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Eddie Flanagan's blog: The rise of EVs is reshaping the UK's fleet landscape
Date: 15 March 2021
Bolstered in part by a recent commitment in the UK Government's 10-point plan, electric vehicles (EVs) are becoming ever-popular for personal and business users. However, for fleet managers, choosing the right time to go all-electric can be difficult. With capital expenditure considerations, costs and specifications varying between EVs and conventional vehicles, new leasing approaches are needed to prepare for the fast-approaching widespread switch to EVs. With vehicle leasing contracts coming to an end soon, what options and legal considerations are available to businesses and fleet managers?
Electric vehicles have until recently played a minority part in the vehicle supply chain. Two years ago, there were only two or three models available, now there are north of thirty with many more being added on a continual basis. However, with climate change becoming a more pressing issue, leading to a worldwide commitment to reduce emissions, the pressure is increasing on businesses - and consumers - to make the switch sooner rather than later. The rate and desire for change has quickened notably.
In addition to the obvious positives of little to no pollution, less noise, and fewer negative impacts on public health, EVs also offer a wide range of perks for businesses when compared to internal combustion engine vehicles (ICEs). From increased energy efficiency and lower maintenance costs to being able to benefit from government grants, EVs could be a good option for future-focussed fleet managers. Equally fleet managers can now play an active part in the delivery of carbon reduction to the businesses they serve. Not only can EVs help the environment, improve green credentials and meet customer demand for greener companies, they can also help to cut costs in terms of fuel savings and maintenance. Fleets save up to 70 percent on fuel bills, EVs often benefit from tax breaks, whether directly, such as through the plug-in grant and 0% benefit in kind (BIK) tax, or indirectly, for example through not having to pay congestion or clean air zone charges.
Despite these positives, there is still much to do before the widespread adoption of EVs is possible, both in terms of the development of the vehicles themselves, and the wider infrastructure needed to support them. Some in the business community remain hesitant to switch from ICEs, with one of the biggest concerns being 'range anxiety'. However, with both batteries and car models becoming increasingly efficient, this may not be a concern for much longer. Some EV models are now able to travel up to 320 miles (such as the Tesla Model S) before needing a charge and with innovation happening at a fast pace, range should not be a deterrent to adoption, as more long-range models fill the market.
Another common concern for fleet managers is price. EVs are still quite costly compared to conventional vehicles, although some leases can reduce the difference by offering longer terms and added extras. There are also subscription type user models. This way, fleets pay for the 'usership' of the car, rather than the full purchase price. It also allows the fleet to be updated frequently, so drivers benefit from the latest innovations and efficiencies in the sector and money isn't tied up in technology that will soon be outdated. However, companies should see this shift to electric as an investment made for the long term.
A more immediate problem is the need for better charging infrastructure and accessible charging points across the country are essential for more widespread EV adoption. This problem is slowly disappearing as there's a predicted 36% growth in both private and public charging solutions over the coming years, as well growing availability of charging points across the country. However, there is still a long road ahead.
Despite fast-charging solutions being developed at a rapid pace, EVs take longer to refuel than conventional vehicles, meaning a large number of charging points are needed, and often extra time has to be factored into journey planning. Businesses should also consider offering charging facilities to employees who own an electric vehicle, which could come at an extra cost, however some EV lease agreements do include the provision of charging infrastructure at the place of work to support the fleet. Furthermore, there are some government backed schemes that will help lessen the burden of any infrastructure changes, including the Workplace Charging Scheme (WCS) and the Electric Vehicle Homecharge Scheme (EVHS).
Offering more flexibility and value for money than a direct one-off purchase, leasing is often a cost-effective option for businesses that operate a large number of vehicles. The leasing process for an EV is identical to that for leasing a conventional vehicle, the only difference is the need for charging infrastructure. To address this, many leasing companies offer to install the needed infrastructure changes and portable charging options, such as the necessary cables and socket converters. On top of that, some leasing companies provide regular maintenance checks from certified dealerships further reducing the overall cost and ensuring the cars stay in good shape for longer. It is vital that those who carry out maintenance on EVs are properly trained, as it is a very different process to assessing an ICE.
As with any major change, electrifying a fleet involves full commitment from the business and its employees. Misuse is a major factor in EV wear and tear so for increased longevity, companies must be clear to users around the extra care involved in keeping an EV, such as needing to avoid overcharging and the importance of having a timed charging period.
It's also vital to keep in mind that there are often significant differences between various EV models. The business' needs should determine the type of vehicle chosen, as it must be able to effectively carry out its purpose. For example, if a company requires the end user to regularly undertake long trips, opting for a vehicle with a higher range should be the priority. Not only does this lower the chances of the car unexpectedly running out of fuel, but it also reduces the amount of time spent charging, improving productivity. However, maximum efficiency involves more than just acquiring the right vehicle, as an EV's range differs greatly depending on how people drive. Giving end users EV driving training can help with this.
As transportation emits 23 percent of global emissions, reducing the number ICE vehicles in fleets is a critical step in going carbon neutral. With a growing charging network and cars increasing in range, EVs have made major leaps towards mass adoption. However, to begin with, leasing may be the most viable way for businesses to introduce EVs to their fleets, until they are ready to take the zero-emissions plunge.
With the recent introduction of the 'super discount' in the Budget we may see leasing companies, funders and fleet managers reducing the tax liabilities of fleet users. Now could be a cost effective time to make a capital investment in EVs.
Eddie Flanagan is leasing specialist and partner in the asset finance team at law firm Shakespeare Martineau.
