Electric cars: too expensive for business fleets?

Electric cars are on the up for business fleets. Businesses are under increasing pressure to reduce their carbon footprints: decreasing their car fleets’ CO2 emissions is a sure-fire way to do that. Plus, by moving a diesel fleet to an electric one, there are cost savings to be had if you’re clever.

If you like the idea of going green but think that range anxiety will be too much of an obstacle for your fleet drivers, just take a minute to explore the benefits. The many, many benefits.

Why choose electric cars for your business fleet

What is an electric vehicle?


Let’s deal with the basics first. A pure plug-in Electric Vehicle (or EV) is powered solely by an on-board battery and has no other fuel source.

There is another type of part-electric, part-fuel vehicle category known as Plug-in Hybrid Electric Vehicles (PHEVs). These have an electric battery like the pure EVs but also have a combustion engine to extend the range of the vehicle.


What are the benefits of changing to an electric car fleet?


1.  Let’s get the obvious bit out the way, shall we? Zero CO2 emissions mean a greener fleet and less harm to the environment. If your company is looking for ways to reduce its CO2 emissions and be more environmentally responsible, an electric vehicle fleet will tick all the boxes.

2.  Charging up an electric vehicle at home or work will cost much less than paying for diesel or petrol.

To give you an example using the most popular electric vehicle - assuming a typical energy tariff of 13p per kW - the Nissan LEAF’s 30kW battery costs just 4p per mile in electricity. As a comparison, a basic Ford Focus costs around 8p per mile in diesel!

3.  Charging up an electric vehicle from a public charging station is far cheaper than fuel too; in fact in some cases it’s completely free!

Ecotricity, the UK’s largest public charging network, has free charging stations up and down the country: all you need to do to take advantage of them is register online for an Ecotricity card - which is also free by the way. Even the public networks which offer pay as you go charging rarely cost more than a pound or two for an 80% charge.

4.  Currently all electric vehicles are exempt from Vehicle Excise Duty (also called vehicle tax).

5.  UK government grants are currently available (for businesses and private individuals) on electric vehicles and plug-in hybrids. Manufacturers can deduct 35% off of the on the road price of a car (up to £5,000) and 20% off of the on the road price of a van (up to £8,000) so monthly lease rental costs are reduced in line with this.

6.  There are no London congestion charges for electric vehicles either, if you register an account with TfL.

7.  Free public charging stations and/or work charging points can reduce expenses administration and free up your employees' time for core duties.

8.  With an electric vehicle you get free parking in various UK locations and car parks (i.e. The City of Westminster has made parking for electric and plug-in hybrid vehicles free.)

9.  Company car tax benefit in kind rates for ULEVs (Ultra Low Emission Vehicles) – such as electric cars with zero emissions - is the lowest on the charts.

Company car tax BIK rates for EVs:

 

Comparing running costs of an entry level diesel car and an electric vehicle


 
EV electric car business fleet comparison table
 

The general rule is that electric vehicles cost more to lease per month but are cheaper to run day-to-day; primarily because of the difference between fuel costs and electricity charges but also because of government grants and lower taxes for employers and employees.

To examine the cost differences in detail, we’ve compared an entry level Ford Focus and a Nissan LEAF (30kW) electric vehicle:

 

 

* Tax for 20% tax payers. For 40% tax payers double this figure. ** Based on 100% of annual mileage. *** Based on a standard 3 + 35 leasing payment profile including maintenance/tyres but not insurance.

 

 

So, in this conservative example, the Nissan LEAF electric car is the more cost effective choice overall. Just. You can imagine that if the Focus wasn’t the basic derivative, or if the annual mileage was higher, the LEAF gets more and more economical in comparison plus you get to chirp about your reduced carbon footprint, all while keeping your drivers happy by paying less company car tax.

The fact of the matter is that electric vehicle technology is still in its infancy. In the coming years, as demand gets higher, electric vehicle list prices will drop but the counteraction is that the government will get less from taxes so the grants will disappear and tax rates will rise for EVs (which we can already see in future BIK rate tables). As the UK's electric charging infrastructure develops, there will undoubtedly be a fleet industry shift towards EVs, but for now, the cost advantages are inconsistent. If keeping fleet costs to a minimum is a priority, the only way to be sure if EVs will be cost effective for your business is to crunch the data, or better yet, ask us to!

 

Ask yourself these 4 questions before saying yes to an electric vehicle fleet


 

Will you provide a charging point on-site if drivers don’t have off-street parking at home?

Motor manufacturers often set these up for free or subsidise their installation. The issue logistically of having a charging point on-site is to control its usage so that employees don’t use it for personal mileage. You could take the stance of, if the employee doesn’t have off street parking to install their own EV charging unit, then they can't select that company car - it depends on your company’s motivations.

 

Are your drivers typically driving less than 100 miles a day?

This isn’t a hard and fast rule but let’s use the most popular electric vehicle, the Nissan LEAF, as an example: with it’s new 30kWh battery, drivers can get approximately 95 miles of range in winter traffic with the heat blasting. Given, a leisurely drive in Spring will give your drivers much more from a full charge - closer to 155 miles - but realistically you’ve got to work to the minimum when planning a fleet change which would affect driving routine.

If however, you’re looking at an executive company car option, something to replace a BMW 6 Series for example, then you can be more generous with your range expectations. The Tesla Model S for example, even with the smallest 70kWh battery option, is designed to give up to 260 miles from a full charge.

 

Are you prepared to update your fleet policy?

Whether you're talking about a commercial fleet or a company car scheme, getting staff buy in and/or incentivising EVs is key to their business success. The higher rental cost of electric vehicles when compared against their non-EV equivalents, can make them look unappealing at first glance, but the moment you look at the total running costs and benefits, the EVs come into their own. It’s important to make your employees aware of these benefits, especially the difference between electricity and fuel cost and their low BIK rates.

Looking at total running costs, something known in the fleet industry as whole life costs, is a good habit to get into no matter what type of vehicles you’re considering. Check out our whole life costs page to find out more.

 

Can you get your head around the expenses?

Recharging an electric car, on a home electricity tariff or at a PAYG charging station, is far cheaper than stopping at the pumps for petrol or diesel.

The big hole for company car fleets at the moment is that the government does not recognise electricity as a “fuel”. As such, there is no advisory fuel rate (AFR) for electric vehicles. That said, AFRs are not mandatory and it’s really not rocket science to come up with your own calculation to suit an electric fleet.

Elizabeth Ward-Lewis, personal tax customer, product and process at HMRC, suggests employers use the “actual costs” of charging a vehicle to calculate their own reimbursement mileage rate.

 

How to work out electric vehicle business mileage reimbursement without AFR

 

The most realistic and practical way to calculate business mile reimbursement for an electric vehicle is to base it on charging at the most popular plug-in location: at home. Here are the simple sums using an expenses example:

The EVs battery in kW (30kW) x pence per kW of your chosen electricity tariff* (13p) = £3.90 worth of electricity for a full charge at home. The manufacturer states that the EV gets 100 miles of range on a full charge. So, £3.90 divided by 100 miles gives just under 4p per mile.

Your employee puts in expenses for 180 business miles so would be reimbursed 180 miles x 4p = £7.20

* You need to agree a fair tariff with your employees for the calculations for reimbursement to be based on.


If you’re considering going electric, contact us to talk through your best fleet options.

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