How can a fleet persuade more drivers to choose electric vehicles?

This feature originally appeared in the December 2020 edition of Fleet News. Read the digital issue of the magazine.

For some environmentally-conscious company car drivers, the prospect of running an electric vehicle (EV) for its green credentials alone will be a compelling argument.

But for others, the key persuader will be the enormous savings they can make by choosing an EV over a petrol or diesel model.

For example, employees opting for a battery electric vehicle (BEV) pay no company car tax in the 2020/21 tax year, while the benefit-in-kind (BIK) rates for a plug-in hybrid begin at 2%, increasing to 14%, dependent on the electric-only range of the vehicle (see full BIK table).

“If you drive a BMW 320d and switch to a Tesla Model 3, how much BIK do you save a year? It’s £4,500 take home,” says Simon King, director of sustainability, social value and fleet at Mitie.

“So, if I take away your BMW 3 Series and give you a Tesla instead, that’s the same as giving you an £8,000 pay rise assuming you are a 40% taxpayer. What’s not to like about that?”

The BIK rates for zero emission BEVs will increase to 1% for the 2021/22 tax year, and 2% for the following three years.

Energy Saving Trust (EST) says this means a driver who took delivery of a Nissan Leaf N-Connecta 40kWh instead of a petrol Ford Focus 1.0 125PS Zetec Nav in April this year would save £3,614 in BIK over a three-year replacement cycle.

Drivers would also make significant savings in the cost of fuel. If the employee used their company Leaf for 24,000 personal miles, they would save £1,321 due to the lower cost of powering an EV, says EST, leading to overall savings of £4,935.

This example assumes a petrol price of £1 per litre and an electricity tariff of 16p per kWh.

On top of this, drivers would be exempt from ultra-low emission and clean air zone charges if they enter those areas on personal journeys.

“It’s a really great deal for employees,” says Ian Featherstone, account manager, supply chain, at EST. “It’s no wonder that many leasing companies are reporting a big uptake in pure electric car sales.”

Many organisations report that drivers who had opted out of their employer’s company car scheme to take cash allowances now want to return to take an EV, not only for the savings, but the convenience.

“We had seen a mass migration to the cash allowance but, from talking to our drivers, most of them didn’t want to do that, they like the comfort of a company car, but didn’t want to pay the tax,” says Matt Hammond, head of fleet at Altrad Services.

“A lot of those employees had company cars for 10, 15 or 20 years and suddenly they’ve gone out into this big bad world of insurance quotes and running a car and they don’t like it, they want to come back again and go electric.”

Increasing EV uptake

There are a number of ways organisations can capitalise on the interest in EVs, such as revising company car choice lists.

“Historically, what we see with a lot of organisations is they looked at car banding predominantly based on lease cost or lease and maintenance,” says David Raistrick, senior manager at KPMG in the UK.

“But what we are starting to see with clients is, effectively, a change in how they think about the cost of vehicles.”

This sees them adopt a wholelife cost (WLC) model, where the significantly lower tax, fuel and SMR expenses are taken into account, enabling EVs to be offered in many more company car grades.

“WLC can provide access to more prestige or larger vehicles than may otherwise have not been affordable within an employee’s grade,” says Claire Evans, head of fleet consultancy at Zenith.

Employers should be flexible with the amount drivers can contribute to the car scheme to ensure a range of EVs are available at all grades, she adds.

For example, if the monthly WLC of a Tesla Model 3 Long Range is £600 and a company’s WLC entitlement is £500, then without a driver contribution the vehicle would not be available.

“However, if the driver could pay £100 contribution towards the Tesla, they would pay £0 BIK and yet still be in a better total cost position, compared with the average BIK cost of £300-£400 (40% taxpayer) for equivalent petrol and diesel cars within their entitlement,” says Evans.

“The driver gets a £200 to £300 a month saving and the opportunity to switch to cleaner technology at no extra cost to the employer.”

Despite the cash and convenience benefits increasing the appeal of an electric company car, research consistently finds there are aspects of EV ownership drivers are always worried about: charging and vehicle range, in particular.

Many fears are unfounded and Evans says can alleviate these by focusing on designing policy and issuing clear communications to help to inform employee choice and remove these perceived barriers.

“Engagement and education are pivotal to successful uptake,” she adds. “Successful policies with good uptake offer driver support and education about available vehicles and how to optimise the use of home, work and public charging.”

Some organisations arrange roadshows where local dealers or leasing companies take EVs to workplaces so employees can look at the vehicles, drive them and ask experts about them.