Should your company be using electric vehicles?
Major automakers are making the transition to electric vehicles (EVs). BMW, Ford, General Motors, and Volkswagen are all committed to bringing EVs to market in the coming years. In this article, we focus on the positives and drawbacks of owning an EV. Furthermore, as EVs become increasingly relevant to fleet operators, we discuss the possible benefits to your company.
The increasing popularity of electric vehicles
2017 was a remarkable year for EVs in Canada. Sales grew 68% year-on-year. In the province of Ontario sales more than doubled, with a 120% increase on the previous year. Important to note, EV includes hybrid and fully electric vehicles. Similarly, The United States ended 2017 with just under 200,000 EV sales. Equating to 27% increase year-on-year, and 53% for fully electric vehicle sales.
Can this increase be explained? Well, a number of new models have reached the market. The strong sales of the Chevrolet Bolt introduced in early 2017 along with the Nissan Leaf and Tesla are a significant factor. Leading the sales tables, the New Tesla Model 3. Furthermore, we expect 2018 to be an exciting year for new EVs.
The availability of charging points in Canada and the United States
Public charging infrastructure is a crucial barrier to EV adoption. Studies have indicated that investment in charging facilities will help EV sales. As a result, US and Canadian governments have pledged substantial investment. In the US, charging outlets reached over 50,000 in 2017, up from 45,000 in the previous year. Boosted by Volkswagen $800 MM commitment to EV charging infrastructure in California. A full list of US charging points is available at the U.S. Department of Energy.
Comparatively, Canada continues to invest in Charging Infrastructure. Committed to developing a national strategy for zero emission vehicles in 2018, in an attempt to increase the number of EVs on the road. Canada has seen notable growth in fast charging infrastructure. Customers (including employees) don’t want to be waiting for their EV to charge. Time is inconvenient and costly. And therefore, the development of fast charging will be vital to further adoption.
In support, an array of incentives are available. In Canada, EV purchase incentives are only available at a province level in British Columbia, Ontario and Quebec of $5,000, $14,000, and $8,000 respectively. Also, Ontario offers $1,000 off a home charging station. Similarly, Quebec provides a 50% rebate. The hope is federal subsidiaries will become a part of the incentive package, bringing them in line with other major nations. For more information, FleetCarma carried out a recent review of global purchase incentives.
Pros of electric vehicles
Policymakers see advancing electromobility as a way to mitigate emissions. And therefore, meet the Paris Climate Agreement of limiting temperatures below 2 degrees. Furthermore, the increasing use of renewables to generate electricity will magnify the environmental benefits.
There is also a real opportunity to cut costs for users. According to a recent study, savings from the operation can reach more than 45% in comparison to an internal combustion engine (ICE) vehicle. Also, EVs have around 20 moving parts; an ICE has hundreds. Consequently, maintenance costs are likely to be much less. AAA estimates the average annual driving costs in the US taking into account upfront, depreciation, fuel, and maintenance costs. They find EVs cost 7% less than a small sedan. Increasing to 15% for a medium sized vehicle. With that said, as the upfront cost of EVs continues to decline, so will overall operating costs.
EVs can have a genuine impact on your company. Fleet vehicles are usually used more frequently than personal vehicles, meaning the potential for additional savings. For example, the City of Vancouver operates a fleet of 31 EVs, and claim that per vehicle, $440 is saved on fuel alone each year.
An opportunity also exists to bolster your corporate image. People can see that you are working towards an environmentally friendly fleet composition.
Cons of electric vehicles
EVs are considered as luxury vehicles, as the price remains relatively high. However, unlike ICE vehicles, an EV is a technology. Therefore, as technology advances prices will fall. An EV battery pack constitutes around a third of the cost. And, according to McKinsey battery packs dropped 80% in the six years to 2016. The trend is expected to continue to 2020. Coupled with government subsidies, EVs are likely to become price competitive with ICE in the short to medium term.
Range anxiety is a concern for consumers. The ability to drive from A to B without having to worry about recharging. However, the range has been improving and will continue to do so. For example, Nissan Leaf range has almost doubled in the span of 4 years to 243 kilometers from 2014 to 2018. Given the trajectory, the range will soon be a non-issue.
Finally, battery degradation. While EVs are relatively new to the market, the evidence remains limited to 1) how long batteries will last? And 2) how quickly will batteries lose range as a result of usage? A recent article looked at the current evidence. And in summary, found after driving 250,000km, on average 90% of the range remained. Furthermore, degradation is highly dependent on charging habits. However, important to note, further research is required.
A conventional method used for commercial fleet replacement is eight years or 100,000 miles (160,000 kilometers) and therefore, it is unlikely at present that battery degradation is a prominent issue of concern.
Benefits of electric vehicles to the company
Whether you decide to buy or lease an EV fleet, benefits to your business are substantial. Annual cost savings in fuel can be considerable, especially when your mileage is high. The reduced maintenance costs, coupled with fuel savings, will offset the higher capital cost of purchasing an EV fleet.
However, it is not all about cost savings. Environmental benefits of EVs will help reach corporate sustainability goals and provide a broader contribution towards lowering emissions. Embracing the latest vehicle technology will strengthen your image on a local and global level. Also, allowing your employees to charge their vehicles at work (reducing consumer costs), is a cost-effective way of supporting/retaining employees. And to switch may be easier than you think. For example in Ontario, Canada workplace incentives are available to offset the up-front cost of chargers and installations.
FleetCarma’s Electric Vehicle Suitability Assessment
Regardless of whether you decide to use ICE or EVs for your fleet, you need full confidence that the vehicles you choose will be the best operational fit, and that they’ll deliver your business the best ROI.
FleetCarma’s EVSA is the only solution that allows you to accurately forecast your fleet performance before EV deployment.
FleetCarma collects high-quality vehicle-side data across your fleet, analyzing and running efficiency diagnostics to produce a final report. This lets you forecast the effects of your purchasing decisions and supports budgetary decisions by accurately forecasting ROI, allowing you to:
- Forecast fleet wide savings
- Understand the total cost of ownership per vehicle
- Evaluate multi-year procurement plans, tailored to your fleet
- Forecast the reduction of GHGs based on possible fleet compositions
Whether you lease or purchase your new EVs, it is paramount that you have sound operational and financial justifications. FleetCarma’s EVSA provides you with all the data you need to support your decision before you make the investment.
In summary, switching to EVs could be a win-win situation. Material operational cost savings, while having the benefit of purchase incentives. Looking at the more comprehensive picture, EVs could help improve your corporate brand, reduce your carbon footprint, and improve employee retention.