Zevvy

A pay-per-mile consumer EV lease

The idea

Traditional financing discourages EV adoption by the customers who benefit the most from an EV’s low operating costs — high-mileage drivers. So we set out to maximize financial benefits for this underserved customer segment. Customers paid only for what they used and earned equity in the EV the more they used it. 

We offered a short-term EV lease with an affordable fixed monthly fee paired with a variable per-mile fee. For example, the Tesla Model 3 costs $699 a month, plus 15 cents a mile after a one-time initial fee that ranges from $499 to $999. Compared to what the driver would otherwise spend on gas and maintenance, Zevvy saved them money on the total cost of operation. The lease had no mileage cap, and after an initial term of six months the driver had the option to renew month-to-month, return it, or purchase it with all of their mileage fees deducted from the price. 

Competitors / Substitutes

At the time Hertz, which offered EV rentals, was our biggest competitor. Hive, which targets high-mileage commuters as well as gig drivers, was another competitor, but we were never head to head since they were in LA and we were in SF.

Other EV companies: 

Autonomy launched an EV subscription program with Tesla Model 3 in Jan 2022

On.to was an EV subscription platform offered in the UK and Germany that filed for insolvency in September 2023

Spring Free EV offers a gig driver EV leasing program

Octupus EV - spinout of UK retail energy provider Octopus Energy. Offers EV Leasing in Texas

Drive-it-away offers a lease-to-own EV program

Amount raised

$1.2M at pre-seed, $5.4M seed led by MaC Venture Capital, with participation from BoxGroup, MissionOne Capital, Gardner Capital’s Upward Mobility Fund, I2BF Global Ventures, and Climate Capital.

Duration

I came up with the idea in 2018 during a 75-mile work commute work in a company-provided EV. I launched Zevvy’s EV product in March 2021, and shut down in April 2024.

Team size

7

What went well

Customer adoption

Customers loved the product and company (I’m not sure how many people say that about their car dealer or auto financier relationships!) We had hundreds of customers from across the socioeconomic spectrum who leased our vehicles. A little more than half of our customers were gig workers for services like Uber or Lyft. The average vehicle in our fleet drove 2,000 miles per month. The most we saw was 9,000 miles in one month - that’s a lot of avoided tailpipe emissions! Our customers saved ~$283 per month versus the equivalent gas-powered vehicle. And while there was pressure along the way to focus on “traditional” (ie: high earner) early adopters, we stuck to our original target as we wanted to prove out a more equitable form of auto financing.

Strong fleet financial performance

Since we had a limited capital deployment window, we were stuck buying most of our cars at peak prices, not knowing when the market might correct. Despite this fact, our fleet generated a 22% average annual yield according to book value (yield is the profit generated from the fleet relative to its total cost including purchase price, maintenance, fuel, and depreciation). Our fleet achieved an impressive average utilization rate of 96%. 

Organic growth in early days

We ranked on the first page of Google for “car subscription”. A partnership with Uber drove a lot of leads and helped with consumer validation. We converted web leads at 2x the industry average (5.3% vs. 2.6%)!  However, a lack of substantive car inventory meant that sometimes we would not have an available car for an interested customer and procuring one from auction could take 2-3 weeks. This resulted in our full funnel rate being just industry average (0.11%). 

Challenges and what you'd do differently

Market environment

Rise and fall in auto prices, particularly EVs: We launched our MVP with the abundant and cheap Chevrolet Bolt, which was subsequently recalled three separate times for battery fires, burning our first asset funding relationship and stunting our initially solid growth.  In 2022, car prices peaked - new EVs were unobtainable / all pre-sold. A used Tesla cost more than the price of a new one. Used Bolts cost almost as much as new. Then in Aug 2022, the announcement of the IRA drove massive EV price declines. Tesla was forced to drop its prices in order to regain eligibility, and non-eligible manufacturers like Hyundai and Kia offered discounts to remain competitive. And while the IRA’s 45W leasing tax credit would have been perfect for us, the law was initially opaque and it was hard to convince investors to monetize it. 

Rising interest rates: Interest rate hikes increased our cost of funds, limiting our ability to grow the fleet and reducing our runway, making it extremely hard to attract new equity investors.

Pullback in VC funding: Venture equity was readily available when we started in 2021, but saw a massive pullback broadly and in transportation more specifically. 

As of October 2023, our vehicle assets were worth nearly 50% less than when we purchased them. At the same time, our cost of funds went up nearly 40%. These factors forced the sale of our vehicle fleet and ultimately the wind down of the corporate parent. 

Red tape

One of the last business development conversations we had was with the head of consumer auto leasing for the largest non-captive lessor in the country, a division of a very large consumer bank. His feedback was that our financial product made complete sense, but the internal and regulatory red tape they would need to cut through would take years, and Zevvy would need to reach massive scale for them to consider offering our product. Looking ahead, I believe auto lenders could improve their returns if they started approving more people on lower rates for EVs knowing that they will likely benefit from an EV’s (generally) lower operating costs.

Charging infrastructure access

The single largest determinant of whether a customer would be successful was whether they could figure out charging. Nearly 80% of charging for our EVs was done in public, showing that access to a private garage for charging is not a prerequisite to adoption. However, it does require a fairly robust public network and lifestyle adjustments. Gig drivers were particularly savvy with finding free or cheap driving. But customers who could not figure out charging discontinued within the first month of their lease. 

Business model focus

I’ve alternated pitching the company as a leasing company, a marketplace, or a technology platform. I think not fully validating any one model resulted in none being as good as it could’ve been.

Interview above with Andrew Krulewitz, CEO & founder of Zevvy. Andrew continues to lead the EV transition in his current role as VP,  Strategy and Business Development at Inspiration Mobility. For more information re Zevvy, see Andrew’s previous LinkedIn post.