Written by Hejab Azam
17 May, 2019
When it comes to a company fleet, small aspects of managing your fleet can become costly. Many businesses forget to consider “whole life cost” which is the true cost of running a car. Legislative and environmental changes can also have a huge impact on the cost of a vehicle. And when you have multiple cars, costs of running a large fleet can rapidly increase.
Businesses are transforming their fleets by incorporating electric vehicles to reduce their carbon footprint and they are also finding that switching to electric vehicles reduces their fleets’ overall expenses compared to regular internal combustion engine cars. Research by the International Council for Clean Transportation examined a number of Europe’s best-selling cars including the VW Golf in its electric, hybrid, petrol and diesel versions. They found that over four years, the electric version was the cheapest. This is due to a combination of lower taxes, subsidies on purchase price, and lower fuel costs.
It’s estimated by 2030 there will be 123 million electric vehicles on the road, according to the International Energy Agency. If a mass switch to EVs takes place, by 2030 hundreds of millions of tonnes of CO2 could be saved. Many governments in countries across the world have started initiatives to reduce CO2 emissions and increase use of electric cars. For example, China has introduced Made in China 2025 which incentivises people to buy electric vehicles (EV). Sales of EVs in China are now more than half of all new energy vehicles sold globally. And in Norway, the electric car market has overtaken traditional vehicle sales, with a series of incentives introduced by governments over the past decade.
In the UK, you can get a number of government funded grants if you purchase an electric vehicle. Electric vehicle owners also get tax benefits and, the running costs of electric vehicles are typically lower. Introducing electric cars in your fleet can be a great way to reduce fleet costs.
Electric vehicles are typically more expensive to buy than petrol or diesel vehicles. This is mainly due to the expensive battery technology used within them which increases the headline costs. However, the British government has introduced initiatives such as government grants which contribute towards purchasing electric vehicles.
The government’s Plug-in Vehicle Grant is a great way to acquire new electric vehicles for your fleet. If you choose a car with CO2 emissions of less than 50g/km which can travel 70 miles without any emissions, the grant will pay for 35% of the purchase price of the vehicle up to a maximum of £3500. Whether your fleet is large or small, this could be a huge cost saver, and there are some excellent vehicles that fall under this category which you can find on the government’s website. Examples of approved vehicles include the Tesla Model 3, Audi e-Tron, Jaguar I-Pace, Volkswagen e-Golf, and many more. Grants are also available for vans that fit the same criteria. The grant provides 20% of the cost of a van up to £8000.
Alternatively, if you want to acquire vehicles through a lease agreement, there are other government grants which can still help reduce costs. For example, you can apply for an OLEV grant which is a government grant for electric car chargers. The grant provides up to £500 per socket, for up to a maximum of 20 sockets for dedicated off-street parking for employees, visitors, or fleet use. With an electric fleet, workplace charging would be essential for your daily operations and could be a huge cost saver.
Although upfront costs of purchasing electric vehicles may be high, the overall running costs of running an electric vehicle fleet is much lower than running petrol or diesel cars. When it comes to the cost of vehicles, it’s important to take into account “whole life cost”. These are the extra costs associated with running a fleet, beyond the initial purchasing price. This includes fuel costs, service, maintenance and repair (SMR), tax, insurance, and any other cost associated with running a vehicle.
If you have an electric vehicle fleet, these costs can be significantly reduced. For example, according to Lex Autolease, electric vehicles have an estimated 20%-40% reduction in SMR costs than petrol or diesel cars. This is because electric cars don’t have as much equipment as cars with internal combustion engines, oil and fuel filters, exhausts, transmissions, spark plugs etc. Therefore, you don’t have the cost of maintaining those parts.
A reduction in whole life costs of your fleet would mean an immediate reduction in costs to your business.
Businesses can take advantage of the low charging costs of electric vehicles. According to Driving Electric, it’s estimated than an electric vehicle has some significant savings compared to a diesel equivalent. For example, over a year and across 9000 miles, the diesel Hyundai Kona would cost you roughly £825 a year to refuel- making it 9.1p per mile to run. The Kona Electric on the other hand would cost you a total of £250 in recharging fees – 2.7p per mile. This figure is if you are charging at home, which – according to Go Ultra Low – is where 90% of electric vehicles are charged.
At public charging points, the prices vary across different locations. Some public chargers such as Polar Plus have a subscription service costing £7.85 a month, and new customers get the first three months free. Polar Instant on the other hand, is a pay-as-you-go service which has an admin fee of £1.20. Charging varies from £1 to £6 depending on whether you use a slow charger or a rapid one.
Most service stations in the UK have rapid chargers which cost slightly more than home or workplace chargers but give your car a full charge in a short amount of time. For example, some motorway service stations have Ecotricity as their service provider which charge you 30p per kWh. This drops to 15p if you are an existing customer. Hypothetically, if you weren’t a customer and wanted to charge your 40kWh Nissan Leaf, it would cost you £12.00 to fully charge your car for a claimed 200+ mile range. Not bad, considering how much it would cost you for a full tank of fuel.
If your drivers and employees regularly commute to London or other major cities, they may be exempt from certain charges and penalties. For example, electric cars are exempt from Congestion Charge and Clean Air Zone penalties. According to Energy Saving Trust, Plug-In cars with emissions of less than 75 g/km C02 or less are eligible for a 100% discount from London congestion charge. If you’re regularly commuting in and out of this zone, you could save over a £2000 a year! These savings could be greater with exemptions from London’s Ultra Low Emission Zone (ULEZ) or Clean Air Zones (CAZ) charges.
There are a number of tax benefits with driving electric cars which could be a huge cost saver for your business.
Firstly, pure electric cars are exempt from paying vehicle excise duty. Cars with 75g/km CO2 will pay less road tax in the first year, saving your business money if you have plug in hybrid cars.
Capital allowances allow businesses to keep track of the cost of purchasing vehicles against taxable profits. Cars with 50g/km or less are eligible for 100% first year capital allowance. If your business has zero emission vans and you haven’t claimed the plug-in van grant, you are also eligible for the capital allowances benefit.
Cars with emissions between 51-110g/km are eligible for 18% of the cost of your vehicle against your businesses annual taxable profits. This goes to 8% if your car has over 110g/km. Businesses can also claim 100% of first year allowances on electric car charging points if you install at your workplace. This means you can deduct the cost of the charge point from company pre-tax profits each year.
Additionally, businesses have to pay National Insurance contributions on Benefit in Kind tax such as company cars for employees. If you switch to electric cars, there could be a significant reduction in the National Insurance you have to pay, compared to if you have petrol or diesel cars. For example, if you were to offer your employees a diesel Seat Leon ST, you’d have to pay £1,045 in National Insurance contributions. Whereas if you offered an electric Nissan Leaf, you’d only have to pay £585 – that’s a reduction in almost half of your costs!
What better way to see if an electric car is right for your business, than to try one for yourself? We have an excellent lease deal on the all-electric Tesla Model 3. Take the first step to transform your fleet!