Electric Vehicles go from company status symbol to company workhorse

Electric vehicles (EVs) have received a lot of press-coverage of late, none more so than Tesla, who’s Model S has drawn favourable comparisons with its diesel and petrol powered competitors. Yet at a starting price of £50,000 for the basic model, and no resale market, critics might question how wide its appeal may be. Meanwhile total sales for plug-in electric cars in Western Europe remain below 0.5%, prompting the question as to whether EVs are suitable only for a wealthy segment of early adopters…

To answer this it’s important to take the broader view of the capabilities offered by electric vehicle technology and where they offer greatest benefit. EVs are not a like-for-like replacement to the internal combustion engine (ICE). Where petrol and diesel fuelled vehicles benefit from a lower upfront cost, better range and an established infrastructure of refuelling point; EVs offer cheaper running costs, zero tail-pipe emissions, low noise and the ability to charge where-ever there is a power supply.

These attributes offer an alternative set of options, that has increasingly attracted the commercial and transport sector. In fact, EV technology has long been used in regulated sectors such as indoor material handling or early morning milk deliveries, where regulations prohibit emissions or noise. Fuel prices, tax and incentives for low carbon transport, improvements in technology and the greater availability of EVs on the market is now making commercial procurement managers and transport operators think more broadly about the role of EVs in their fleets.

For keen eyed observers, a quiet transformation can be seen in police and public sector vehicles, amongst the bus and community transport operators, in logistics and delivery fleets, and in car clubs and even (some) taxi firms. Hybrids and fully-electric vehicles are becoming visible in a broader range of functions.

Some of this change can be accounted for as a response to government incentives. EVs receive exemptions on both circulation tax and company car tax, low carbon vehicles are exempt from the London Congestion Charge and public sector fleets can benefit from the recently announced £5 million ultra-low emission vehicle (ULEV) scheme of subsidies.

But these initiatives, welcome as they maybe, are vulnerable to changes in government think and it is the perceived benefits of the vehicle itself that is of greatest interest. In a recent project in the West Midlands (Warwickshire rural Electric Vehicle Project (WREV) intended to introduce EVs to rural businesses the participants were surveyed to understand why they were keen to join the scheme. Early results have revealed the following findings:

• Cost savings Depending on usage patterns each business saved between £700 – £1500 per year per vehicle. The top end of these estimates reflected reports from taxi firms, elsewhere in the country, that had adopted EVs to reduce costs.
• Suitability to the business Businesses operated limited predictable routes suiting vehicles of more restricted range. New practices for refueling, the duration of fueling and the availability of public charging points required adaption, but also bought benefits such as the ability of businesses to automate the charging of vehicles on premises or at home.
• Environmental & marketing benefits Participants saw reducing emissions as important, but also recognized the marketing potential of zero-emission particularly where it connected to their brand image or it distinguished them amongst their customers. This may be particularly important where corporate clients concerned about carbon emissions for regulatory or social responsibility reasons place stipulations about emissions in contracts.
• Keeping up with technology For consumers a car is likely to be their second biggest purchase, so the decision to move from a mature technology to one in a state of flux is fraught with risks. Fleet managers with multiple cars can trial EVs for specific purposes and widen adoption only as the business case is made. Keeping up with technology means the business does not need to make any sudden changes later down the line that may be disruptive.

Of course this doesn’t mean that EVs will be suitable for all business practices, but are likely to continue infiltrated a broader range of sectors where they provide greatest benefit. There are also has a range of important implications for the broader consumer market: exposure to EVs at work is likely to enable individuals to assess the strengths and limitations of EVs without risking their own capital. This is particularly true for owners of microbusinesses (under 10 people) where individuals are likely to acquire a direct insight into the balance between life-time and upfront costs of vehicles. Greater visibility of EVs on roads will go some way to reducing the image of EVs as a novelty and greater use of public charging points is likely to lead to better maintenance by providers and potentially accelerate the deployment.

The most important and still unknown impact will be on the resale market. Consumers are unlikely to invest in high-value assets without some assurance that the vehicle can be resold and without a precipitous level of depreciation. More vehicles from corporate fleets available are likely to stimulate the demand for a resale market and create a benchmark for asset valuation. However prices are likely to remain volatile whilst the technology of new models continues to change.
So whilst car manufactures compete to improve the performance of the technology, it is likely to be the business models of commercial firms as much as the sales strategies of dealerships that will see it being adopted on UK streets.

Richard Brooks
Project Officer, Applied Research – International Projects
Business, Environment and Society
Coventry University

Printed in THE CONVERSATION Aug 2014

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