How much will it cost to electrify fleets? (Partner content)

29 November 2021

This content piece is a paid partnership with Ford Fleet Management

Fleet procurement professionals may find themselves with the calls of climate protesters ringing in their ears from the COP26 summit to decarbonise as quickly as possible.

The UK government has set a deadline of 2030 for an end to the sale of new petrol and diesel cars and vans. Its Net Zero Strategy says hybrids will be allowed until 2035, when all new cars and vans must be zero-emission at the tailpipe.

The need for action is highlighted by figures that show transport accounted for 27% of total UK greenhouse gas emissions in 2019, with passenger cars and taxis making up the majority (61%), followed by HGVs (18%) and light commercial vehicles (LCVs) (17%), according to the government’s Transport and environment statistics: Autumn 2021 report.

With the end in sight for internal combustion engine (ICE) vehicles, fleet procurement professionals will have many questions in their minds. Uppermost is likely to be how soon do we make the switch to electric, and how much is it going to cost?

Prepare, but don’t rush

For Ford Fleet Management (FFM), a joint venture between Ford and ALD Automotive launched a year ago, the critical element is to start preparing now. “There is still time but don’t delay,” said John Wright, managing director at FFM.

“Start collecting information on your fleet today if you don’t have it already. Who are the users, are they essential, non-essential, what are their journeys, distances, frequencies, routines? Do they have access to off-street parking? How far from the office are they? 

“Collect the data on a spreadsheet or even map and start to pick the easy wins, such as who could transition first.”

Yet, despite the clamour for change, it is essential not to go too early. Companies could end up with a fleet that is not fit for purpose and unimpressed users unable to fulfil their commitments, leading to negative sentiment around the whole electrification agenda.

“We’ve had businesses make a very early commitment to say, ‘We’re not buying any more diesel vehicles’ and they’re now having very real problems. Those companies are now having to adjust their procurements to allow some more diesel and hybrid products in. You have to be realistic,” said Wright.

“You can go too fast and put vehicles into your operation that don’t work for what you want to do.

“Whereas if you do it in a more controlled, patient way – bridging with hybrid products and flexible contracts before you go into electrification with both feet – you can manage the user groups better.”

The infrastructure isn’t there yet

A critical question is the charging infrastructure. For most company car drivers, the answer will be overnight charging. But, for those without access to a charging point at home, on-street options will be necessary.

Government figures show in July 2021 there were almost 25,000 public charging points, across the UK, against an anticipated need of up to 480,000 by 2030, so clearly there is more work to be done in this space.

“The public charging infrastructure needs to improve across Europe,” said Wright. “You hear stories in every market: there aren’t enough points, they’re often broken, don’t work properly, you need a special app... There’s lots of confusion in that part of the market.

“Government and big business need to think at the strategic level about getting infrastructure in place for how we will all charge these vehicles in the long-run, because eventually the majority of the market will be electric.”

Companies face potentially bigger hurdles with van fleets and charging infrastructure at depots. Significant infrastructure spend could be required to get depots and commercial buildings up to required standards.

“There are some big issues that as a business owner you will have to overcome,” warned Wright. “It could be, at the dramatic end of the scale, that your premises are just wholly unsuitable and you need to look at whether you need to repurpose them or even move.”

Perhaps the most important shift in thinking required for an electric future is consideration of the total cost of operation. This should take into account not just a vehicle’s list price, taxation, and running costs, but also the infrastructure to operate these vehicles.  Service, maintenance and repairs for an EV are considered to be 10-20% less than for an ICE vehicle, according to FFM internal analysis. 

“Procurement needs to look very carefully at the policy and take into account the total cost of operation,” said Wright. “List price is not the full story.

“On the face of it, it looks like EVs will be more expensive and certainly early adopters are paying premium prices for them. While they are more expensive than their ICE equivalent, our consultants have been doing a lot of financial modelling and it doesn’t take a long time for the improved fuel cost to overtake the ICE vehicle. The higher purchase price in most cases, is offset by the lower running costs.” 

Embrace a flexible approach

Ultimately, what fleet procurement professionals must consider is adopting a flexible approach, given how fast the EV market is moving.

FFM’s free-of-charge EV Consultancy uses software to crunch the numbers around factors such as list price, taxation and running costs, with the data then used to build a fleet policy.

Analysis of outright purchase (OP) fleets versus contract hire and ICE versus EV indicates it’s more cost effective to contract hire EVs.

“Why would anyone wish to purchase an EV now when they are expensive, the residual value is unknown due to advancing technologies and OP fleets tend to keep them longer, so are missing out on newer technologies?” said Wright.

Instead FFM, which can provide commercial vehicles and passenger cars across any brand, is emphasising the value of Flexible Leasing. This offers more than 1,500 vehicles on contracts between one and 24 months with 48-hour cancellation notice.

“What’s cost effective is to remain flexible and open to doing things differently,” said Wright. “We’re seeing some large fleets that perhaps have done things in the same way for many years, they’re now challenging themselves to think and do things differently because they recognise the world is moving faster.”

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