Opinion: The fleet industry’s role in accelerating EV adoption

By Beibei Sun, managing consultant and automotive sector specialist at Vendigital

For too long, growth in demand for electric vehicles (EVs) in the UK has been mainly driven by businesses.

Now, with the gap in demand between consumers and company-car and business drivers widening, should policy makers, manufacturers and the fleet industry be working together to reverse this trend? 

Only about one in 10 new EVs were sold to private buyers in the UK last year and with the number of commercial users growing rapidly, the gap in demand between the two segments is expected to widen. 

One reason for this is that the needs of commercial and private buyers are very different. 

For commercial users, EV usage generates a return, which means the upfront investment required to purchase or lease vehicles is worthwhile and can be recouped over time. 

The hub and spoke nature of many fleet-based businesses also means charging infrastructure can be mapped and installed based on known requirements at onsite and offsite locations. 

For private buyers, the decision to buy a new EV over a petrol or diesel engine vehicle seems riskier due to the relatively high sticker price, uncertainty about resale values, a lack of performance data and significant charging anxiety, especially in London.

There is also a significant imbalance in the incentives available to commercial and private buyers of new EVs. 

Whereas commercial buyers can apply for EV charge point and infrastructure grants, private buyers will not be able to apply for an EV charge point grant from 31 March 2025 and EVs will no longer be exempt from vehicle excise duty (VED). 

Of course, there are good reasons for putting commercial buyers first. Driving demand from fleet-based businesses at an early stage in the market’s evolution can create the volume leverage needed to accelerate the transition to EVs. 

EV fleets can also help to establish much-needed charging infrastructure, some with potential for public use, and company car drivers can increase confidence among private buyers by raising awareness of what it’s like to own and drive an EV. 

Crucially for OEMs, onboard battery management systems (BMS) and other monitoring systems can also help to build a data bank of performance-related insights and help buyers to choose vehicles to suit their needs.

However, commercial demand alone won’t generate the critical mass needed to pivot the market in favour of EVs. 

Some intervention by industry and policymakers will be needed to help close the gap in demand. 

In Norway, where nine in 10 new cars sold are battery powered, EV market penetration is much higher and there is no evidence of a gap in demand between commercial and private buyers. 

In China, which is the world’s fastest growing market for EVs, incentives are generous and evenly balanced in favour of both commercial and private buyers. 

As well as local taxes being waived and discounts provided for the installation of charging infrastructure, buyers are eligible for national subsidies too. 

There is also a domestic price war in China, which caused OEM discounts to rise to an average 12.8% last year.

Learning from other markets, policymakers and OEMs could work together to find more creative ways of incentivising demand for new EVs. 

For example, to start closing the gap in demand, they could develop an ecosystem of incentives for consumers spanning the lifetime of their EV – everything from tax incentives at the point of purchase to discounted on-costs for aftercare, and trade-in or financing schemes. 

As OEMs are close to the end market and there is a tradition of vehicle customisation, they would be ideally placed to develop tailored incentives packages that are geared to the needs of their customer base.

In addition to putting in place the right incentives, lower cost models are urgently needed to drive demand. 

To make this possible, OEMs must find alternative ways to drive revenues to offset their significant upfront investment. 

For example, they could consider introducing Battery-as-a-Service (BaaS) propositions or explore ways to generate value from the second life of batteries. 

Collaborating with other OEMs, including competitors such as incoming Chinese EV manufacturers, could help reduce cost bases more effectively and address the growing demand for affordable EVs. 

As early movers, fleets also have a critical role in enabling cost reduction by sharing BMS and other EV data with OEMs and potentially with the entire industry. 

Fleet operators could support the transition to EVs by trialling more second hand EVs. 

The falling price of second hand EVs, caused by the high volume of used EVs being released back onto the market by early adopters, including company car drivers, is having a detrimental impact on the market for new EVs. 

Despite their low price point, private buyers are reluctant to buy used EVs due to uncertainty about how well they will perform, especially battery performance, and the impact this could have on their value. 

Used EV fleets could provide manufacturers with vital insights that could help to shape the EV market and support OEMs in realising the vital cost savings needed to drive demand.

Fleet operators may think they are doing enough already to drive demand for EVs, simply by putting more of them on the road. 

However, if the UK’s EV market is going to survive and thrive, all segments of the market will need to work together to incentivise demand and bring down costs.