Compared with a petrol or diesel car, the drivetrain of a fully-electric vehicle (EV) is simple: dozens of moving parts are replaced with just three main components. However, buying and operating an EV does not share this simplicity.

For starters, fleets have to consider range issues, whether EVs are a good fit for their company and also potential recharging issues.

Then there are considerations over procuring them, including higher P11D prices than equivalent petrol and diesel models and the Government’s plug-in grant.

Fleets also have to take into account recent changes to the benefit-in-kind (BIK) tax regime (see panel, page 53) and the confusing issue of mileage reimbursement rates.

Then there is uncertainty over residual values, which are currently weaker than for equivalent petrol or diesel models.

Despite these issues, EVs are soaring in popularity.

Figures from the Society of Motor Manufacturers and Traders show that, in the first four months of this year, 3,148 pure EVs were registered, 103.5% more than in the same time period last year.

It is a trend Chris Chandler, principal consultant, fleet consultancy, at Lex Autolease has witnessed among fleets.

“The number of electric vehicles on our fleet has increased tenfold (to around 1,500) since April 2014 and now make up around 1% of our total fleet.

“This is a result of growing awareness among businesses and confidence in EVs and their benefits.

“There is also a wider range of models and technology now available to customers, giving them far more choice when choosing a vehicle to suit them.”

Historically, the high list price of EVs when compared with petrol and diesel models has often been highlighted as a barrier to fleet entry, even after the Government’s plug-in grant scheme has applied

Under this initiative, companies or individuals acquiring an electric car are entitled to a grant of up to 35% of the cost of the vehicle, up to a maximum of £5,000.

The grant scheme also covers electric vans. In these cases, it is for a maximum of 20% of the price of the new vehicle, up to £8,000.

In April 2013, the Government committed to retain the £5,000 car grant, which also covers plug-in hybrids with CO2 emissions of 75g/km and below, until 50,000 claims had been made.

So far, more than 31,000 grants have been paid, and the Government has made £200 million available to continue the scheme  to 2020.

It has now split qualifying ultra-low emission cars into three categories – CO2 of less than 50g/km and with a zero emission range of at least 70 miles, CO2 of less than 50g/km and a zero emission range between 10 and 69 miles, and CO2 of 50-75g/km and a zero emission range of at least 20 miles – and last month commenced a review of grant levels.

This will take place over the next few months, and the Government says this will allow it to set the grants at a level that will support the market as effectively as possible without exhausting its budget too quickly.

However, organisations need to look beyond the high purchase price, says the Energy Saving Trust.

“While there can be an additional upfront cost (compared with petrol or diesel), this should be weighed against the many financial incentives in place to consider going electric,” says a spokesman.

Chandler also urges fleets to look at the ‘bigger picture’. “It is important to consider the wholelife cost of electric vehicles,” he says.

Advisory fuel rates an issue

“Tax breaks and low fuel costs can mean that financial benefits become more apparent as the vehicle ages, which can reap a higher return on investment.”

The Energy Saving Trust highlights fuel as a key area where savings can be made with EVs.

It says it costs £2-£3 to fully charge an electric car for a range of 80-100 miles while an equivalent petrol or diesel model costs £12-£18 to travel 100 miles.

Figures from wholelife cost data provider KeeResources support this: in its calculations it uses a fuel cost of between 3.24 pence per mile to 3.80ppm for an electric car, depending on the model.

In comparison, a highly-efficient Ford Focus 1.5 TDCi Econetic, which has an official fuel economy of 83.1mpg, has a fuel cost of 6.50ppm.

Over 10,000 miles, this difference means the EV will cost around half as much (£325) to fuel than the diesel Focus.

However, one aspect of fuelling EVs remains a contentious issue among fleets.

HM Revenue and Customs has not yet published advisory fuel rates (AFRs) for fully electric vehicles because it does not recognise electricity as a fuel.

A number of fleets have told Fleet News that this lack of clarity has prevented them from adopting plug-in vehicles.

“If you operate a wholelife cost model for selecting fleet vehicles and you use AFRs, without a published AFR, it is impossible for a business to determine the wholelife cost of an EV model when compared against a traditional vehicle,” says Alex Castle, head of supply chain management at Telereal Trillium. He argues that it would be negligent to put both the business and the employee at risk of future retrospective tax burdens by arriving at an unapproved reclaim rate for recharging.

“With reclaim rates for AFR effectively allowing hybrid drivers to profit unfairly from their mileage – potentially incentivising mileage – for the drivers willing to take the leap of faith and select all-electric vehicles, having no clarity on what they can be reimbursed by their employer is crazy,” adds Castle. “It just seems the opportunities to support fleets moving in that direction are being missed.”

However, other industry experts feel this is an obstacle that can easily be overcome by fleets.

“The lack of an AFR from HMRC, while annoying, is an excuse and not a reason for companies to not explore the benefits of EVs,” says David Watts, fleet risk consultant at Zurich Insurance.

“AFRs are advisory and not compulsory – in the absence of a reimbursement rate, companies are more than capable of calculating and using their own rate as long as it’s sensible.”

Another major influencer of wholelife costs are residual values, and this is an area in which EVs are outperformed by petrol or diesel models.

This is probably down to a “fear of the unknown”, says Simon Henstock, UK operations director at BCA.

Data in our running cost comparison table (see page 53) shows that the Nissan Leaf, BMW i3 and Kia Soul EV all retain a smaller percentage of their new value after four years/40,000 miles than their diesel equivalents.

“The key issue for all alternative fuels is acceptability with the general motoring public, because they will drive the demand in the used market,” says Henstock.

“Probably the key factor for motorists is the fear of the unknown – the internal combustion engine has been around for well over 100 years, whereas EVs are perceived as  relatively new. For a motorist to commit a sizeable amount of money to purchasing an EV, they have to feel confident it will deliver for all their motoring needs.

“As EVs have not been widely adopted by fleets in any volumes, there is no real steady supply of electric-powered vehicles reaching the markets.

“This makes it difficult for trade buyers and dealers to get an idea of what EVs are really worth, despite there being a lot of interest with buyers when examples are offered.”

Manufacturers have a key role to play in improving residual values, says Steve Jackson, chief car editor at Glass’s.

“In order to bring the residual values up to the levels of normal combustion engine cars, manufacturers need to overcome the range anxiety issue with extended ranges and a wider network of charging points that are easily identified and easy to use,” he adds.

Insurance issues

Typically, EVs have higher insurance ratings than their petrol or diesel counterparts: a Nissan Leaf Acenta is in group 23, while the Pulsar 1.5dCi Acenta is in group 11.

However, Caroline Coates, head of automotive at business law firm DWF, says other insurance issues also need to be taken into account.

“From the perspective of the Road Traffic Act,  the insurance requirements for EVs are no different from those using any other fuel type,”  she says.

“However, where the commercial use of EVs  is concerned, this throws up some interesting questions around whether insurers will (or should) treat them the same when it comes to risk.

“One issue is their lack of engine noise, which could be considered a greater risk to pedestrians less able to hear them approaching.

“Could this lead to a requirement for fleets to generate a certain level of artificial engine noise  on public roads and in built-up areas, particularly where these are larger vehicles?

“Another is modification. Most insurers take  a keen interest in how any post-sale changes to vehicles could affect their risk profile.

“In addition, this could also affect the level of liability of any outsourced maintenance providers responsible for the ongoing upkeep of the fleet.

“While none of these challenges is  insurmountable, they give both fleet managers  and insurers plenty of food for thought.”

EVs ‘could earn money for operators’

Nuclear power stations are perhaps the most controversial means of  generating electricity today.

Disasters such as Chernobyl in 1986, and the more recent Fukushima meltdown caused by an earthquake and tsunami demonstrate that safety could still be a problem when things go seriously wrong.

But it’s unlikely that we could meet carbon reduction targets without them, while at the same time, some of the UK’s nuclear power stations are ageing and need replacing while old fossil fuel power stations are decommissioned.

The need for electricity is unlikely to reduce, but, according to Dr Colin Herron, managing director of Zero Carbon Futures, EVs could have a role in helping return power to the grid at peak times or to compensate for fluctuating supplies of renewables (such as when wind levels drop or periods of dull weather in winter), flattening the spikes in demand and earning money for their owners at the  same time.

They would draw energy to charge the battery at times when there is a lower draw on the network overnight, and feed it back into the grid from early evening  to midnight.

Current charging standards don’t allow for vehicle to grid charging, and it would require EV users to plug their vehicles in habitually rather than merely when they need charging.

Although hydrogen fuel cell vehicles need refuelling rather than recharging, they would also be able to potentially feed the grid using their hydrogen to produce electricity.

Much work is still needed before the technology is fully developed, but if  governments can see EVs performing a beneficial role in bridging the energy  gap in future, systems and structures are likely to be put in place to make  vehicle-to-grid power a reality.

Benefit-in-kind

Historically, the Government had encouraged drivers to adopt EVs by placing all vehicles with CO2 emissions of 75g/km and below in the 0%  BIK tax band.

However, from April this year, cars with  emissions of 50/gkm and below were moved into a 5% band, and this will rise by two percentage points each year, reaching 13% in 2018-2019.

“Given the Government’s focus on encouraging demand for electric and plug-in cars through a range of incentives, notably grants, ACFO would have expected the chancellor to reduce BIK tax rates, not increase them, on these vehicles,” says John Pryor, ACFO chairman.

ACFO believes that it would also potentially encourage company car drivers to turn to ultra-low emission vehicles if they paid BIK tax on the P11D value of the vehicle after taking into account the plug-in-grant.

“Currently company car drivers receive no benefit from choosing a car that is subject to a plug-in-grant, which benefits only the vehicle owner,” he adds.