Why the Inclusion of Electric Vehicles in Corporate Fleets Makes Business Sense
- Many businesses are now replacing traditional vehicles with electric vehicles in their corporate fleet.
- While they may face initial challenges, the inclusion of electric vehicles is likely to reap long-term benefits.
- They should also have a plan to deal with complexities of availing government incentives.
February 28, 2023 | Automotives
Of late, there has been a lot of talk on ESG and sustainability. However, businesses have not done much to implement their plans.
They can no longer delay action, given the increased scrutiny of regulatory authorities. But where should they begin?
Their vehicle fleet is a good place to begin.
By replacing gasoline and diesel vehicles with electric vehicles, they can reduce their carbon footprint and take a decisive first step toward sustainability.
Current Levels of EV Adoption in Corporate Fleet
Corporate demand for EVs has increased across various sectors while the adoption of internal combustion vehicles has reduced. Data of 2019 versus 2021 across eight major sectors shows a reduction of around 25% in the share of diesel vehicles. This reduction in the share of diesel vehicles is accompanied with around 28% increase in the share of electric vehicles.
The substantial change in the corporate passenger fleet make up highlights the increased focus on EV transition.
Why Corporate Fleets Should Have Electric Vehicles
There is little doubt that electric vehicles are more expensive than their internal combustion engine counterparts. Despite the initial cost, the inclusion of electric vehicles in corporate fleets can offer several advantages. Here are some of these.
- Reduce operating costs: One of the biggest advantages of EVs is that they are significantly cheaper to run than traditional gasoline vehicles. In the U.S., gas prices have been soaring since 2020 while electricity costs have remained steady in comparison. This makes EVs a cost-efficient alternative. On average the cost of charging an EV is about one-third of the cost of fueling a gasoline vehicle. Additionally, EVs have fewer moving parts, which means that maintenance and repair costs are often lower as well.
- Leverage government incentives: Government entities across the world are offering several incentives to corporations to adopt EV in their operations. These incentives are in the form of rebates, tax reliefs, subsidies and grants. In the U.S., around 45 states provide an incentive for EVs either through a specific utility operating in the state or through state legislation, and California has the most favorable laws and incentives for EV customers/end-users in the country with a total of 134 schemes. In the European Union, favorable legislation and purchasing incentives for EVs are currently available in 27 member countries, with France and Romania having the most generous purchase subsidy schemes. These incentives are a major driving force of EV adoption in fleets.
- Boost sustainability: Incorporating EVs into the corporate fleet is also a great way to fulfil the commitment to sustainability. By reducing the reliance on fossil fuels and using renewable energy, companies can demonstrate their commitment to protecting the environment. According to the International Energy Agency (IEA), the average EV produces about half the CO2 emissions of a comparable gasoline vehicle over its lifetime.
- Enhance brand image: The inclusion of electric vehicles in corporate fleets can change the way the business is perceived by the public. It can enhance the brand image for customers, investors as well as potential employees.
How to Avail Lucrative Government Incentives
Global organizations with operations in multiple countries and jurisdictions may find it difficult to understand the purchase and tax incentive structure related to electric vehicles. To avail such benefits, they must have thorough knowledge of the tax landscape across various countries and states. To simplify this process, lease providers and fleet management companies (FMCs) are actively offering advisory services to support clients in EV transitions.
Conclusion
Transitioning to EVs can create a win-win situation for corporations and government authorities. Before finalizing a strategy for such a transition, companies must understand the complexities around government incentives and prepare accordingly.
Companies must consider various factors such as:
- Market maturity (sales of EVs, PHEVs & BEVs)
- Charging infrastructure (number of public chargers and fast chargers)
- Tax & By-laws (incentives on chargers & EVs and emission rules)
- Green powertrain landscape (number of green models available)
- Sustainability relevance (CO_2 "per kWh consumed" )
Proactive and detailed planning with a trusted advisor that has deep industry knowledge can ensure a seamless transition to EVs.
Learn more about spend management for corporate fleet by downloading the 2023 GEP Spend Category Outlook.
Author: Abdeali Dholkawala
