THE FUTURE OF FLEET
A change is gonna come
Ian Richardson, managing director of 360 Media Group, gazes into his crystal ball and tries to predict the challenges and trends in electric vehicles for the upcoming year
One long-standing question in the automotive sector has been, “when is the tipping point for electric vehicles?” Several factors are at play, with new car registrations a barometer of progress, however price parity and the charging infrastructure are critical for mass market adoption. Looking firstly at the new car registrations, 224,919 battery electric cars have been registered (15.1% share) YTD, with 93,047 plug-in hybrids (6.3%) over the same period. This means that one in five new cars sold now has a plug.
Looking at fleet predictions for 2023, the expected share of the new car orders results in one in thee having a plug, with a split of 18% of BEVs and 15% PHEVs.
It has been widely recognised that the fleet sector will be the dominant channel for electric car orders – and with BiK at just 2%, that is no surprise.
(6+ car fleets / n= 398)
“Monthly leasing costs for BEVs are still, in the main, more expensive, but that’s before TCO calculations”
Price parity for electric cars appears some way off when thinking list price, not helped by new models not being directly comparable to the ICE counterparts – the Volkswagen ID.3 being a prime example. However, comparing the list price is missing the point; when comparing the ID.3 to an equivalent spec diesel Golf, the total cost of ownership over three years delivers savings in favour of the ID.3. Of course, that all depends on where and when you charge.
Monthly leasing costs for BEVs are still, in the main, more expensive, with a typical premium of £120-£150 for the BEV (mileage dependant), but that’s before the aforementioned TCO calculations.
“We anticipate initial EV purchase prices to continue to decline as the decade progresses,” says David Capati, low carbon transport analyst, Platts Analytics. "We forecast global EV battery costs to fall below $100/kWh by 2026, making EV vehicles more broadly cost-competitive with ICE vehicles without subsidy. We believe the culmination of these factors will convince consumers that EVs are a logical purchase.”
Looking at the charging infrastructure, there are more than 400,000 home and workplace charger points – and growing. Most electric cars sold will likely go to those with access to a driveway – but not all – and this landscape will change. According to Zap-Map, at the end of November 2022, there were 36,752 electric vehicle charging points across 21,906 charging locations in the UK. This represents a 33% increase in the number of charging devices since November 2021. If this growth trend continues, we will break the 50,000 barriers by Christmas 2023 and, looking at the five-year growth rate, my prediction is much earlier.
Enablers to electrify fleets
A staggering 50% of fleets do not have a formal fleet policy. And with one in three fleets planning to order a car with a plug in 2023, there are obvious concerns. For example, if your driver orders a PHEV, is the driver responsible for charging the vehicle – and what are the consequences if they don’t? For a BEV, who is allowed one and based on what criteria?
The absence of a fleet policy can often lead to a disjointed approach to electrifying the fleet. Our Fleet Outlook report explores how fleets help their employees access electric cars.
Electric cars are more accessible to perk car drivers, with 54% having the option of an electric car on their choice list, compared with 48% of job-need drivers.
Just over half of fleets provide the option to trade up to an electric car (if this is not available on the choice list), while 59% of perk car drivers have the opportunity to take a cash allowance instead of a company car.
However, company car drivers are returning to the car scheme due to the attractiveness of electric cars and to access BiK tax savings. Some 86% of fleets expect to see cash takers return during 2023.
Options offered to perk and business-need drivers
Options offered to perk and business-need drivers
With greater certainty on BiK tax rules through to 2028, a staggering 48% claim that it is very likely that they will introduce a car salary sacrifice scheme in the next 12 months. Our research indicates that employee uptake for such schemes is around 10%. The challenge with salary sacrifice schemes is for employers to minimise the risk for drivers. The best practice is to allow the employee to hand back the keys to the employer if and when they exit their employment. It is deemed unattractive for the driver to be saddled with a potential early termination cost running into thousands of pounds and given the prediction that supply chain issues will not ease until 2024*, reallocating a good-condition electric car to other employees shouldn’t be a problem.
*Source 360 Media Fleet Outlook report
Barriers to entry
Fleet experts see electric van adoption as slightly more challenging than cars. There is less overt demand from drivers and a bias towards off-street parking for many van drivers, which manifests into potential challenges in achieving a compelling TCO. However, fleets are pioneering change. For 2023, 73% of fleets intend to invest in workplace charge points. This trend has been consistent over three years, reinforcing the importance of the workplace for e-LCV adoption.
Access to public chargers, specifically those that can accommodate vans (the size, charging position and cable length), is seen as business critical for half of the fleets. To demonstrate that range, expectations are being managed, 53% of fleets are very likely to change the van payload profile to accommodate electric vans.
With regards price parity for cars, one concern raised by many fleets is the residual values for e-LCVs. As more vans are outright purchased vs. vehicles, this becomes a question for the procurement teams to be comfortable with.