Ecobank inks deal for interest-free EV loans in Rwanda

From the newsletter

Electric vehicle buyers in Rwanda can now access interest-free loans to purchase an EV of their choice, thanks to a new partnership between Ecobank Rwanda Plc and a local hybrid and EV distributor, Longtai International Automobile Trading. The interest-free offer is valid for two years — but customers may be repaying loans for up to five years.  

• Financing for EVs in Africa often incurs interest rates as high as 40%, making ownership unattractive for many. This severely hampers the adoption of electric vehicles, despite growing interest in sustainable transport.

• Interest-free EV loans are limited time offers often provided as part of marketing campaigns by financiers in partnership with EV dealers.

More details

• The partnership will offer up to 100% financing for customers purchasing Longtai electric or hybrid vehicles, including models such as BYD, Honda, and Geely. By providing full financing, Ecobank reduces the upfront cost barrier, making EVs more financially accessible for Rwandans.

• Customers opting for longer repayment periods, up to five years, will benefit from discounted interest rates, streamlined application processes, and fast loan approvals. This approach aligns with the bank’s goal of expanding its customer base through environmentally conscious financing solutions.

• "We are excited to collaborate with Ecobank to bring electric mobility closer to everyday Rwandans. The discount model not only lowers the overall cost of ownership but also reinforces our shared goal of supporting the national green agenda and reducing harmful emissions," stated Peter Zhao, the Managing Director of Longtai Auto.

• Ecobank Rwanda has joined Bank of Kigali and Equity Bank Rwanda in offering EV-specific loans. However, the interest-free loan is more of a marketing strategy than a genuine financial benefit, as both banks are profit-driven. These loans are part of a promotional effort to boost EV sales and attract customers, rather than solely focusing on promoting sustainable mobility.

• The interest-free loans provided by Ecobank and its competitors are not sustainable in the long term. Both the bank and Longtai are for-profit companies, and as such, they cannot afford to offer interest-free loans indefinitely without external funding or subsidies. The marketing strategy is designed to create a buzz around EV financing.

• Longtai's higher pricing is likely a deliberate strategy to create a premium brand image and attract a different segment of the market. While the higher prices are not necessarily justified by added value, Longtai aims to sell more units by positioning its EVs as premium products. Ecobank, in turn, benefits from this increased volume of sales by securing multiple loans, even if the individual profit margin is smaller.

• Longtai International Automobile Trading Co. Ltd’s EVs are priced higher compared to Kabisa’s offerings. For example, the BYD Song Plus at Longtai costs RWF 49 million (approximately $33,900), while Kabisa offers it for RWF 46 million ($31,900). This pricing strategy gives Kabisa a competitive edge, making their models more attractive to price-conscious consumers. 

Our take

• Rwandans are increasingly favouring hybrid vehicles over fully electric ones. As of 2024, there were 512 fully electric cars and 6,660 hybrid vehicles in the country. The introduction of financing for electric vehicles comes at a crucial time, especially as hybrid cars are now subject to additional taxes.

• However, repaying RWF 2 million (approximately $1,385.65) monthly presents a significant challenge in a country where the average monthly income is only $82. This creates a substantial financial burden for many potential buyers, making it difficult for the population to purchase EVs unless they have additional sources of income.

• While the 24-month financing model may work for electric motorcycles, it may not be as suitable for electric cars. Customers who are unable to meet repayment deadlines within the two-year window could face unexpected interest rates, adding an additional financial strain.