Shaun Sadlier's blog: Why whole life costs are crucial to electric vehicle adoption
26 February 2020
There is genuine excitement around the whole subject of electric vehicles (EVs) at the moment in the fleet sector. Factors such as the 0% benefit in kind rate, the Government's 2035 announcement and the arrival of a whole host of new models this year are all helping to create real momentum.
What this means is that more and more customers are asking us to sit down and talk in a serious and detailed manner about how they can start to integrate EVs into their choice lists. Inevitably and appropriately, costs are a big part of this conversation.
It's here that whole life costs (WLCs) become an essential part of the dialogue. EVs can easily look, at first glance, like an expensive proposition. List prices are significantly above petrol and diesel cars, and lease rates are often correspondingly high. It's only when you take a structured look at overall costs including factors such as fuel and National Insurance contributions that they start to make sense.
In the WLC calculations presented to customers, an important step for us is the use of the HMRC's Advisory Fuel Rates (AFRs) to allow the like-for-like comparison of different fuel types, including EVs, in a way that has direct relevance to real world performance. This produces much more accurate and relevant outcomes than the alternative approach of using often fluctuating pump prices, and the manufacturer fuel consumption data which is largely meaningless for hybrid comparisons.
If this approach is taken, EVs perform very competitively on monthly costs against petrol, diesel and hybrid options. This represents the clearing of a major hurdle, we believe. If these vehicles are shown to be economically viable, then their widespread adoption is, in our view, inevitable.
Shaun Sadlier is head of Arval's Mobility Observatory