Environmental business advisor Rebecca Chedd and green technologies and services advisor Jack Smith discuss the benefits of going electric and what businesses should consider before switching.
Reasons to go electric
Jack Smith (JS): The business case for electric vehicles (EVs) is all about total cost of ownership. Yes, the upfront costs are higher, but over their lifetime EVs are far cheaper to run. First, the fuel: electricity is cheap compared to conventional fuels. EVs typically cost around £2-4 for a 100-mile range, whereas that will cost you £13-16 on average in petrol or diesel. That’s four times the cost. If you have solar panels the deal is even better – you essentially have free fuel on tap during the day, or at any time if you can combine it with battery storage.
Second, EVs need far less maintenance due to having fewer moving parts. Third, the tax liability is minimal: there’s currently no vehicle tax on pure electric cars, and from April 2020 company cars are exempt from Benefit in Kind (BIK) tax in their first year. Just the BIK benefit alone will save company car users thousands of pounds. The full upfront cost of an EV can also be written off against taxable profits as a Capital Allowance.
Fourth, EVs ensure compliance with the increasing number of environmental regulations and restrictions being rolled out across the country. Greater Manchester is currently proposing a Clean Air Zone (CAZ) that will charge non-compliant petrol and diesel vans £7.50 a day to drive within the city region – that’s nearly £2,000 a year if used 5 days a week.
Rebecca Chedd (RC): There are also a host of CSR and competitiveness benefits. EVs will significantly reduce your carbon footprint and they don’t emit harmful air pollutants, so they contribute to tackling climate change and improving air quality. Demonstrating these environmental benefits in tenders can mean the difference between winning contracts and missing out. This is especially the case for corporate and public sector customers, who are focusing more and more on reducing the environmental impact of their supply chains. Having signage on your vehicles to draw attention to the fact that they are electric will also do no harm to your local image!
Understanding vehicle use
RC: Every business is different, so naturally EVs will be more suitable for some than others. The first step is to have a good understanding of how you currently use your vehicles. What sort of journeys are you making? How often are you making them and at what time of day? Do you need to carry heavy loads? Where are vehicles left at night? Do you own or lease? How long do you keep vehicles before replacing them? You need to be able to answer all of these questions.
JS: As a general rule of thumb, EVs are most suitable for predominantly shorter, urban journeys because they are very efficient in lower-speed, stop-start environments. The golden ticket is what we call ‘the milk round’ – identical journeys of around 60 miles or less that are made every day. This might be the commute to work, or a regular visit or delivery.
Conversely, the business case is less attractive for long distance journeys that involve a lot of motorway driving, or those that require carrying a heavy payload and quick turnaround times.
RC: The freely-available LoCity fleet advice tool – originally developed for London’s Low Emission Zone – provides a useful indication of cost savings based on vehicle usage. For example, a small electric van driving 30,000 miles a year on mostly congested urban roads is estimated to save £23,600 compared to a diesel equivalent over a 5-year ownership period – roughly a 50 per cent saving. However, move the majority of that mileage to motorways and the saving is cut by nearly half. Note the importance of how long the ownership period is: the longer you keep the vehicle, the higher the savings become over a diesel model.
Cars vs. vans
JS: The first-hand market for electric cars is full of choice. There are around 35-40 electric models now available in a wide variety of sizes and price points. That number is expected to double this year, and the second-hand market is growing rapidly.
The story is a little different for vans. While there are a growing number of small vans now available, the market is yet to mature and second-hand vehicles are difficult to come by. The only large van currently available on the market is Renault’s Master, although a Peugeot Boxer and Citroen Relay will be launching soon. Nevertheless, with batteries decreasing in price and improving in efficiency, a healthy market is definitely on its way.
Owning vs. leasing
RC: When it comes to owning versus leasing your vehicles, it’s really down to each business’ fleet strategy and ability to pay. Most businesses would prefer to buy, but many are not in a position to do so. The business case for leasing radically improves from April 2020 and it’s also a low risk opportunity to test if an EV works for you while the commercial market matures.
JS: There are also lots of interesting hybrid ownership models coming out now, for example the ability to purchase the car but lease the battery – the most expensive part of the vehicle. That way the upfront cost is a lot lower and the battery can be replaced or upgraded as and when required.
In any case, outright vehicle ownership is on a downward trend. Here at GC Business Growth Hub we are currently exploring options to procure a shared electric fleet for employees, something that lots of larger organisations – such as Manchester City Council and our local universities – are already doing.
An introduction to charging
JS: Potential issues around charging are among the chief concerns for fleet managers considering electrification, but with a range of different charging options now on the market there are a lot of flexible solutions out there.
The government provides grants to cover 75 per cent of the cost of installing charge points up to a limit of £350 per socket. For company cars or small vans that are being taken home at night, a standard ‘slow’ charge point installed at home will do fine. These are generally around 3-7kW, which will allow you to charge your vehicle fully overnight.
However, if your vehicle needs to be kept on-site for multiple uses throughout the day and needs a quicker turnaround time between charges, you’ll need a faster unit. Fast chargers, typically between 7-22kW, will take 2-4 hours for a full charge – these are the charging units you will often see in supermarket car parks and public spaces. If you need an even faster turnaround, there are now rapid and ultra-rapid charge points that can be anything between 100-350kW. These will charge most EVs to full capacity in around half an hour, but they are the most expensive option. Some EVs also have a limit on how much power they will receive while charging, so make sure your model is compatible before investing in a faster charge point.
You can use our Low Carbon Network to find an accredited local charge point installer who will be able to guide you through the process.
RC: It’s also important to consider your site’s electricity consumption and any grid constraints you may have, especially if you’re considering multiple EVs or require rapid charging. If you’re close to your supply capacity, look at ways to reduce your consumption through energy efficiency improvements to lighting, production equipment and any electric heating.
Another thing to consider is your electricity supply arrangement. If you have changeable time-of-day tariffs in your contract, avoid charging at peak times when power is more expensive. If you’re on Economy 7, for example, it will be much more cost-effective to charge your vehicle overnight.
Using public charge points
JS: You can use tools like ZapMap to find public charge points and plan routes. There are a large number of separate public charging networks across the country, some national and others specific to certain areas. Access and cost varies by network – some are free to use, although faster chargers generally require payment. Some have their own app or key fob for access, but contactless payment is becoming more common and major operators have recently agreed to allow more flexible cross-use across different networks.
Greater Manchester has its own charging network, which is currently free to use but is expected to move to a pay-as-you-go model in future.
When to make the move
RC: Even though the EV market is still developing, there are advantages to going electric sooner rather than later, particularly if you have a car that will soon need replacing. As EVs will eventually be the most common form of vehicle on the road, only the early movers will get the competitive benefits. A lot of businesses will understandably wait for prices to fall further, but as we mentioned earlier it’s the total cost of ownership that counts.
The choice may be a bit sparse at the moment for vans, but with Greater Manchester’s CAZ due to come into force from 2021 – and others such as Leeds and Birmingham launching later this year – the sooner you can move any vans to lower emission alternatives the better. Diesel vans will have to be 2016 or later to avoid penalties, but if you choose to wait a little longer, second-hand electric vans will start becoming available.
JS: It’s also worth keeping in mind the government grants available. Up to £3,000 is currently taken off the price tag for new electric cars, and up to £8,000 for vans. These grants have recently been extended to 2023, but depending on how quick the uptake is they may not last that long – and there’s no guarantee they’ll be extended again.
Not ready quite yet?
RC: For those who cannot afford to go electric quite yet, there are plenty of other actions you can take to minimise the environmental impact of your current fleet and make cost savings. This includes driver training and telematics to monitor fuel consumption and mileage – there are lots of efficient driver courses available in the North West, and those who have been on them generally achieve large savings on their fuel bills as a result.
If EVs aren’t feasible because your journeys involve carrying large or heavy loads, then look instead at improving the efficiency of how you pack your vehicles to minimise empty space. Route planning and travelling at non-peak times can also reduce your fuel consumption and improve efficiency. The most important thing is to be as efficient as you can with your current set-up – that’s arguably even more important than going electric!
Posted under General Interest, Fuel Efficiency and Automotive on 25 March 2020