Enabling Fleet Electrification Through Pay-As-You Drive Financing: Our Investment in Zeti
By Lisa Coca, Partner, Climate Fund
Commercial fleets are going electric. According to a 2020 survey by Wakefield Research, 90% of fleet management companies believe electric vehicles (EVs) are the inevitable future of commercial fleets. Leading delivery and logistics companies are making headlines with announcements of EV purchases numbering in the hundreds of thousands. From an emissions perspective, this transition is overdue since fleet vehicles account for a disproportionate percentage of emissions. In Europe, for example, fleet vehicles represent just 20% of the total number of vehicles on the road, but account for 50% of all road transportation emissions on the continent. Moreover, there are significant global legislative tailwinds: fleet management companies and operators (FMCs) are being compelled by government regulations and societal demands to transition their fleets to EVs. However, other challenges exist.
While EVs offer operating cost benefits attributable to significantly lower fuel and maintenance costs, adoption by FMCs is inhibited by the increased capital cost of acquiring both the EVs and the associated electric-charging infrastructure. FMCs face the choice of either paying for the vehicles upfront or taking on expensive lease agreements, which results in a hit to capital expenditures or operating expenditures.
Achieving mass electrification is dependent upon financing that moves beyond today’s traditional leasing options to enable the cost-effective transition of fleets to zero-emission vehicles — which is why I am excited to announce Toyota Ventures’ investment in London-based Zeti.
On a mission to accelerate the adoption of zero- to ultra-low emission transport at scale, Zeti has created a fintech platform that utilizes real-time data to enable Pay-As-You-Drive (PAYD) financing. With PAYD, lease payments are tied to vehicle usage, thus lowering the burden of higher capital acquisition costs for FMCs and maximizing cash flow.
Zeti’s platform addresses one of the primary challenges posed by the traditional lease financing model that heavily relies on OEM discounts, which are no longer plentiful given that the demand for EVs outstrips supply. In addition, Zeti is introducing new sources of capital — including infrastructure investors, institutional asset managers and large global financial institutions — to the vehicle finance market, which is projected to hit a growing global annual market worth $1 trillion per year. Zeti provides these investors with an opportunity to not only earn attractive risk-adjusted returns, but also satisfy mandated environmental, social, and corporate governance requirements.
The reporting of vehicle usage and payment to the capital providers is enabled by ZERO, Zeti’s patent-pending software platform that ingests real-time data from telematics. FMCs can access the data via ZERO to track usage of individual vehicles and the fleet in aggregate, as well as leverage the information for continuous improvement of their operations. The data set is rich, including battery information (i.e. state of charge, how long it takes to charge or discharge, etc), vehicle positioning, starts and stops, etc. Zeti’s business model includes monetization of the data for ancillary products and services, such as insurance, battery health and congestion pricing.
Most importantly, we are incredibly excited about the team. Zeti was co-founded by CEO Dan Saunders, who brings 20 years of experience in finance and energy “pay-per-usage”, along with co-founder and CTO Dan Bass, a senior technology development and deployment manager in fund management. They have partnered with Pete Malcolm, an experienced serial entrepreneur and highly successful designer of globally deployed software solutions with more than 150 patents, who is offering guidance as Zeti’s president.
Consumption-based financing is set to play a major role in the future of mobility, and we are proud to support Zeti’s highly capable team by joining the company’s Seed round, led by Powerhouse Ventures. Special thanks to Climate Fund analyst Isay Acenas, who played a key role in driving this deal. Visit Zeti’s website and the Toyota Ventures portfolio page to learn more.
