With carbon emissions a key global issue and the UK continuing on the Road to Zero, fleet managers are in the middle of a significant industry shift.
Expected new Benefit-In-Kind tax rates and increased demand for electric vehicles and plug-in hybrids make now the perfect time to move towards an electrified fleet.
WHOLE LIFE COST SAVINGS
There are several initiatives encouraging businesses to move away from traditional petrol and diesel and convert fleets to electric vehicles, but one consideration often overlooked is the whole-life cost of a vehicle. When comparing whole life costs of a combustion-engined car with electric vehicles, the cost saving is substantial. This is because the whole life costs looks at the entire life-cycle of your fleet vehicle and not just the upfront purchase cost, which may be higher for EVs.
Whole life costs takes into consideration depreciation, fuel, vehicle tax, servicing, maintenance and repair costs. So, when comparing the whole life costs of diesel vs electric, we must consider the Lease Rate Rental disallowance charge incurred by businesses for vehicles above 110g/km, as well as the significantly lower National Insurance tax, and lower business mileage reimbursement costs of EVs.
Overall, while the vehicle rental cost of a diesel hatchback might be £384 per month compared to an electric hatchback at £407 per month, the employer saving in the whole life costs of an electric vehicle could be as much as £1500. This makes whole life costs one of the most important factors for fleet managers to consider when making purchasing decisions.
NEW COMPANY CAR TAX
One of the key elements for calculating whole life costs is the tax costs for the business. With a clear Benefit-In-Kind tax incentive now outlined by the Government to help its drive towards the Road to Zero, businesses should take full advantage of the cost savings available and seriously consider the move to EVs. Plug-in hybrid cars also attract considerably lower tax costs compared with traditional vehicles, and therefore provide another great option for fleet managers.
As local councils in big cities begin to take steps to drive the adoption of EVs, it is now a more important time than ever for fleets operating in these areas to consider purchasing choice. London’s Ultra-Low Emission Zone, designed to improve air quality, now operates a 24/7 vehicle charging system, and cities such as Bristol are proposing to take even bigger steps, with the south west city planning to become the first UK city to completely ban diesel cars from some of its roads.
Since the proposed change to Benefit-In-Kind tax, demand for EVs and hybrids has quickly risen, showing the appetite and change in mindset already happening in the industry. At Alphabet, we’ve seen a 165% rise in orders on plug-in hybrids and electric vehicles, and expect this to continue rising throughout 2020.
Infrastructure to support the EV movement in the UK is also moving in the right direction. Nissan recently revealed drivers now have more public places to charge electric cars than they do petrol or diesel pumps. The December Zap-Map stated there are 10,400 electric vehicle charging locations across the country in comparison to 8400 fuel stations, down from 18,000 in 1992. While there’s still more work to be done on the charging infrastructure in the UK ensuring they are readily available in more locations, these are positive steps in the right direction, reflecting the country’s demand for EVs.
With the UK’s Road to Zero strategy, improved charging infrastructure and the savings on whole-life costs for electric vehicles, there are increasing benefits for businesses electrifying their fleets, meaning now is the time for organisations to make the move.
Principal consultant, Alphabet GB