Jonathan Musk looks at why recent legislative changes to how electric vehicles are taxed will be the tipping point for their acceptance and should encourage fleet uptake.

Electric vehicles (EVs) represent the most significant opportunity for your fleet since diesel became a mainstay fuel in the early 90s. If you haven’t already planned for EVs on your fleet, then you should do so now to capitalise on massive potential savings. However, getting to the stage whereby EVs make up a majority of fleet vehicles will be a fairly rocky road. Although they may well represent the future for fleets, take-up thus far has been limited by supply constraints and the current range of EVs on the market not meeting criteria seen as important for mass adoption.

The BVRLA and its members have pledged to buy 300,000 plug-in cars and vans per year by 2025, but at the end of 2018 only 50,000 had been bought by fleets. Meanwhile Capgemini says only 28% of companies have implemented electric cars in their fleets or plan to do so in the future, both indicating that certain hurdles need to be overcome over the next five years to reach targets.

However, there’s no question of the potential for fleets to make a huge impact in the market. According to research by Capgemini, company cars account for 44% of all new EV registrations in the European market which – in the total fleet leasing business – amounted  to €10.47bn in 2018, representing 77% of the total new leasing business of €13.6bn.

Up until recently, corporate taxation for EVs was a major factor, as despite benefiting from nil to pay vehicle excise duty (VED), the Government demanded that company cars used by employees for private use pay Benefit-in-Kind (BiK) tax of 16% for an electric car in the 2019/20 tax year. However, HMRC announced on 9 July that the BiK rate for zero-emissions vehicles will drop to 0% for the 2020/21 financial year, rising to 1% in 2021/22 and 2% in 2022/23. These new rates will also retrospectively apply to cars already registered before 6 April 2020, when the new rates come into effect. Although this is clearly a step in the right direction, commentators criticised the Government for not going far enough or announcing the rates for the years beyond 2023.

Similarly, plug-in hybrid vehicles also benefit from preferential BiK tax rates due to their low CO2 figures; the greater   rate depends on electric range, with the greater the electric-only distance the vehicle is able to cover, the lower the BiK rate.

Fiona Howarth, CEO at Octopus Electric Vehicles, says: “The new BiK rates are even better news for employers who offer salary sacrifice schemes, and the employees who make use of them. For example, on Octopus EVs’ Energised Staff Scheme, employees can save up to 50% on the monthly cost of their car.

“The employer will enjoy offering a benefit of significant financial value to their employees and themselves, while at the same time making a highly visible commitment to tackling climate change and local air pollution – at no implementation cost, and with all bases covered should the employee leave during the lease period.”

Coincidentally, the then Prime Minister, Theresa May, announced in early June that the UK would be the first major economy to commit to net zero carbon emissions by 2050, which puts transport right at the centre of debate. Mike Brown, director of industry collaboration & partnerships at the University of Salford, commented: “The transport sector as a whole is already under scrutiny, with ground transport accounting for 27% of the UK’s Greenhouse gas emissions, therefore the need to move to EVs must be a priority in the coming years.”

Hurdles and solutions

Over the last couple of months, the government has made electric cars attractive to fleets once again. However removal of the Plug-in Car Grant (PIGG), that took £2,500 off the price of plug-in hybrids has had an effect. In addition, the BVRLA suggests government should also get rid of the £320 VED surcharge for EVs costing over £40,000 and extend the remaining PiCG for electric vehicles – which removes £3,500 from the list price of a qualifying electric car and up to £8,000 for an electric van – until 2025 rather than the current situation that leaves fleets guessing from one year to the next.

Further hurdles to adoption include the supply of vehicles, perceived issues with charging and range as detailed.

It’s a supply problem

In relation to the supply of vehicles, the issue tends to boil down to battery constraints and the difficulty in getting enough availability for cars. Or at least, that’s the common perception of many and that has been allowed to propagate by manufacturers. Instead, the reality is new so-called ‘Gigafactories’ have been coming online to meet demand, each with the potential to build enough batteries to supply 300,000 vehicles each year. However, although battery partnerships have been formed between most major OEMs and battery manufacturers – such as LG Chem with Jaguar, Hyundai, Renault and Volvo, Samsung SDI with Volkswagen and BMW – it’s difficult for a manufacturer to buy in batteries when it has previously pushed the fuel-purchase onus onto customers. Suddenly, manufacturers are in the business of buying ‘fuel’ for vehicles from a third party, which is expensive; the obvious knock-on effect being a price hike for the end-customer.

Compounding the issue, OEMs are under pressure from governments around the world demanding they reduce their overall fleet emission CO2 average. Commonly referred to as ‘CAFE’, the regulations mean that manufacturers selling cars will face significant fines if they breach legislatively set limits by Europe. Consequently, supply of plug-in hybrid vehicles has been affected, with many manufacturers pulling cars from line-ups before reintroducing them with <50g/km official CO2 emissions. However customers are unlikely to be able to buy these vehicles till next year, ensuring they contribute to the tougher 95g/km manufacturer corporate emissions  average.

To make this costly process more affordable for manufacturers, Cornwall Insight says that “it’s no surprise that there are so many global tie-ups, with eight of the 13 major car manufacturers having either engaged or attempted to arrange a joint venture.”

Range anxiety

Range anxiety continues to be the biggest barrier to the large-scale adoption of EVs, according to ABI Research. However, the firm’s research finds ongoing and significant improvements in battery technology will pave the way for an installed EV base of 100 million by 2028, with 11 million EVs on UK roads by 2030 according to the National Grid.

With technologies from promising start-ups StoreDot and GBatteries able to offer sub 10-minute charging for both advanced lithium-ion batteries or using AI charging on today’s battery technology respectively, it is conceivable that within the next five years charging will become a past issue and, consequently, if there’s suitable supportive infrastructure, range too should be eradicated as an obstacle.

In regard to supportive infrastructure, great strides are being made with, for example, the introduction of Europe’s Ionity network – a series of more than 400 rapid chargers across Europe backed by Daimler, Ford, BMW and Volkswagen Group. The difference this time being manufacturers are taking the reins on charging cars in a bid to encourage uptake of EVs, rather than relying or waiting for third-parties such as fuel companies to come up with the solutions. These rapid chargers are set to offer up to 350kW charging initially, which in a compatible vehicle should be good for giving a 220-mile range in around 10 minutes.

Additionally, other networks are installing more rapid charge points, such as BP Chargemaster and Shell Recharge at fuel forecourts. And, thanks to another set of legislation, all rapid chargers installed from 2020 onwards will support contactless credit card payment, negating the need to join networks or carry around RFID cards. In the UK, BP Chargemaster has already begun retrofitting this technology to its existing rapid chargers.

An electric future

Keen to facilitate the move to EVs, electricity service providers are set to become the new oil magnates and are therefore eager to spread the message to fleets of the potential cost savings to be had.

Philip Valarino, EV lead at EDF Energy, says: “Over the last 12 months, we’ve noticed a marked increase in the number of customers asking for help in getting set up with EVs.

“The average British petrol and diesel motorist will spend around 6.5p and 11.5p per mile, while EVs typically cost 4p. Maintenance costs are lower too; EVs have fewer moving parts, which means fewer things to replace as they wear out, and are exempt from congestion charges – a significant saving for those travelling through central London.

“Couple these benefits with smart charging technology such as vehicle to grid (V2G) – which creates revenue streams for businesses by selling unused energy back to the grid – and the case for business EV fleets strengthens even more.

“Electric vehicles won’t suit every business just yet, but it’s clear that they are here to stay. As the technology evolves we’ll be seeing more vehicle types and longer ranges, which is bound to encourage more businesses to make the change.”

Of course, with London’s new Ultra-Low Emission Zone (ULEZ) now in force, as well as other towns and cities looking to implement similar anti-pollution zones, electric vehicles will quickly become the de facto choice for fleets operating in or near large urban areas. This may well be the catalyst, but it would also be prudent to recognise that as EV sales increase, government revenue streams from fuel and tax will decline. Therefore, the BVRLA is pressing Government to begin looking into an alternative to CO2-based taxation for vehicles, which is likely to adopt a mileage basis, with higher-mileage drivers paying for their proportion of road use.

The Mayor of London is working on E-Flex, a vehicle to grid project, that can deploy unused electricity in the EV’s battery. The technology is still in its infancy, but several manufacturers are running pilot schemes, such as Renault in the Netherlands and Portugal. This does raise the question about energy supply, although this is an infrastructure issue that needs to be addressed by organisations outside of the fleet remit. However, early indications following various trials report that there is enough energy to go around, but that more will be needed in the future and the National Grid’s own Future Energy Scenarios report concluded that the Government’s 2050 decarbonisation target could be met and that electric vehicles will play an important role in meeting this goal.

The immediate future

Ultimately, the combination of all these factors will make the next few years the most exciting in automotive history. New electric models are on the horizon that promise to answer all the uncertainties around current electric vehicles, and there’s added impetus by manufacturers to sell EVs on a major scale to avoid hefty penalties.

The key take-away for fleets is that there has never been so much choice and it’s arguably easier than ever to choose the right tool for a specific job-need.

Legislative changes this year have made little effect just yet, but they set the foundations for mass electric fleet adoption, removing all the typical pain points commonly associated with the technology. In addition, even disregarding BiK and charging infrastructure, EVs offer the potential for fuel and maintenance savings, as well as local environment and employee health benefits. There’s never been a better time to plan electric vehicles into your fleet and make the most of the opportunity they present.

Hot topics of debate

Are lithium-ion batteries truly the answer for electrifying the masses? Hyundai, Toyota and Honda each produce hydrogen fuel cell-powered electric cars, which purport to offer what everyone wants: fast refuelling, zero CO2 emissions and long range.

However, the technology has its own problems, such as the difficulty in harnessing hydrogen that requires bulky storage tanks, hindering efficient vehicle packaging. In addition, although hydrogen can be extracted from water via hydrolysis, in the region of 95% of today’s hydrogen is extracted from fossil fuel. However, the fuel could work well for LCVs and HGVs, with Toyota and Mercedes-Benz both currently testing big-rigs in the US.

The flip-side to this is that battery advances are coming thick and fast and they could spell the end for hydrogen’s relevance as they get smaller, more energy dense and are able to charge just as quickly as it takes a hydrogen vehicle to refuel.Vehicle-to-grid (V2G) technology could enable fleets to earn as much as an estimated £400 per electric vehicle per year while not in use.