- Government to retain electric vehicle purchase incentives 2015-2020
- Electric vehicles can benefit many fleets with varying profiles
- Fleets can still benefit from Plugged-in-Fleets Initiative
- Drivers key to successful fleet implementation of electric vehicles
- EV residual value setting is single biggest leasing industry challenge
Ambitious Government plans to make the UK the world leader in electric car adoption could be hampered by its decision to increase company car benefit-in-kind tax on those vehicles by 500% in 2015/16 with a further rise due in 2016/17.
Zero emission electric vehicles are currently 0% rated for company car benefit-in-kind tax, but fleet-decision-makers’ organisation ACFO’s Electric Vehicle Seminar heard that fleet demand could be hit by HM Treasury’s decision to increase the charge on models to 5% in 2015/16 and 7% in 2016/17.
Corporate demand for electric vehicles is rising, and the 2013 launch of the BMW i3, which fleet chiefs had an opportunity to drive at the Seminar on Tuesday, February 18, at BMW Oxford – the home of the Mini – is seen by many, including ACFO chairman Damian James, as a potential “game-changer” in fleet demand for zero emission cars.
ACFO has already called for the Government to reconsider the rise in benefit-in-kind tax on electric vehicles in its 2014 Budget Statement on March 19.
At the seminar ACFO director Phil Redman called on fellow fleet decision-makers to talk to their MPs about the benefit-in-kind tax rise as it “will act as a dissuader” to demand.
He added: “ACFO has put pressure on the Government and we want fleet managers to do so as well. The tax rises should not be coming in before 2020 to enable electric vehicles to become established.
“We need to remind HM Revenue and Customs that electric company cars are on long-term retention, perhaps four, five or six years. To establish the market, the tax rise should be delayed and employees also need to know the tax position well into the future so as fleet managers we can convince them that they are the right vehicles to have.”
Anna West, head of consumer initiatives at the Government’s Office for Low Emission Vehicles, which is charged with encouraging the adoption of ultra low emission vehicles, said the Government was committed to maintaining a two percentage point differential between the 0-50g/km and 51-75g/km company car benefit-in-kind tax band in 2015/16 and beyond, but that HM Treasury “was unable to maintain” the 0% rate on zero emission models.
The Government has established a Plug-In Grant scheme to help the corporate sector and consumers acquire electric vehicles – maximum grants of £5,000 on a car and £8,000 on a van are available.
The car grant scheme – 20 models are currently eligible – was launched in January 2011 and up to the end of 2013, 6,709 claims had been made. The van grant scheme – seven models are currently eligible – was launched in February last year and in 2013, 404 grant claims were made. The business sector accounts for 47% of all grants.
Grant take-up last year was 335% higher than in 2011 and Mr Redman told more than 110 fleet decision-makers at the Electric Vehicle Seminar: “The marketplace is changing so electric vehicles have to be a factor on fleet managers’ radar.”
But, he added: “Electric vehicles will always be a niche within fleet operations, but it will be a large niche rather than a small niche.”
Government to retain electric vehicle purchase incentives 2015-2020
Fleets can expect incentives to remain in place to assist in the acquisition of electric vehicles from 2015, OLEV has hinted.
OLEV is currently analysing responses to a consultation document on how a further £500 million of Government cash might be spent to support the uptake of low emissions vehicles between 2015 and 2020.
Delegates were told by Ms West that an announcement would be made in the spring on the draft package of support in advance of implementation from April 2015.
“We think there will be some form of purchase incentive available from April 2015 so the fleet market is supported in electric vehicle acquisition,” said Ms West. “We recognise that fleets are leaders and we need to get them on board to make sure our agenda to encourage adoption of ultra low emission vehicles is a success.
“We have had a fantastic response from fleets so far with almost 50% grant uptake being from the business sector. Where fleets lead others will follow.”
The Government has forecast that by 2050 it anticipates almost every car and van on the nation’s roads will be an ultra low emission vehicle – and that implies a huge take-up among fleets and consumers for electric power.
Nevertheless, Ms West said OLEV did not believe there would be a single mobile solution, but a range with pure electric vehicles, plug-in petrol and diesel and hydrogen models among those available.
She said: “We are moving towards a zero emission world and we are here to kick-start change.”
Existing and future electric vehicle purchase incentive schemes are supported by a range of tax incentives that, apart from company car tax, include special rates in relation to Vehicle Excise Duty and capital allowances.
However, electric vehicle mileage reimbursement rates for company cars (Advisory Fuel Rates) and privately-owned cars on business trips (Approved Mileage Allowance Payments), despite repeated ACFO requests, remain to be clarified.
Ms West told delegates: “We are working with HMRC to try and develop a new regime and guidance will be published soon.”
Electric vehicles can benefit many fleets with varying profiles
Electric vehicles can be utilised by many different fleets operating across a wide cross-section of age and mileage profiles, according to experts.
Energy Saving Trust consultant Karl Anders told ACFO Electric Vehicle Seminar delegates: “What we have learned from our research and analysis across many different types of fleet operation is that there is no single bespoke profile.”
Critically fleets must balance the higher procurement cost of electric vehicles when compared with petrol and diesel models with lower in-life operating costs.
As a result, said Mr Anders: “When analysing electric vehicles it is necessary to look at different replacement cycle and mileage profiles to the standard three years/60,000 miles or four years/80,000 miles for petrol or diesel models.
“The challenge is to identify an electric vehicle opportunity and understand the whole life costs across different mileage patterns. One size does not fit all. It is all about finding the sweet spot over a longer replacement cycle.”
When fleet managers seek to identify electric vehicle opportunities other key considerations in addition to the mileage profile also include recharging opportunities and limitations and vehicle specification with payload limitations, he explained.
Vehicle Leasing and fleet management company Alphabet has launched AlphaElectric in a bid to encourage corporate demand for electric vehicles.
Nigel Trotman, strategic fleet consultant at Alphabet and an ACFO member, said: “We feel very positive towards electric vehicles. It is all about fleets getting the optimal blend of internal combustion engine (petrol/diesel) models and electric vehicles in realising any cost and carbon dioxide (CO2) savings.”
Research by the company among fleet mangers in the UK, France and Germany identified five key hurdles that needed to be overcome in encouraging electric vehicle adoption: Fleet suitability of electric vehicles, cost, residential and work place recharging, access to public recharging and range anxiety.
An analysis of nine vehicles over a six-week period on one client’s fleet revealed that only three of the cars were not suitable to be replaced with electric models.
Of the other six models one was ripe for electric vehicle substitution with the remaining five potentially suitable if charged mid-journey or an alternative petrol/diesel model was available for some journeys.
As a result, Alphabet concluded the fleet, which has yet to make a final decision as to whether or not to go along the electric vehicle route, could cut operating costs by 13% and reduce CO2 emissions by 66%.
Mr Trotman concluded: “Getting vehicle recharging right is absolutely key to running a successful electric vehicle fleet.”
Additionally, it is critical to educate drivers on vehicle recharging with available electric vehicles presently equipped with either a five or seven pin connection and different modes of recharging available – standard, slow fast charging and rapid charging.
There are presently around 18,000 electric vehicle recharging points across the UK and Peter Lunt, Energy Saving Trust fleet consultant, said: “There is an increasingly wide and varied recharging infrastructure. Drivers need to be aware of that, particularly prior to setting off on a journey.”
Fleets can still benefit from Plugged-in-Fleets Initiative
A handful of places exist for fleet managers to sign up to the Government-backed Plugged-in Fleets Initiative 100 to discover if electric or plug-in hybrid vehicles make sense for their businesses.
As part of the Plugged-in Fleets Initiative (PIFI), which is funded by the Department for Transport and Transport for London, the Energy Saving Trust is undertaking a free bespoke analysis on 100 fleets to help them understand where ultra-low emission vehicles could work for them.
More than 90 fleets have so far taken part in the initiatives, but there is still time for further fleets to apply – go to www.energysavingtrust.org.uk/pifi or email pifi@est.org.uk.
Interested fleets should complete an application form and provide data about their fleet including the types of cars and vans operated, usage and mileage patterns.
Based on information provided and interviews with an organisation’s fleet decision-maker, the Energy Saving Trust team will provide a detailed report and analysis using whole life vehicle costs with recommendations of how plug-in vehicles could work in a business.
Although current PIFI funding expires on April 5, the Government is currently exploring options for a further phase in 2014/15.
Mr Anders said: “Any fleets interested in being involved should get in touch as soon as possible.”
Drivers key to successful fleet introduction of electric vehicles
Drivers are key to the successful fleet introduction of electric vehicles, according to Energy Saving Trust fleet consultant Karl Anders.
“Some drivers are very anti, but all organisations also have environmental warriors and when employees get to drive an electric vehicle they realise they are a lot of fun,” he said.
Highlighting the exceptional torque and power available from start-up when compared with diesel and petrol engined models, Mr Anders said: “Drivers do not have to rev an electric vehicle very hard for it to respond.
“Getting employees to drive electric vehicles and experience performance for themselves is very important.
“They need to be involved in the whole process because different driving skills are required to obtain maximum performance and increased range.”
It’s a view shared by Mr Redman, who said the introduction of electric vehicles to IBM’s company car choice list where he is fleet manager had been accompanied by a major employee awareness programme.
At IBM, where Mr Redman manages a 4,000-strong company car fleet and 5,500 cash allowance drivers, employees were asking about the availability of electric vehicles and subsequently five employees have selected them with orders placed for a further seven, including six BMW i3s.
In addition to undertaking cost calculations and introducing a long-term demonstrator programme, Mr Redman said the provision of additional driver information included intranet and employee bulletin articles, information on vehicle space which can be limited due to battery packs and advice on vehicle recharging and the impact of seasonal variances on driving range.
Paul Barker, editor of fleet industry publication BusinessCar, highlighted the pros of cons of electric vehicles having “lived” with a Vauxhall Ampera range extender car for six months. It features a battery with an internal combustion engine generator on board giving the car a battery range of about 50 miles extended by up to about 310 miles by a 1.4-litre petrol engine.
Mr Barker explained: “Maximising the benefits is all about usage patterns, Fleet managers need to consider like never before how a vehicle will be used. Vehicles will be either perfect or pointless depending on their use, but vehicles must be fit for purpose.”
And, he urged fleet manager delegates: “Don’t get distracted by the technology and remember an EV must function as a vehicle, but they are part of the solution.”
Electric vehicle residual value setting is single biggest leasing industry challenge
Setting residual values on electric vehicles poses the single biggest challenge for the contract hire and leasing industry since the advent of leasing, Jim McNally, Alphabet’s asset risk manager told the Seminar.
The fact that electric vehicles were a step into the unknown with no meaningful volume in the marketplace coupled with a lack of historic data on which to base used vehicle values, were all reasons why residual value setting was proving to be a challenge.
Mr McNally, who is also chairman of the British Vehicle Rental and Leasing Association’s Residual Value and Remarketing Committee, said Alphabet disposed of 30,000-40,000 vehicles a year and to-date had remarketed just one electric vehicle.
He continued: “Some leasing companies don’t want to know about electric vehicles. But I believe that is a fear of the unknown rather than venturing into the unknown.”
Alphabet is owned by BMW and has launched AlphaElectric, the company’s four-step approach to electric vehicle mobility adoption.
“There is a long way to go before electric vehicles are taken up by a significant number of fleets. But there is an incentive for us to get it right, while other leasing companies may not be in that position and that appears to be the case. There is a higher risk than they are willing to adopt.”
Alphabet has written electric vehicle contracts on four, five and six year replacement cycles to make model usage viable on a whole life cost basis.
But Mr McNally said: “Those vehicles will be disposed of in the future, so we don’t have the disposal data in our data bank.”
But, he said, against that background a “bold” residual value risk stance had been taken because a lack of volume meant Alphabet would not incur significant losses.
He also highlighted how plug-in range extender vehicles such as the Vauxhall Ampera, had a broader appeal so the company had set higher residual values on those than on pure electric vehicles.
“We are not favouring range extender vehicles, but we are reflecting the flexibility they offer drivers,” said Mr McNally.
However, he concluded that electric vehicles were part of the carbon-reducing mobility solution and added: “From a leasing company perspective I want to see the opportunity that electric vehicles can give. To close the door on electric vehicles seems short-sighted from a leasing company perspective.
“There is a risk, but there is also an opportunity. The safest residual value is the one you never write.”
