It now finances 11% of all EVs sold in Australia
Pepper Money is leaving its competitors behind when it comes to financing Australians’ growing desire to own electric vehicles – the non-bank lender says it’s now the largest EV lender in the nation.
It financed 11% of all electric vehicles sold in Australia in calendar year 2021 – the figure was revealed as part of Pepper Money’s impressive 2021 financial results released yesterday.
Pepper Money’s net profits rose 31% to $130.7 million, and while mortgage assets under management growth made up the bulk of this (up 15% to $12.3 billion), asset finance AUM growth was even more of standout, rising 33% to $3.5 billion.
CEO Mario Rehayem spoke to MPA following the release of Pepper Money’s first full-year results since listing on the ASX in May 2021.
He said Pepper Money’s strategy was always to tap into emerging markets and a number of years ago it saw the opportunity provided by electric vehicles, so it built alliances with Tesla and other car manufacturers.
“We wanted to be right at the forefront before it becomes a buzzword and a craze,” Rehayem said. “We were able to tap into that very early. Our fast turnaround times, our consistency in our credit decisioning and our consistency in great customer service has allowed us to grow year on year our EV exposure in Australia.”
Rehayem said there had been a surge of customers purchasing EVs over the last 18 to 24 months.
“Beside the limited stock that hinders your flow month on month, you are seeing overall growth year on year.”
While EVs only make a tiny proportion of all new cars sold in Australia, at just under 2%, Rehayem said he was confident that over time more and more people would buy electric vehicles.
“With everything, when it starts to become part of everyone’s dialogue things start to grow. I don’t think there’s going to be a spike overnight, there has to be more infrastructure invested,” he said.
“We’re struggling in Australia to get new stock – there’s up to sometimes a 200-day delay in getting new (EV) stock into Australia.”
Rehayem said EV manufacturers favour other countries before Australia because of our small population.
“We will probably be a fast follower rather than a leader (in EVs),” he suggested.
When asked if Australia should manufacture its own EVs, Rehayem said Australia should pursue manufacturing opportunities whenever it can to boost employment and growth in the economy.
While barriers included high prices and lack of EV charge points, Rehayem said he noticed many local councils were looking to invest in infrastructure for the growing number of EVs.
“If you look at all new buildings in NSW, they’ve all got EV power stations, a lot of the new homes being built have included those into their designs so we are seeing a natural shift around trying to accommodate the ever-growing electric vehicle market,” he noted.
Pepper Money boasted massive growth across its asset finance class, which contributed 30% of its operating income. Asset finance represented $3.5 billion of its total $15 billion book. Asset finance AUM was 8.2 times system growth in the second half of 2021.
“Our asset finance business saw originations grow by 70%, with commercial originations growing 86% and consumer 55% on CY2020,” Rehayem said. “We believe this makes Pepper Money the largest non-bank asset finance lender in Australia.”
Across asset finance, the shortage of new cars meant there was unprecedented growth in the used car market.
“That’s been part of our offering from day one, when we entered into asset finance six years ago,” he said. “It has been the fastest growing segment in the last two years.”
Construction equipment, caravans and motorcycles have also been strong asset finance segments.
“Pepper is over 20 years old and we have this new organic growth coming out of asset finance which is very appealing because we’ve been able to find a very strong position in the market,” he said.
Growth was also strong in mortgages – in home loans Pepper Money notched up record originations of $6.4 billion, an 89% rise. Refinances, debt consolidation, first home owners and investor loans were all important contributors to the loan mix.
“Being the leading digital non-bank has allowed us to grow market share,” said Rehayem. “You’re talking about 2.6 systems growth in the second half of 2021, it’s a testament to our product, market-leading turnaround times and we service an array of customers, we don’t just focus on one segment.”
This included non-conforming loan customers, a segment that had been growing every year for the last 10 years.
“We then have the ability to also take business away from the banks for our prime segment, which is one of our fastest growing segments at Pepper Money,” he said.
Rehayem said around 97% of Pepper Money mortgages came through brokers.
“We have been servicing mortgage brokers for over 20 years so we are well entrenched, understand their needs and the way we address that is that we give them confidence every time they recommend a Pepper product to a customer,” he concluded.
