The investors are interested. The assets are real. So why isn’t capital flowing into commercial fleet electrification?
I work on that problem every day, structuring transactions that connect private capital to public and commercial fleet operators.
Commercial vehicle fleets represent roughly 4% of vehicles on the road but account for approximately 36% of transportation-related fuel consumption and greenhouse gas emissions. Electric vehicles already deliver operating cost advantages of 20–50% over diesel in many segments, and total cost of ownership continues to improve.
This momentum is arriving just as the policy frameworks that helped create it are being pulled back. This is precisely where private capital has a role and an opportunity. The policy vacuum creates urgency, but the underlying demand and the maturing operator models make this a compelling moment for capital providers to step in, with or without a full policy tailwind behind them.
The policy context
The Inflation Reduction Act’s Section 45W credit offered up to $40,000 per qualifying clean, commercial, medium- or heavy-duty vehicle. But the One Big Beautiful Bill Act terminated this tax credit nearly seven years ahead of schedule, eliminating a program projected to support $14.4 billion in commercial electric vehicle purchases.
In Europe, proposed revisions to the bloc’s 2035 vehicle emissions standards are also introducing uncertainty at exactly the moment fleet operators need investment visibility. Across both regions, public support shaped the early market, and its retreat is forcing a reckoning with whether private capital can take over, and under what conditions.
Why the capital isn’t flowing
Infrastructure investors and project finance lenders are actively seeking long-duration, transition-aligned investments, but structure is lacking. Project finance lends against contracted cash flows, requiring predictable revenue and well-defined risk. Many EV business models don’t fit yet.
Uncertain cash flows and technology risks are often cited as barriers. Revenue tied to vehicle utilization fluctuates with adoption rates, routes and seasonality, making multi-year debt difficult to underwrite. On the technology side, residual values for commercial EVs remain opaque. Battery degradation curves are still being validated, and without a functioning secondary market, lenders can’t reliably assess end-of-term asset value.
The result is that the sector has relied on venture equity and balance sheet lending, which are higher-cost instruments that served early deployments, but they are too expensive and not suited to finance the transition at scale.
The structural innovation already underway
The most significant response to the revenue challenge has been a shift towards an electrification-as-a-service model, bundling vehicles, charging and maintenance into a single contracted service fee. The logic mirrors the solar PPA: Replace utilization-driven revenue with stable, predictable cash flows that lenders can underwrite.
Inspiration Mobility applies this model to rideshare and corporate fleets. Forum Mobility applies it to trucks serving short-haul port freight carriers. Highland Electric Fleets contracts directly with school districts for designated-route student transportation.
In the UK, Zenobë demonstrates what institutional maturity looks like. Starting with a £241 million debt structure in 2022 against bus operator contracts, it has since raised over £1 billion from 13 banks and institutional investors. It is entering the US market through a recent acquisition. Its lenders explicitly cited stable and predictable cash flows as their rationale.
Each of these operators is generating proof points that electric vehicle fleets can be a replicable asset class with stable, contracted cash flows and well-allocated risk among parties. Scaling these assets further depends on incremental comfort with the technology and additional capital providers entering the space.
The argument for investment
The technology risk associated with EVs, including residual value certainty, battery degradation and end-of-term asset recovery, is difficult to forecast, creating barriers for new capital entrants. These challenges won’t resolve themselves overnight, but favorable conditions are emerging.
Battery degradation data from thousands of commercial EVs in service is beginning to support more sophisticated valuation models, and the operational track records of companies like Highland, Forum and Zenobë are giving lenders something concrete to underwrite against.
Availability and communication of this data is key to convincing lenders to evaluate the space. Scaled adoption will also build a secondary market, increasing lenders’ confidence around asset re-deployment.
What capital providers need to do now is update their lens. The instinct to treat fleet EVs as too new and too hard to underwrite is outdated. The data exists, comparable transactions are closing and the operators building this market today have real deployment history behind them.
The clearest model for where this goes is distributed generation and residential solar. A decade ago, financing was scarce and the province of specialists willing to learn a new asset class. The first batch of developers moved the market. As these models grew, capital broadened from specialty funds to major banks and eventually to asset-backed securitization.
Fleet electrification is at the same inflection point. The servicer agreements, performance data and financing structures being developed today are laying the groundwork for scale. Investors and lenders who engage now will access an emerging asset class and help build the market infrastructure that will support it. Early capital will shape the standards, attract follow-on investment and be positioned to capture outsized returns before the space matures.
The enabling conditions
Private capital markets can’t do this entirely alone. There is also a capital deployment gap worth naming: the space between venture equity and project finance, which requires more standardized structures before it can scale. Specialty funds and CDFIs willing to provide credit enhancement, first-loss coverage or hybrid structures in this middle zone are a missing link. California’s Capital Access Program for zero-emission heavy-duty fleets models what this looks like on the public side; private capital can perform the same function faster and at greater scale.
Besides the policy tools to uplift financing, in a post-tax credit era for EVs, binding fleet electrification targets, stable emissions standards and purchase incentives that bridge the upfront cost premium, such as New York’s school bus program, expand the addressable market and extend the investment horizon that project finance requires. Policy is an input, not the driver. It enhances and enables successful business models and bankable structures.
The path forward
Fleet electrification is where solar was in the early 2010s, past the proof-of-concept phase, but not yet mainstream. The companies and financiers building the asset class today are doing the same work that made solar institutionally investable: standardizing structures, accumulating operating data, demonstrating repeatability. The capital markets question is no longer whether fleet electrification is real. It’s whether impact investors will show up early enough to shape how it scales.
Li Shi is a senior associate in project finance at Highland Electric Fleets and a Fellow at the Clean Energy Leadership Institute.
Guest posts on ImpactAlpha represent the opinions of their authors and do not necessarily reflect the views of ImpactAlpha.