With governments worldwide signalling increasingly tough approaches to emissions, the mass development of battery power for vehicles has continued apace. Christopher Marchant talks to leading figures at vehicle leasing companies in the UK and Europe to see how both business and consumer can be impacted by the rise of the electric vehicle.
OEMs across the world have begun releasing more affordable electric vehicles (EVs) over the past 18 months, building on the success of massmarket models such as the Nissan Leaf and Renault’s Zoe range.
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The Paris Motor Show in October 2018 was dominated by alternative powertrains, as carmakers from around the world took the opportunity to showcase new models such as the Mercedes EQC SUV and the European premiere of the Tesla Model 3.
As availability of EVs has increased, Lex Autolease associate director Chris Chandler has seen customers take note.
He says: “At Lex we leased our first pure EVs in 2011. We have now got 14,500 plug-in vehicles in our fleet. The interest has gone from limited trials to seeing large numbers coming in and fleets talking about mass adoption.
“We’re definitely moving into that space where there’s a genuine move to get more of these vehicles on fleet.”
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By GlobalDataIn perspective, an EV fleet of 14,500 out of a total fleet of 390,000 for Lex Autolease may seem small, but it is still a significant number – and one that is only going to expand. The speed of this development, however, is dependent on both direct customer enthusiasm and market directives.
Leaseplan – a native of the Netherlands, one of the leading countries for EVs – has set high aims for itself on the EV front. “There is an increasing demand, reflected by the 77% second-quarter year-on-year growth in registrations of battery EVs in the managed fleet in countries where we have rolled out our EV proposition,” Mathijs Van der Goot, fleet consultant at the company, said in written statements.
“Leaseplan is contributing to this by aiming to transition our entire employee fleet to electric by 2021. Leaseplan also has an ambitious but achievable aim of targeting net zero emissions from our entire fleet by 2030.” Carlos Montero, chief commercial officer of Fleet Europe, identifies a long-standing complaint about EVs – their pricing – as a key point of consideration when analysing how the industry will progress in the immediate future.“It’s all driven by what OEMs will offer in terms of their product line-up,” he says.
“That’s going to drive most of the volume, and if they get it right it could work tremendously well.
“In the commercial environment, the Nissan NV200 has an extended range at just under 200 miles. That has generated quite a lot of interest in terms of uptake since its launch a few months ago. That van is the epitome of getting the range and price right.
“That being said, it’s still more costly than its diesel equivalent. Whole-life costs could well be balanced out by the increased cost of the actual vehicle, but it’s a step forward in generating a lot of commercial interest.”
MASS ADOPTION
For David Jones, communications manager at Alphabet, part of BMW Group, achieving mass adoption of these vehicles also requires an adjustment in pricing.
He explains: “Almost every fleet decision-maker we speak to is looking to add more EVs to their fleet – whether that’s to reduce their emissions or whether that’s to reduce their fuel costs.
“The challenge with EVs is that it’s still a new technology, and with that there is the inevitability of an increased initial cost. This can be for everything ranging from batteries, the technology or the raw materials.”
Jones adds: “The research shows we are moving toward a place within the next five to 10 years where the costs for EVs reach parity with the internal-combustion engine, but we’re not there yet. People want EVs on their fleet, but there are still considerations about how you do it from both the practical and the financial side of things.”
Governments across Europe have made the promotion of EVs a priority, and are confronting cost issues accordingly.
A major factor influencing fleet managers’ decisions in the UK is the business-in-kind (BIK) tax on company vehicles, which is based on a percentage rate in part dependent on the vehicle’s carbon emissions.
For EVs, the BIK tax will drop from 16% in 2019 to 2% in 2020. On the incentives side, the UK Government was until recently offering subsidies for hybrid and electric vehicle buyers, contributing up to £8,000 on vans and up to £4,500 on cars.
Incentives for hybrid vehicles have now been scrapped altogether, while the maximum subsidy for an electric car has been lowered to £3,500.
The private sector, meanwhile, has stepped up its own efforts: British Vehicle Rental and Leasing Association (BVRLA) has launched its own Plug-in Pledge, a drive to see members’ combined plug-in vehicle fleet size surge over tenfold from 50,000 currently to 720,000 by 2025.
Ambivalent signals from governments such as the UK’s are making it harder for fleet managers to make firm decisions around electrified vehicles.
Nevertheless, for Montero, consumer demand is, in fact, the main consideration for pushing more EVs on the roads. “I wouldn’t say that further regulation is the
key,” he says.
“Government regulation, to me, is already pushing a lot of consumers and also commercial entities towards EV, which is good. A future strategy would not be consumeroriented exactly, but encouraging competition among OEMs, for it is competition and choice among the car manufacturers that will be of most benefit to the consumer.”
For Van der Goot, OEMs are already well on the way to introducing this much-needed increase in choice.
He notes: “The major OEMs are doing well to match the growing commercial demand, with most announcing plans to launch an EV line-up over the coming years.
“The battery EV market is expected to increase fivefold by 2021, with over 100 different models scheduled to become available.” Jones appreciates that while current policies may be positive, there needs to be consistency and reassurance moving forward.
“If you’re going to get a company car tomorrow it’s generally a three-year agreement,” he says, adding that the lack of clarity has affected the taxation rate in the past.
“Fleets are saying to us that they need clarity on BIK from 2021. The reduction in BIK tax could help in the takeup of EVs.”
From its position as a commercial player, Lex Autolease is offering a £1m fund to contribute £1,000 towards the cost of a new pure EV. Announced at the Zero Emission
Vehicle Summit in Birmingham, the fund is aimed at the first 1,000 customers who sign up for a pure EV from January 2019.
“This is part of an additional commitment to say we know these vehicles work, that there are benefits for UK companies to transition to zero-emission vehicles in line with the government’s road to zero ambitions,” explains Chandler.
“We thought this would be an effective way of demonstrating our commitment.”
LIMITATIONS
As much as there is enthusiasm from Lex Autolease for EVs, there is also an awareness that they may not yet be the most efficient form of transport for certain types of travel.
For motorway travel purposes, the company still advertises diesel as the best type of vehicle for businesses, says Chandler.
“We have to be honest that there are limitations to electric and plug-in vehicles – the obvious one is range and charging infrastructure. There are vehicles that realistically can do 200 miles on a single charge, but we do have customers who have high-mileage employees that spend a lot of their time on motorways. In a motorway-style environment, diesel is still an effective fuel option. It’s at a lower carbon emission [than petrol] and it’s still efficient.”
Chandler continues: “However, EV is new technology so it won’t always generate cost savings, but typically you’ll find a significant reduction in the fuel bill. A good diesel car will probably cost you £0.12-0.14 per mile in fuel; an EV will cost you about £0.04 per mile.”
It is an enthusiasm shared across the leasing industry that, at a future point, EVs can be adopted on a large scale in the business leasing sector and can serve as a shining example for the feasibility of these sorts of low-emission vehicle in the consumer sphere.
“Companies will lease these vehicles for up to four years; after that time it puts really good-quality, well-maintained electric and hybrid vehicles into that second-use market. The more vehicles that are leased through companies to customers and their drivers, means more vehicles available for the seconduse market,” says Jones.
Leaseplan recently agreed an exclusive partnership to provide operational leasing solutions for Chinese carmaker SAIC’s electric light commercial vehicles (LCVs) across continental Europe.
SAIC says the Maxus EV80 is the first large electric LCV that can be delivered at scale, and is marketed as having a competitive total cost of ownership feature compared to LCVs powered by the internalcombustion engine.
Van der Goot agrees that there is market potential from the business. “Around half the cars on the road are owned by companies,” he notes.
“This means the fleets have a huge role to play in the global adoption of EVs in the future.”
If EVs are commercially adopted, consumers will become more familiar with EVs through their company car policies. This will break down some of the stigma that surrounds EVs, and potentially open consumers up to the prospect of owning one.
“Commercial adoption will also drive improvement in charging infrastructure that will ultimately benefit consumer EV owners.”
EVs may not yet be ideal for all businesses in all cases – not only because of price but because of practical considerations – but a point where battery power could become most quickly established is through LCVs.
According to Montero: “Where you will see the most volume in the next two to three years in terms of an EV is in smaller commercial vans. This is a market that is already used to a drive-and-charge mentality in terms of how they are used operationally. If you are able to get that pricing right, the volumes will just take off as the companies understand it is in their best interest to keep tax costs down.”
Chandler is also aware of how the size of the vehicle can impact rates of EV adoption in leasing. “If you look at commercial vehicles, for instance the panel van sector, for the sub-2.5-tonne weight there are already really good, cost-effective LCVs that do a brilliant job. We’ve got customers who are making quite significant cost savings running these vehicles, including one customer where 30% of its fleet is electric and another where 45% is electric. Those smaller commercial vehicles do really well, and you can see that transition happening quickly.
“If you go to 3.5 tonnes and above, the economics don’t work as well. The vehicles become expensive and the weight of the batteries and the size of the batteries needed increases. The 3.5-tonne-and-above market is moving extremely slowly.”
CHANGING ATTITUDES
Another important consideration is how to integrate EVs with changing attitudes towards mobility in the business sector. Alphabet’s carsharing initiative, AlphaCity, was launched in 2013, and this year the lessor has ramped up its efforts to integrate EVs into the project.
“For the first time, AlphaCity includes not only LCVs but also a wider choice of EVs, such as the Renault Zoe and the Kangoo Van ZE,” says Jones.
“Not only can you use these vehicles for business purposes in terms of the traditional company car, but businesses are now using them as shared vehicles.”
He references one of the company’s UK clients, Hampshire County Council, to illustrate this. “[It is] based in an urban environment but needs to get its employees into the county environs surrounding the city. It has a fleet of vehicles, of which a number are EVs on a current trial basis at its city centre location, and employees take these vehicles out and solve their journey that way.”
Perhaps the name most immediately associated with EVs is Tesla Motors. The Silicon Valley carmaker’s release of the Model 3 is an approach by the company to reassert a once-dominant position in the market.
But historically, Tesla models have had a price range that puts them firmly into the luxury car sector, and even the Model 3 may not change that.
“The top-line figures of just over £30,000 [for a Model 3] and obviously the range that they’re offering – 220 miles – would really suit those drivers that sit within the BMW prestige market and Mercedes market,” says Montero.
“They are saying 2019 will be when the Model 3 is coming through, but still one model like that does not change the whole market in terms of how they will push on volume. It needs the market as a whole to bring on competitiveness for it to really take off and provide choice to the customer.”
Jones says Tesla is not a priority for Alphabet compared to other OEMs with EVs. “I think the question will be around the pricing of the Model 3, not just the base price but the actual price that people will be paying for that vehicle,” he says.
“They key thing about EVs is about accessibility. As we’ve seen with Renault, with Nissan, with BMW, it’s about making sure the price point is accessible for business users.”
Generally, lessors seem optimistic about business use of the EV market across Europe. There are already fleet managers using EVs as ideal vehicles for everyday needs – and the decision to adopt them was arrived at not just by a green individual preference, but through astute business decision-making.
The appetite for EVs and low-emission vehicles is only growing, and as government regulations around emissions tilt in favour of EVs – and against carbon-emitting vehicles – this is surely only going to continue.
Yet to make EVs the norm in business leasing, and by extension the consumer sector, it is going to take a noticeable drop in price, and further reassurances about infrastructure and the powertrain technology itself.
