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To EV or not to EV, that is the Question

 

When a company chooses which type of cars to lease, electric vehicles can offer real benefits to the business, including cost savings and operational advantages. Electric vehicles will not be right for every business however so fleet managers need to consider the individual company’s requirements.

The cost of an electric vehicle (EV) is generally calculated in terms of the whole life cost (WLC) rather than just the upfront purchase price. These costs incorporate vehicle taxes, subsidies, battery costs and fuel and electricity usage. Including these other factors will help a business decide if EVs are right for them.

From a tax perspective, EVs are clear winners as company lease cars:

  • Zero Class 1A NICs on benefit in kind
  • Zero Fuel Benefit Tax (FBT)
  • 100 percent capital allowance in first year of purchase (valid until at least 2013) – also applies to vehicles with CO2 emissions of 110g or less
  • No annual road tax
  • 100 percent discount on the congestion charge in London (currently £9 per day for regular users)
  • Government grants of 25 percent towards the cost of an electric car (up to £5,000) and 20 percent of the cost of an electric van (up to £8,000

When maintaining a business car contract hire one of the biggest expenses is the cost of refueling. According to research conducted by the Energy Trust, of the top 200 fleets in the UK, fuel accounts for one third of the total cost – £6 million per annum. The cost of refueling an electric vehicle (EV) is currently about 25 percent of the cost of refueling a conventional petrol vehicle. Breaking the cost down to a mileage basis, a diesel car costs approximately 13p per mile currently, compared to 3p per mile for an EV.

Most EVs have a driving range of between 60 – 100 miles, depending on the model. Where business users need to drive beyond this they will need to coordinate charging with driving. EVs utilise specific charging equipment and employers need to work with employees if vehicles are being charged at home. To offset the cost, timers are available to restrict charging to off-peak hours and these also record the data, which can be useful the purposes of claiming expenses.

Another consideration is the battery cost as EV batteries can be a significant element of WLCs. Manufacturers have sought to address this by offering different models of battery ownership. There are several available including where the customer buys the car and leases the battery, or a mobility service, which provides for a lower upfront cost and a spreading of the battery costs over the lifetime of the vehicle. Models such as these often significantly reduce the upfront vehicle cost.

From a usage perspective, if the following are present it is likely that EVs are suitable as company lease cars:

  • Daily mileage: Up to 60 miles (pure EV) or up to 150 miles (Hybrid)
  • Return to base frequency: At least once per day
  • Potential for charging: At least once per day
  • Time to charge: 20 minutes or more
  • Road environment: Suburban or rural (pure EV) or all roads (Hybrid)
  • Variation in speed: Low to medium
  • Terrain: Flat or mixed (pure EV) or flat, mixed and hilly (Hybrid)

Whether EVs are suitable will vary from business to business, depending on usage. However, whole life costs are often cheaper for pure or hybrid electric vehicles and represent the most sensible option.