned above, as well as the Electric Vehicle-as-a-Service (EVaaS) path can significantly help advance electrification projects by injecting flexibility for fleet operators, giving them, you new ways to manage costs and reduce financial uncertainty. Let’s briefly review these two models. 

Battery-as-a-Service (BaaS) allows operators to lease, rather than purchase outright, the battery portion of their electric vehicles, which can account for up to half of a vehicle’s cost. Instead of making a large upfront investment, operators can pay a predictable monthly fee that includes battery monitoring, performance guarantees, and replacement if the battery underperforms. This model not only simplifies budgeting but also offloads the technical and financial risk to us, Zenobē. 

Our partnership with Nottingham City Transport followed this model. We financed the batteries on board 24 new electric buses, and gave a 16-year performance guarantee. We also supplied and continue to manage the depot’s charging infrastructure. This arrangement lets Nottingham operate a zero-emission fleet without the financial burden or operational risk of battery ownership (that we’ve taken on), while ensuring service reliability and cost predictability over time. 

Electric Vehicle-as-a-Service (EVaaS) goes a step further by letting you bundle it all–the vehicle and battery, charging infrastructure and supporting services, including the software and ongoing maintenance–into a single package that we manage for you. This end-to-end model lets you electrify a fleet without having to become an energy expert. You stand to benefit from all that goes with running a zero-emission fleet, while we take on the heavy lifting of procurement and integration. Your operations team remains in control of fleet performance, supported by our tools, training, and ongoing technical expertise as needed. And we’ll teach you and your team as much of the process as you’d like, but that’s entirely optional. 

As part of a landmark deal to deliver 130 new electric buses to National Express in Coventry, UK, we delivered an end-to-end EVaaS solution that included financing, batteries, charging infrastructure, and operational software. This enabled National Express to electrify a significant portion of their fleet with minimal upfront capital outlay, while benefiting from our long-term performance guarantees and ongoing support. 

Both of these approaches provide battery lifecycle management, and help maximize value while reducing long-term cost of ownership. They remove uncertainty and make scaling predictable. 

Going electric still makes good sense  

Despite ever-changing policies, particularly at the Federal level, the fundamentals of fleet electrification remain strong. Electric fleets offer lower long-term operating costs, reduce exposure to fuel price volatility, and support energy independence—all reasons adoption continues with agencies and operators nationwide.  

And the benefits go beyond cost savings. Electric fleets mean cleaner air, quieter streets and smoother rides for drivers and passengers alike. School buses create healthier environments for children. Transit and delivery fleets see improved working conditions and community perception. The list goes on. 

More than anything else, electrification is a strategic decision with clear business benefits. With the right planning, partners and financing, fleets can both go electric…and help you get ahead. 

Learn more about our capabilities here. For advice or support with your electric fleet project, connect with our Zenobē North America team via Maggie Clancy, EVP Business Development (Fleet), at maggie.clancy@zenobe.com.