Playing the Waiting Game With Fleet Plug-in Adoption is Probably a Mistake

 In Green Fleet

Earlier this year, one of Europe’s largest utilities, Vattenfall, announced plans to replace all 3,500 vehicles in its fleet with electric vehicles within five years. Major plug-in investments like Vattenfall’s are becoming more and more common all over the world, but most fleets still prefer to play the waiting game with vehicle electrification. Cost, range and the need to test the technology’s usability are usually identified as the top barriers to plug-in adoption.

The Cars Will Get Better, the Timing May Not

As tempting as it might be to wait for cheaper electric vehicles, more range and a clear path to fleet plug-in adoption blazed by those who lead the way, the rewards for patience are overstated. Yes, prices will gradually fall and evolving battery technology will yield better ranges, but the timeline for plug-ins to reach parity with internal combustion vehicles in these areas is anyone’s guess. More importantly, the ever-widening assortment of plug-in models on the market today already meet the range needs of the vast majority of fleets.

Distribution of maximum daily driving distances according to FleetCarma data.

According to a 2015 FleetCarma report, Are Electric Vehicles Right for Your Fleet?, less than 15 percent of fleet vehicles have a maximum daily driving distance of more than 70 miles—well within the range limitations of even the most inexpensive fully-electric vehicle models. In fact, according to FleetCarma’s data, the average daily driving distance of a fleet vehicle is less than 13 miles. That means even most plug-in hybrids (which offer a shorter all-electric range but endless gas-fueled driving once their batteries are depleted,) are capable of covering the average duty cycle of a fleet vehicle without switching over to gas.

As for the cost factor, while it’s true consumers can expect sticker prices of plug-ins to continue to drop over time, it’s unlikely gradual price decreases will surpass the generous $7,500 per vehicle federal credit currently available in the United States anytime soon. Not to mention additional credits offered in states like California or Colorado. In Canada, Ontario’s current credit of up to $14,000 per-vehicle brings the cost of a new plug-in well below comparable ICEs.

These kinds of incentives were put in place to neutralize the cost difference between plug-ins and conventional gas vehicles, but they won’t be around forever. Just how long they stay in place remains to be seen but needless to say, if you’re waiting until electric vehicles are ubiquitous to begin moving your fleet over to electric, you’re likely to miss out.

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When Will the US’s Federal Plug-in Tax Credits Expire?

Under the terms of the 2009 American Recovery and Reinvestment Act, U.S. buyers are currently entitled to a credit of up to $7,500 per vehicle. Once an individual manufacturer records its 200,000th plug-in sale though, it triggers a 15-month phase-out period, during which the credit drops first to $3,750, then $1,875, before disappearing completely. There was once some hope that the subsidies could be extended or even increased at some point but in the current American political climate, that’s become all but unthinkable.

Right now, Tesla and General Motors are the two automakers closest to hitting the phase-out. According to a projection done by InsideEVs earlier this year, both could see their credits halved to $3,750 as soon late-2018. Nissan buyers would be next to suffer, with their credits starting to shrink in the second half of 2019. None of the six major manufacturers included in the calculation are on pace to see their credits survive past 2020.

For individual consumers, this is plenty of time to wait it out until the right plug-in becomes available. For businesses and public entities with dozens (or even hundreds) of vehicles though, the timeline is far more precarious.

Fleet Electrification Doesn’t Happen Overnight

As we’ve discussed here in the past, most fleets choose to wade into plug-in adoption with smaller pilot programs before moving forward with more ambitious plans to replace their conventional cars. There are a number of reasons for doing this, with most centering around:

  1. The need to learn more about the technology and how it fits the needs of a fleet
  2. Planning charging infrastructure deployment
  3. Budgetary restrictions and a preference for staggering investment
  4. Employee education and training

Fleets that have tried to hit big plug-in adoption targets on an escalated timeline have often failed to meet their goals and been forced to scale back. One example is the City of San Francisco, which last month announced it would delay plans to move its entire fleet of sedans over to electric by 2020. After studying the issue in depth, the city learned that only about half of its vehicles park in government-owned spaces, which made installing charging equipment all but impossible in many cases. Furthermore, the cost of the program was discovered to be too high to take on under the suggested funding allocation. Ultimately, the city was forced to push back its deadline by two years—and cut the number of plug-ins it had planned to purchase in half.

For larger fleets, even an ambitious timeline of 3-5 years risks missing out on federal tax credits before a full-scale purchase can be completed. Most prefer to acquire vehicles at the end of their natural replacement schedules—typically about 5-7 years—which means even smaller acquisitions could face the choice of either breaking that schedule or missing out on subsidies that are key to the financial viability their investment.

FleetCarma can create multi-year procurement plans tailored specifically to your needs.

Playing Catch-Up

The good news for fleets that haven’t yet embarked on a vehicle electrification plan is that there are ways to expedite the process and learn many of the lessons pilot programs are designed to resolve without a multi-year trial. Using data compiled by vehicle telematics technologies like FleetCarma, fleet managers can monitor their existing conventional vehicles under everyday use and discover whether usage patterns align with the range, charging, and cost considerations of available plug-in models.

FleetCarma’s EV Suitability Assessment gives managers the ability to see whether plug-ins make sense for their fleets, plan charging infrastructure, create multi-year procurement plans and maximize the ROI they’ll eventually get from each plug-in. You don’t need to install the telematics hardware to existing plug-ins—any old internal combustion vehicle will do. This kind of study provides the option of rapidly advancing an electric vehicle deployment timeline without a major upfront investment and helps to ensure that once you do take the plunge it won’t lead to costly missteps.

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