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Green Company Car: The cost case for EVs

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Environmental and social arguments for EVs are easily made, but the cost case, for company and driver, is now attractive, too. So how easy is it to justify switching an increasing number of your drivers to electric?

 

Electric cars have long-suited specific fleets and uses, be it the ones that want or need to make a strong environmental statement, or the ones that have the kind of journey patterns and ability to charge that mean EVs would fit nicely into a business’s way of operating.

But the zero company car Benefit-in-Kind for full electric cars introduced for the 2020/21 tax year has really captured the attention of drivers, coming as it did alongside the ramp-up of conventionally fuelled cars’ CO2 emissions figures because of the new WLTP method of measuring efficiency. But do electric cars stack up for the employer as much as they do for the employee?

The transition to electric vehicles is gathering pace, with battery electric car sales up a monumental 174.6% compared to January-July 2019, despite 2020 being a touch interrupted by the Coronavirus pandemic, in a market down 41.9% overall. Almost 40,000 new pure EVs were registered across the first seven months of 2020, compared with just over 14,000 between January and July 2019. That’s taken EVs’ share of new car sales from 1.0% to 4.7%.

The red herring of high-mileage drivers

The oft-trotted argument of plug-in vehicles being unsuitable for high-mileage drivers has been well and truly dealt with by the newer wave of electric vehicles offering 200-mile-plus range figures, according to Arval’s David Watts.

“It’s a misleading message because 110 miles a day for 46 weeks a years is more than 25,000 miles a year, and that’s without private mileage on top” he tells Company Car Today. “One charge from home and you could confidently do 50,000 miles a year because most new EVs have a 200-mile range.”

Mitie’s fleet boss, Simon King, adds: “People look at the highest-mileage drivers, and conversely it’s actually the lowest-mileage drivers that it’s hardest to make it stack up for because you don’t have much of a fuel saving.

“You look at cars like the Kia e-Niro, Hyundai Kona, the extended-range Nissan Leaf, there’s quite a number where you’re seeing a range of 270-280 miles. Our fleet policy says you shouldn’t drive for more than two hours without a break from a health and safety point of view, and no-one speeds on motorways, so the furthest you can get is 140 miles before you have to stop. I struggle with there being a problem for high-mileage drivers; I think it was true, but not now.”

That alone, along with the growing tide of momentum to bring forward the date of banning internal combustion-engined new vehicle sales from 2035 to 2030, means that fleets need to be assessing the situation right now.

Simon King is director of sustainability, social value and fleet at Mitie, a company that has pledged to reach net-zero carbon status by 2025, and will have at least 20% of its car and van fleet – equating to more than 700 vehicles – electric by the end of this year.

He says: “Given that the ban is likely to be in 10 years, and certainly 15 at the outside, any fleet is well advised to be looking at what they should be doing proactively because if you wait until you have to do it, then the pressure will be much greater and you’ll have to be doing a lot of thinking a lot faster.

“Whereas if you approach it now, it gives you the time to do it in a way that works for your business, rather than it being backs-against-the-wall and having to make it happen rapidly.”

 

THE FOUR ‘P’s

He continues: “Looking at what we call the four Ps, there’s an argument to say that purely on the first three of planet, policy and people, it’s the right thing to do and you should get on and do it,” continues King.

“The good news, however, is that the fourth P, pocket, is also going in the right direction.

“First and foremost, it is really important that you look at a whole-life cost of the vehicle and every aspect of that whole-life cost,” he continues.

“There will be a whole range of approaches, such as looking purely at the financial lease cost, or some businesses may purchase the vehicles, all the way through to looking at quite sophisticated whole-life-cost modelling.

Simon King Mitie 2020“Wherever people are in that continuum, I would argue from a procurement point of view, you should always be looking at a whole of life cost point of view, and that’s even more true when it comes to things like electric vehicles. And the reason it’s really important is that from a straight financial monthly lease cost, they may see a higher number for electric vehicles. It isn’t a given but they may do because clearly the acquisition cost of the vehicles is currently higher than that of their internal combustion engine counterparts.”

King says that if businesses look solely at the monthly rental prices, they might decide electric vehicles aren’t something they yet want to move to. But, he says, service, maintenance and repair costs will be “35-70%” of the cost of petrol or diesel cars, and the savings are also there to be had in fuelling and the zero rate of National Insurance cost on a vehicle

“Fleets have got to make sure that you’ve got the SMR, the fuel, aspects like the NIC, which don’t necessarily always get built in. They typically won’t sit in a fleet manager’s budget, they’ll sit in the labour costs of the part of the business where the employee works, so you’ve got to look at all of those aspects,” adds King. “If you do, then electric vehicles are cheaper now on a whole life-cost basis, and I would say probably have been for the past 12 months or so.”

 

MILEAGE DEPENDENT

However, David Watts, a consultant at leasing company Arval points out that for job-need fleets, where there is less driver choice and more of a bulk-buy approach or restricted list of manufacturers, the equation is slightly different. It will depend on the terms the business is getting from a manufacturer (electric models command less of a discount at present) and what the vehicles are used for, because job-need cars tend to cover higher mileages. Although that’s far from the issue fleets believe it is (see panel).David Watts Arval 2020

Also worth noting is that lower mileages are at least as troublesome for the equation of EV cost matching petrol or diesel as high ones are. “On car-versus-car parity, EVs already do and they don’t, it depends on mileages” says Watts.

The Benefit-in-Kind zero rate for electric vehicles also allows businesses offering a company car choice list to be a little creative, suggests Watts, in allowing employees to add to their allocated monthly car cost to an electric car that is slightly outside of their banding.

“If, for example, a Tesla Model 3 is slightly out of someone’s band, allowing them to trade up £50 gives them the BiK benefit and everyone wins,” he says, with the company gaining National Insurance and fuel-cost savings. “People are willing to compromise to access the technology.”

paul barker