EV is the future… but are fleet managers ready to transition?

The phased ban on new petrol and diesel cars is going to have a seismic impact on the motor market. Influencing which vehicles are bought and how they are run, the move brings a range of challenges for fleet managers.

The Government made the announcement in November 2020, to help the UK become carbon neutral by 2050: sales of new petrol and diesel cars, vans and pickups will now be subject to a phased ban by 2030.

There will also be a ban on new diesel lorries from 2040, with smaller models being removed from sale by 2035.

Leader of the pack?

With fewer than 10 years to go, time is of the essence as fleet managers may have believed that this change was further down the line. By setting the target, the UK is looking to take the lead and is set to be the fastest G7 member to stop vehicle emissions being released from cars and vans. To aide this the Government is also making a £1.8 billion investment to improve infrastructure, including a boost in charging points, and to develop more green car technology.

So, car owners, and in particular fleet managers, who make the country’s biggest vehicle-buying and usage decisions, have an important role to play. Fleet managers who continue to run vehicles powered by petrol and diesel have some big choices to make. Do they buy or lease? What manufacturers and models will be right for their business? What training considerations are there? What are the initial costs over long-term savings?

Despite this, many may already feel they have enough to manage; they’re busy re-engineering fleets as a result of the pandemic, which for some businesses would have reduced the frequency their fleets were in use. That said, we’re also seeing the economy opening up, with more people returning to workplaces, creating busier roads. We appreciate there’s a lot to think about.

EV fleets – where are we now and when should fleets switch?

There’s no single right time to say goodbye to the internal combustion engine (ICE) vehicle and each business has its own variables. But, it should be borne in mind that there are incentives currently available from the Government to go electric. These have already reduced in part and there are no guarantees they will be available longer term. Meanwhile, although still in the minority, EVs are rapidly moving into the mainstream.

Recent figures from the Society of Motor Manufacturers and Traders (SMMT) showed that in June 2021, combined battery electric and plug-in hybrid vehicles accounted for 17.2% of new vehicles on the road. Pure electric (battery) accounted for 10.7% of registrations, so the market is showing considerable growth.

What’s more, fleets are moving ahead of the consumer sector. Research from the SMMT in March 2021¹ showed there were twice as many EV registrations from businesses as for personal use. The figures for 2020 showed just 4.6% of car registrations were by private buyers, while 8.7% were for fleets. Given the momentum that surrounds the sector, it looks likely that figures for 2021 will show a significant rise.

Breaking down the barriers

A recent report on ‘The Future of Fleet’ surveyed fleet managers in the UK and found that over half (52%) already have EVs in their fleets, and among those who do not, 54% plan to switch to them in the next five years.

It also found that the main reason for switching (71%) was to ‘be greener’, while 39% said it was to ‘improve the reputation and CSR of their fleet’. Despite the financial incentives, only around 35% said they had switched for financial benefits. According to the report, fleet managers have a “unique opportunity to win both the hearts and minds of consumers, if they’re quick to adapt and engage with the demographic who prioritise sustainability in the suppliers they use.”

So issues around reputation and whether customers will actually vote with their feet if a company is not using EVs could be yet another issue for fleet managers to weigh up. But, it shouldn’t be forgotten that there are barriers to an EV purchase, not least high upfront costs and while concerns around ‘range anxiety’ are fading, they’ve not gone away altogether.

BP found that of those that do not yet have EVs in their fleet, more than a quarter said this was because they could not afford the upfront cost of switching all vehicles to an EV (27%). A further 25% said it was because their fleets drive long haul and that current EV models didn’t do as many miles in one charge as current diesel options. Some 24% stated they didn’t have the time to wait for EVs to charge while on the road. Other barriers included lack of driver access to home charging (24%), lack of confidence driving EV vehicles (10%) and a reluctance to change (10%).

52%

Of surveyed fleet managers already have EVs in their fleets

What are the positives?

Reluctance to change’ is not an option with the 2030 deadline on the horizon. In some cases, there’s definitely a need for education and it makes far more sense to focus on the many positives that surround EVs:

Choice

Whether it’s a compact car or a top-end model, manufacturers are highly focused on launches – in fact, having so many options may make the fleet manager’s job even harder. But, it is also worth remembering that there may be little to judge between a ‘standard – entry level’ EV car aimed at the mass market and a luxurious one aimed at senior executives, when it comes to range. Indeed, the mainstream manufacturers have focused on this, along with efficiency, and their cars will be broadly aligned in terms of range with the most expensive EVs. These instead will focus on hi-specification interiors and more acceleration. EVs have ranges from around 100 to 300 miles on a single charge.

Better servicing costs

Because they have fewer parts that can go wrong, costs for maintenance and service³ of EVs are generally lower than those with an ICE. In particular, research from KeeResources found there was a 30% reduction in servicing costs, when compared to an internal combustion model.

More chargepoints and more information

There are nearly 43,000 chargepoints in the UK in approaching 16,000 locations. The numbers are increasing all the time and Government incentives are propelling this – such as the recent £20 million chargepoint boost initiative². A driver is never more than 25 miles from a rapid chargepoint anywhere on England’s motorways and major A roads. EV specific telematic solutions along with initiatives such as the Zap-Map app allow drivers to locate their nearest chargepoint, plan journeys and stay updated.

Safety standards are high

Although there have been fears that EVs can pose fire risks, they have largely been discounted. Tests conducted by the Allianz Center for Technology Automotive (AZT Automotive) have shown that the high voltage components of most electric cars are well-protected and will not be affected in most crashes. The one downside is that in serious accidents that do involve major battery damage, then a total loss may be more likely.

Look longer term – why EVs mean value

Whether buying or leasing, the headline price of an EV is going to be more than the equivalent petrol, diesel or hybrid model. Take a rough example of a Vauxhall Corsa-e – while there will be various offers from dealers the price is around the £27,000⁴ mark, some £9,500 more than its petrol counterpart. This might be a typical entry level or pool car, but it does offer a full battery range of up to 209 miles and only takes 30 minutes to charge to 80% battery capacity. It’s also eligible for the government grant of £2,500.

But, once through the potential initial barriers, whether in terms of purchase or leasing, an EV fleet will actually bring costs down over the longer term.

One of the most obvious reasons for this is that electricity is far cheaper than petrol or diesel. Electric cars typically cost £2 – £4 to fully charge, for a range of 100 miles. An equivalent petrol or diesel car costs £13 – £16 to drive 100 miles – about four times the cost.

Clear tax advantages

Although the Government has recently made its incentives less generous, there are a number of tax-related benefits for both employers and individuals buying and driving EVs.

Lower tax for employees

Employees pay considerably lower income tax rates if their company car is electric compared to a traditional vehicle. This tax is known as Benefit in Kind and while it was zero rated last year, the rate is now set at 1% for this tax year and will rise to 2% for 2022/2023. Eligibility is for hybrids with CO2 of less than 50 and full electric cars with a mileage range of over 130.

EV means lower mileage rate costs for employers

HMRC sets rates for mileage⁵ that employees can claim back when using a company car. The rates are used either to reimburse employees for business travel in their company car or if employees need to repay fuel costs used in private travel. The advisory electricity rate for fully electric cars is 4p per mile, whereas in comparison, for a small petrol car, it is 11p per mile.

EVs are exempt from congestion charge and clean air taxes

If drivers need to travel through urban areas where there are congestion and clean air charges, then EVs are the way to go. Over 60 towns and cities in the UK either have or are looking at introducing clean air zones and while in many cases, newer petrol and diesel cars are not paying charges, this may well change in the future.

Notably in London, the Ultra Low Emission Zone (ULEZ), with a charge of £12.50 a day, will only allow exemption for full EVs from 25 October 2021 and plug-in hybrids will be required to pay.

Capital allowance benefits

Cars with CO2 emissions of less than 50g/km are also eligible for 100% first year capital allowances, which means employers can deduct the full cost from their pre-tax profits.

EVs are road tax exempt

Zero emission EVs do not pay road tax, however, hybrid cars are subject to this, albeit at a lower rate than traditional fuel vehicles.

Could EVs re-energise the company car market?

Yes! Company cars have long been an attractive perk, but the additional tax they attract has been a major disincentive and resulted in more employees choosing to use their own cars, which can lead to wear and tear and the need to be checked they are fit for purpose. However, the very low additional tax now being levied for EVs could well change attitudes, leading to higher take-up and demand for company cars, which in turn will benefit car manufacturers and the wider economy.

Do EVs lose more value?

All vehicles lose value once the new owner takes delivery or they leave a dealer’s forecourt – but electric cars may prove a better investment than petrol and diesel cars. Comparison website Carwow⁶, for example, has claimed EV ‘residual values are strong since they have greater longevity – while batteries do deteriorate over time, they can still last for decades. Obviously, there will be variation in terms of which makes hold their value most, but this is no different to ICE vehicles and will form part of the fleet manager’s vehicle section due diligence.

Government EV support in detail – what is the Office for Zero Emissions?

Measures from the UK Government to encourage take up of EVs go back to 2011 and were administered by the Office for Low Emission Vehicles (OLEV) now renamed as the Office for Zero Emissions ⁷, although the name OLEV is still often used.

Currently, the plug-in grant will pay for 35% of the purchase price and for cars is capped at £2,500, for small vans it is £3,000 and for large vans and trucks, it is £6,000. To date, the Government has provided around £1.3 billion towards the cost of some 285,000 plug-in vehicles.

Under the Government’s Workplace Charging Scheme (WCS), organisations can receive grants towards the upfront cost of the purchase and installation of chargepoints. The contribution is limited to 75% – or £350 per socket – of these costs, up to a maximum of 40 sockets per company and these can be on different sites. The business needs to have sufficient off-street parking and firm plans to use EVs for at least part of the fleet. The chargepoint must be installed by an OLEV-approved installer. Businesses apply for a voucher – which is worth up to £14,000 – and valid for 120 days after being issued.

Meanwhile, the Electric Vehicle Homecharge Scheme provides a 75% contribution to the cost of one chargepoint and its installation. It has a cap of £350 per installation and is subject to a qualifying vehicle and there being dedicated off-street parking. Up to two chargepoints can be applied for if there are two qualifying vehicles. In terms of company cars, this needs to have been assigned for at least six months.

EVs and fleet managers – key considerations

Changing to an EV fleet requires extensive research and detailed planning. The good news is that fleet managers wanting to get up to speed will find there is plenty of useful reading material to bring them up to speed such as the Allianz report, The future of mobility in a post-pandemic world.

There are also many EV reviews, whether from trade and consumer publications and websites, and the not-for-profit Energy Saving Trust⁸ also provides EV reviews and guidance for fleet managers.

Larger organisations may bring in independent consultants, but for all fleets there are a number of important considerations, including:

The number and siting of workplace chargepoints

With a larger organisation in particular and with uncertainty about employee numbers within a workplace, it can be difficult to decide how many to install. But given that EV use will only expand, it may make sense to have a few more than may seem immediately necessary. The types of chargepoints will depend on the vehicles and needs. Often, the largest and most powerful are not needed if employees are able to work from the workplace – and so 7kW will suffice. If they are only stopping by and need to leave promptly, then faster charging will be required. Location should be close to the electricity supply to lower installation costs.

There also needs to be investment in clear signage and if necessary, landlord approval for the chargepoints. Companies may also pay for employees to have chargepoints installed at their homes.

Driver
training

It always makes sense for the driver of any new vehicle to have at least basic familiarisation, but formal training is important if a driver is new to an all electric fleet or if they will have to switch between different vehicle types. EVs tend to have greater instant acceleration and of course, have specific charging requirements. For those undertaking longer trips, knowledge about range is essential, as is making best use of the battery. There are various tips to be aware of, such as using heated seats rather than full cabin seating, not driving too fast and being aware of the payload as heavy items mean a shorter range.

Many training providers are already well-versed in EV learning and can offer online and workplace courses.

There will be much work ahead in switching to EVs. But let's also celebrate the fact that EVs are poised to make an enormously positive contribution towards mitigating climate change and helping improve our air quality.

We’ve the expertise to support your fleet customers as they make their transition, including practical advice on considerations before making the switch, as well as guidance on implementing new electric vehicle driver training and telematics solutions.