By Paul Hollick, chair of the Association of Fleet Professionals (AFP)
We’re at a moment that many in the fleet industry have been anticipating for some time.
Electric vans are starting to become available in large numbers and in a range of different models after what feels like an eternity when the sector lagged behind electric cars.
It seems as though we should be on the verge of large scale eLCV adoption but, alongside some well-documented operational objections, another issue has emerged - with uncertain future residual values (RV) for electric vans proving to be a significant barrier reported by our members.
Essentially, this issue makes it difficult to build a financial case for electrifying van fleets and businesses making the move are effectively accepting they are taking a significant gamble. This is especially the case for those that outright purchase.
The size of the RV risk is difficult to estimate in a sector that essentially has almost no sales track record and for which there is very limited operational experience.
It is entirely possible that the market for used eLCVs might be strong in the second half of the decade, but it may also be sluggish.
Certainly, the industry view is tending towards a markedly conservative outlook at present, something underlined by the used electric car market’s recent crash, which left many dealers suffering following stock values that fell by double figure percentages.
As a result, we’re seeing a very definite split in the market when it comes to van electrification.
Large corporates with a strong commitment to the environment can, to an extent, make a decision to ignore future values but most other fleets generally can’t afford to do the same.
If they are acquiring electric vans, it is tending to be very much on a small scale.
The difficulties with RVs can perhaps be seen most clearly by contrasting current lease rates between diesel and electric vans.
As a rule of thumb, lease rates for diesel vans are roughly half of those for their electric equivalents.
That’s partially a product of high electric van purchase prices, of course, but is also very much a sign of leasing companies hedging their bets when it comes to a future market that is very much an unknown.
So what is the solution? There are a range of potential ideas that could make something of a difference but they all need input from government.
Probably the simplest solution, we feel, would be some kind of formal support for used electric van buyers, which could take the form of anything from subsidies for used vehicles to interest free loans.
This would help to offset the risk by simply making eLCVs more accessible to used buyers, which in turn would allow more optimistic RVs to be set by industry experts.
I’m at pains to point out that this is not advice intended to make people wary about adopting electric vans. At the AFP, we hear of many, many positive experiences from businesses that are in the process of LCV electrification and we are strongly committed to the sharing of best practice that will help to make this possible for as many companies as possible in the future.
However, while we support the electrification of van fleets and remain committed to the 2030 production deadline, there are structural problems that we cannot easily solve as an industry without external intervention and more help is needed from Government, we believe.
Our feeling is that the authorities believe van electrification will follow a similar pattern to cars but that is probably not going to happen.
Car adoption of electric vehicles was very much a reflection of tax advantages and general operational viability, and there are few similar parallels in place for vans.
We believe that higher levels of support are essential to make electric vans more feasible before the end of the decade both in the new and used markets.
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