CUTTING THE COST
ELECTRIFIED FLEETS THE TIME IS NOW
As the Government consults over the date for a ban on the sales of petrol and diesel cars, Craig Thomas considers when fleets should start the process of electrification.
You must have heard it: 2020 is the tipping point for electric vehicles, according to received wisdom. Despite the effects of COVID-19, new models are being unveiled on an almost monthly basis and the major carmakers have firmly nailed their colours to the mast of electrification. Some have used more nails than others but make no mistake: electric is now the only game in town.
The only questions remaining begin with when. When will the Government ban the sale of petrol and diesel vehicles? When will supply of EVs match demand? When will the public charging infrastructure be widespread and reliable? And when will it be the right time for businesses to invest in all-electric fleets?
The last question is perhaps the most pressing. If the Government ban starts in 2032, that’s just four leasing cycles away. As Poppy Welch, head of Go Ultra Low, tells us: “The direction of travel is set now. I think the sooner businesses start to think about it, the better it is for them.
“That's for a number of reasons. There can be cost advantages and there are obviously advantages for the environment – particularly when it comes to local air quality – so businesses have their own CSR-type targets and this is one really good way of helping to meet those.”
Tim Anderson, head of transport for the Energy Saving Trust, adds: “We're all now on this journey together. This isn't just about fleets doing something in isolation. Government policy is very much pointed towards zero emissions in the future. We've got shifting dates, in terms of when petrol and diesel cars won't be available to buy, so that is a challenge for everybody – and that includes fleets. In a sense, there's an urgency that we've not had before that we all need to consider how we adopt cleaner transport. At the moment, that solution is electrification.”
“We all need to consider how we adopt cleaner transport. At the moment, that solution is electrification”
Tim Anderson Head of transport for the Energy Saving Trust
Businesses need to grasp
the nettle now
if they don’t want
to get left behind
In short, if fleets are thinking about electrification, the time is now, as Fiona Howarth, CEO of Octopus Electric Vehicles, reiterates: “Think about it now. Think about car orders. Think about the charging infrastructure and it's about trying to move before you start incurring additional costs or higher lead times, by being slightly late to the party.”
The financial arguments are certainly persuasive, with incentives still to be had. The £3,000 grant for electric cars and £8,000 for electric vans from the Office for Low Emission Vehicles (OLEV), as well as grants for workplace and home chargers, are still in place (at time of writing). These grants won’t last forever, especially as the sales volume of EVs increases over the next few years, so taking advantage of them now will help mitigate initial purchase costs.
Indeed, those higher purchase costs have proven to be a brake on greater EV adoption, but fleets need to look past that and consider the clear financial benefits of EVs when the total cost of ownership is considered. Anderson says: “For a long time, there's been a misconception that EVs over the life of the vehicle will cost more. What we do is we provide a whole-life cost analysis that takes into account the running cost. We're finding increasingly that there is a cost benefit over the life of the vehicle to adopting electric vehicles.”
Company car drivers have also been jumping onboard the electric juggernaut this year, because Benefit-in-Kind rates for EVs plummeted to 0% in April. This low rate has made EVs look very appealing to business drivers and should prove significant.
“Lowering BiK to 0% is an absolute game changer,” Anderson tells us. “The benefit to the driver in this case, where they will literally be saving thousands of pounds, in terms of their tax bill, is a huge boost.”
Lowering BiK to 0%
is an absolute game changer
Indeed, the massive reduction in BiK rates could have another consequence: reducing dependence on grey fleet. Drivers coming out of grey fleet vehicles and into EVs is undoubtedly a positive outcome. “We've seen in recent years a lot of organisations, for a range of reasons, almost killing off their company car policy,” Anderson says. “People have walked away with the cash and gone into their own grey fleet vehicles, which hasn’t had any positive impact on decarbonisation. People usually buy older, more polluting cars that they wouldn't have been able to buy if they had still been in a company vehicle. What we're hoping is there will be a reverse of that trend, with individuals saying to their employers, ‘We want to be in an electric company car, so that we can benefit from that tax break.’”
So the conditions are ripe for growth. More models launching on to the market; existing incentives for adopting EVs; an appealing whole-life cost; and favourable tax rates for users.
All that’s left now to fix is the nation’s charging infrastructure.
But we’re getting there, Howarth tells us: “The number of places you can publicly charge your EV is now about 25% higher than the number of petrol stations in the UK. They’re popping up all over the place. There's the £400m fund that the Government's already committed to, a huge amount of money going towards that infrastructure. We've seen a huge amount of private money going in as well, with people like BP and other private investors.”
Workplace charging is an obvious solution for many companies, but this is another area where they have to be quick, as Howarth points out: “You need to look at the capacity on the grid. Let's say you have an office building right next to a big Tesco. If Tesco has put in loads of chargers, taking up all the spare capacity on the grid, you are going to then have to pay for increased capacity on the grid. Your costs will be much higher. But if you get your chargers in while there is capacity now, you won't have to pay for the additional cost of the network upgrade.”