Comment: Time to act on fleet electrification – here’s how
David Bushnell, principal consultant, Alphabet GB, on all the areas fleets need to address when adopting electric vehicles.
As anyone who works in or around fleet and mobility knows, we are now firmly on the Road to Zero in the UK, with increasing pressure from within and outside of our organisations to enable more electric vehicles (EVs) and plug-in hybrids (PHEVs) into fleets. Meanwhile, other demands on modern fleets – the need to optimise fleet performance, find efficiencies, manage duty of care obligations, as well as complying with changing local and national regulations or legislation – are ultimately in addition to the overriding business objective of continuing to deliver effective, sustainable operational performance.
These pressures and demands come from many sources. Company car drivers are keen to go electric or hybrid because they can reduce their personal Benefit-in-Kind tax burden, especially from April 2020. Following the Government announcement in July, company car drivers now have the option to choose a vehicle which is zero rated for BiK and rises only to 1 and 2% in subsequent years to 2023. For some company car drivers this tax saving could be worth hundreds of pounds per month and many thousands of pounds per year, so will clearly have appeal. What’s more, HMRC has set a fuel reimbursement rate, for business miles completed in an EV, of 4p per mile – which is more than the actual average cost of the energy used. For those company car drivers who can’t or won’t make the switch to a full battery electric vehicle, the plug-in hybrid option will certainly be an increasingly attractive proposition in terms of BIK liability over the next few years until April 2023.
Pressure also comes from company directors and managers, who are now in a position to share capital costs relating to EVs with their employees – as will be explained later in this article – and are more likely to favour pure EVs in light of the removal of Government purchasing incentives for plug-in hybrids with the Plug-In Car Grant (PiCG). There are also reputational and brand image benefits for an organisation – in addition to demands from customers and employees – to be visibly and demonstrably committed to working in a cleaner, more sustainable, more responsible way.
There is no doubt that many businesses now have a real focus on electrification of their vehicle fleets and that it offers significant benefits for fleet operators, decision makers and drivers alike. But these benefits can only be realised if organisations have the right electrification strategy, implement it correctly and clearly communicate any associated policy changes.
The uncomfortable truth is that, even though companies are under huge pressures to electrify their fleet, regardless of driver and vehicle profiles, if EVs and hybrids are given to drivers for whom they are unsuitable, the benefits may not apply and further costs may arise. In this article, we explain how you can avoid that trap.
Does the EV fit the driver?
Battery technology has improved greatly in the last few years and it’s now common for EVs to travel 150 to 200+ miles on a full battery. That means the often-cited complaint that ‘there aren’t enough charging points to make EV use realistic’ is largely irrelevant for many drivers on a daily basis, particularly given the average round-trip commute is between 45 and 100 miles. That doesn’t mean however that an employee’s 400-mile round-trip to Manchester every month isn’t a concern to them and could potentially put them off taking an EV.
What this also means is that the ability of the driver to charge the vehicle at home is crucial. There are, of course, examples where employees successfully use an EV and do not have home charging, but this requires a level of public charging infrastructure available which is currently the exception rather than the rule. So when allocating fleet EVs to drivers, the organisation must be satisfied that the driver can successfully charge that vehicle overnight. Most vehicle batteries are going to need 6-8 hours on a 7Kw feed to charge fully; this generally rules out the local supermarket or council car park, which often use ANPR cameras to enforce stays of less than 2-3 hours and effectively limits the charge point to wherever the vehicle stays overnight.
Fortunately, if drivers have dedicated off-road parking, such as a driveway or nominated parking bay, they probably qualify for an OLEV grant that pays 75% (maximum £500) of the cost of installing a home charge point. What’s more, there is a good argument for the home-owner/employee to bear the additional cost – which is likely to be in the region of £300 to £400– as in the long run it will add to appeal and value of their property. Alternatively, some companies may wish to contribute on a shared cost basis but the provision by an employer of a chargepoint at the employees’ home does give rise to BiK. Either way, there are clear mutual advantages in terms of capital cost reductions for the company, as well as long-term fuel and tax savings for the individual. Clearly though, for employees who live in rented or leasehold properties – and even for those businesses that rent rather than own their premises – the situation is much more complicated. There is currently a Government consultation (closing 7 October 2019) proposing to amend building regulations for new residential and non-residential buildings to include requirements for electric vehicle infrastructure.
Drivers who cannot install a charge point at home may still want to choose an EV and wish to charge their vehicle at work. That sounds straightforward, but unfortunately it’s not.
Any company installing workplace chargers must have rigorous employee policies and an EV charging strategy in place. For example, which employees are allowed to use the workplace chargers? When can they use it and for how long? How will your organisation manage ‘charge hoggers’ who park up to charge and leave their vehicle there all day? Even if an app is used to alert them, what happens if the owner of the car attached to the charger is off site, in a meeting or ignoring their phone? We currently hear of lots of organisations and employee groups using unofficial ‘WhatsApp’ groups to manage their EV charging needs and usage – but how sustainable and scalable is this if 20%, 40% or 60% of your workforce needs to use these chargepoints? Think of chargepoints like your company’s meeting rooms – they are shared company assets for all employees, so will require management, a booking system or at least some form of transparency and ability to self-serve.
Another key question is perhaps obvious: how many chargers can you accommodate, how big is your fleet and ultimately what will it cost? If your fleet is 200 vehicles or more, you clearly need a strategy beyond simply installing workplace charging. Employers can also take advantage of the Workplace Charging Scheme (WCS) that provides support towards some of the up-front costs of the purchase and installation of electric vehicle chargepoints.
There is also the thorny issue of the company knowingly or inadvertently paying for drivers’ ‘fuel’. After all, if you wouldn’t install a petrol pump for your ‘traditional’ company car drivers, why would you install chargers for your EVs? That’s not to say you shouldn’t – but you do need to know exactly why you’re doing it and how, or chaos and bad feeling will ensue. There is also a question around Benefit-in-Kind tax on ‘free’ fuel which you need to consider carefully. However the Government announced at Autumn Budget 2017 that employer-provided electricity, provided from workplace charging points for charging employees’ own electric vehicles, is exempt from being taxed as a BiK.
But I can’t get there in an EV!
For those fighting objections to EVs or yet to be convinced of their practicality, the question of range and employee mileage often comes up. The good news is that modern batteries should easily take an EV 180 miles or further. The bad news is that sometimes you have a small but vocal proportion of company car drivers who need many more miles than that.
This is why businesses and fleet decision-makers need to undertake a comprehensive analysis of current vehicle usage patterns as the first step in your electrification strategy and policy development. If a driver regularly exceeds 200 miles a day (assuming you have ensured overnight charging, as above) then you either have to look at roadside charging options or find another type of vehicle until battery technology catches up. But many drivers only travel long distances occasionally, in which case hire cars or pool vehicles might be a useful solution. This may sound inconvenient, but the more practical fleet managers make it, the more likely it is to be used.
Fuel cards are very popular within fleets and with drivers so have to be a central consideration as part of any electrification strategy. In doing so, the incentivisation of charging the vehicle – particularly with PHEVs – must be kept in mind. Fuel cards should give drivers a choice of home charge/charging point/fuel as appropriate; the good news is that integrated cards are now starting to become available in the UK market.
To summarise, the UK’s Road to Zero Strategy, along with changing consumer and employee attitudes and updates to taxation and regulatory frameworks, means that now is the time for organisations to act on fleet electrification, if they have not already started. In doing so, however, fleet decision-makers must establish a comprehensive strategy that outlines precisely how they are electrifying, why they are doing it, the changes in real-world behaviour required (reinforced by policy) and what the benefits are to the organisation and employees.
If that is done, the business benefits of electrified vehicles and the competitive advantages it offers will be theirs for the taking.