Fleets must ask critical EV questions

As increasing numbers of fleets investigate electric vehicles it is important to ask the right questions before deciding to join the trend. John Maslen reports.

Fleets are switching on to the potential benefits of plug-in cars, with demand soaring more than one-third last year. The number of cars involved is still relatively small, with 35,000 registered that qualified for the Government’s plug-in car grant in a car market of nearly 2.7 million. Around 70% of plug-in cars went to businesses.

However, the next few years could prove a watershed as supply increases significantly, with dozens of new plug-in models arriving from mainstream car manufacturers, both plug-in hybrids and pure EVs.

At the same time, awareness is increasing, with more than two-thirds (69%) of company car drivers saying they would consider driving an electric vehicle (EV) if they were offered one by their employer.

But before fleets introduce EVs or plug-in hybrids, there are a number of issues they need to consider. Questions fall into three key categories – the fleet, the driver and the journey.

 

THE FLEET

Q1: Is there support for change?

A: For any initiative to be successful it needs the support of senior management and the same is true with the introduction of plug-in vehicles.

Fleet managers need to set out their proposals, the resource implications of introducing vehicles and the potential benefits to the business from making the change.

It is important to start the groundwork early, as it is likely other senior executives in the business will be asking the fleet similar questions about the benefits of choosing plug-in vehicles in the coming years.

Andrew Benfield, group director of transport at the Energy Saving Trust, says: “Companies need to think about business motivation and whether there is support to move toward adopting ultra-low emission vehicles (ULEVs).

“This includes the organisation’s ethos and image and benefits ranging from cost savings to gaining a commercial advantage, for example when tendering for contracts.”

Q2: Who can I speak to?

A: There are a wide range of expert sources that can guide decision-makers during the journey towards introducing plug-in vehicles. These include Government-funded organisations such as Go Ultra Low and the Energy Saving Trust, which has produced a guide to ultra-low emission vehicles for fleet managers and offers a fleet review service.

Suppliers may also have experts on hand to provide advice.

David Bushnell, product manager for Alphabet, says: “We are helping customers either to try these vehicles to see their benefit, or work with those customers who have dipped their toe in but need further support.”

Companies can also speak to other managers who have direct experience of running plug-in fleets.

Poppy Welch, head of Go Ultra Low, says: “Talk to consultancy services and other fleet managers using EVs to ensure you fully understand the technologies and can make well-informed decisions.”

A spokesman for Nissan adds: “Understanding the fleet and how it works, to provide proper fleet analysis before trialling or deploying vehicles, is crucial. Support from leasing companies and the Energy Saving Trust is vital as they can identify where to deploy electric vehicles and, almost as importantly, where not to.”

Q3: What financial support is available?

A: For fleets that invest in electric vehicles, up to £4,500 is available (for cars; £8,000 for vans) as a Government grant to reduce up-front purchase costs, with a maximum limit of 35% of the vehicle cost.

The amount that can be claimed depends on certain conditions and covers the full purchase price for the basic vehicle including number plates, VED and VAT, but it doesn’t include delivery charges, the first registration fee or any optional extras.

Fleets need to be aware that the grant depends on the emission-free range of their vehicle and the official CO2 emissions, so there are six potential levels of funding available.

Q4: How will plug-in vehicles affect my running costs?

A: It is important for companies to consider the wholelife costs of plug-in vehicles.

Costs to consider include depreciation, fuel costs (electricity), SMR spending and insurance.

Poppy Welch, head of Go Ultra Low, says: “Look beyond the initial list price or monthly rental. Typically, fleets can save more than £800 a month on a fleet of 10 EVs when using a wholelife costs model.”

EVs tend to suffer from higher depreciation, but this is offset by lower fuel and servicing costs.

The Fleet News Running Cost Calculator provides detailed cost per mile information on a range of electric vehicles, which can be benchmarked against petrol and diesel equivalents.

In addition, companies need to consider external factors, for example the distance to the nearest garage that can service a plug-in vehicle.

Q5: How should I adapt my fleet policy?

A: Initially, companies may just trial EVs to ensure they meet their expectations about performance and suitability for the fleet.

However, if vehicles are to become a permanent offering for drivers, then it will require a policy review.

Having EVs and hybrids as an option on some job grades may be the best starting point, says John Kelly, managing director at CLM Fleet Management.

He adds: “A carefully structured approach to green fleet management and vehicle selection can lay the foundations for a fleet which not only delivers lower costs all round, but also provides significant motivation for employees.”

Companies may also need to consider providing incentives for staff that choose low-emission cars, such as improved vehicle specification.

Q6: Should I lease or buy?

A: Experts suggest that leasing may be a less risky proposition than buying, both for the car and the battery itself.

John Kelly, managing director of CLM Fleet Management, says: “Leasing removes some of the uncertainty about the resale value after three to four years. The leasing company bears the RV risk rather than the fleet which gives buyers peace of mind that they will not be left with a number of vehicles that are difficult to sell on the used vehicle market.”

Companies should also consider how they would reallocate EVs if employees leave. As they are a relatively niche choice, if may be difficult to hand a vehicle to another driver. That said, if a vehicle is leased, the early termination fee may be significant.

An alternative for fleets to consider is corporate car sharing schemes, where drivers share a pool of vehicles and book use in the same way they might reserve a meeting room.

Aylesbury Vale District Council operates three Nissan Leaf EVs on its corporate car sharing fleet.

Alan Asbury, senior energy and fleet consultant, says: “There is a learning curve, as drivers were anxious about range and we had to make sure drivers always plugged in cars when they were returned, but we have educated them to make sure they do it.”

 

THE DRIVER

Q7: What do I need to tell employees?

Communication and education are key when introducing electric vehicles. Companies need to engage with employees and managers to help them understand how much EVs have developed and what modern cars are capable of.

To some extent, the success of Tesla is changing perspectives, but there may still be resistance to adapting to a new way of driving and refuelling, particularly when it comes to the range limitations of pure EVs.

Poppy Welch, head of Go Ultra Low, says: “Make sure employees understand how to run an electric car efficiently and responsibly – particularly in relation to when and how to re-charge the battery.”

This is particularly important to avoid cases where drivers opt for plug-in hybrid cars because they currently incur lower benefit-in-kind tax charges, but then just run them without charging the battery.

Q8: What will happen to employees’ tax bills?

A: Tax bills may prove one of the most difficult conversations relating to plug-in cars.

From April 2017, cars with CO2 emissions of 0-50g/km will pay benefit-in-kind (BIK) tax at 9%, with a charge of 13% for cars emitting 51-75g/km and 17% for cars in the 76-94g/km band.

By 2019/20, the rates will be as high as 16% for vehicles emitting 0-50g/km, 19% for cars in the 51-75g/km band and 22% for those producing 76-94g/km.

These increases will undermine the substantial tax savings drivers used to enjoy compared to the bill for using petrol and diesel vehicles.

However, from April 2020, new rules are being introduced based on how many zero emission miles a car can drive in addition to its CO2 emissions, which could slash BIK rates to 2% for some vehicles.

Critics of these changes suggest that they are a disincentive to buy or lease EVs for another three years.

Furthermore, new rules for Vehicle Excise Duty will see EVs and plug-in cars taxed for the first time (fleetnews.co.uk/2017VED).

Q9: How do I account for mileage expenses?

A: This is another complex area for businesses. Currently, HM Revenue and Customs suggests companies should use the “actual costs” of charging a vehicle.

Fleets can calculate their own reimbursement mileage rate using manufacturers’ data for miles per kWh and electricity cost data.

If a driver is using their own electric car, companies can use the Approved Mileage Allowance Payments system, which provides a tax and national insurance-free amount that can be paid to employees for covering business mileage in private cars.

Poppy Welch, head of Go Ultra Low, says: “The lack of Advisory Fuel Rates should not stop fleets from including EVs on choice lists.”

 

THE JOURNEY

Q10: How will vehicles be used?

A: Companies need a very clear understanding of how vehicles are used and how far they travel before introducing plug-in vehicles.

John Kelly, managing director at CLM Fleet Management, says: “Careful consideration needs to be made for company drivers’ requirements and the type of driving they do. EVs should not be introduced arbitrarily across job grades. Short distances in urban environments may be the ideal scenario rather than long motorway distances, for example.”

In addition to companies matching the mileage and use profile of drivers with the charging capabilities of the vehicle, they also need to prioritise the use of EVs in areas where there is maximum benefit, such as in congestion charging or low-emission zones.

Sam Clarke, founder of EV-based delivery company Gnewt Cargo, says: “There is an increasing interest in EVs among businesses. Our solution works because we did not have any legacy systems that we had to mould the EV operation into, but this may be a big step for some other companies.

“Our business is also relatively predictable in terms of mileage requirements compared to companies in some sectors that don’t know where they are going to be sending vehicles each day or how far they will have to go.”

A spokesman for Nissan adds: “Fleet analysis has to focus on individual vehicles, not averages across a fleet as this does not identify the real opportunities to adopt electric vehicles.”

Q11: What charging issues do we need to consider?

A: Companies need to ensure charging facilities are flexible and cost-effective so they can expand as demand increases. This may involve discussions with the landlord about development of parking areas, or negotiations with other local businesses about sharing resources to develop a recharging network.

It is also important to explore the grant support that may be available, using sources such as the Energy Saving Trust.

As demand rises, resource management becomes an issue, such as monitoring usage so fully-charged vehicles are not left taking up valuable charging space.

For home charging, Go Ultra Low recommends that employers help staff sign-up to the Electric Vehicle Homecharge Scheme, which provides a grant of up to £500 towards the cost of installation.

When travelling further afield, employers need to ensure drivers have access to the network of more than 11,000 public charge-points across the UK.

Easy access to charging points is an important incentive when encouraging drivers to change. London Fire Brigade said the introduction of charging points at its stations was a key element in 10 lease car drivers switching to plug-ins.

Q12: Will drivers need training?

A: Drivers may need to be supported in their transition to plug-in cars, particularly pure EVs.

They may be unused to using automatic transmissions and they may be unaware of issues to consider, such as pedestrians being oblivious to the car moving slowly in urban areas, because there is no engine noise.

Furthermore, they may need initial support when it comes to using the charging network for home, office and on-the-road.