Now is the critical time to review the management of your vehicle fleet
Why is this important now?
Climate change is one of the biggest challenges facing our world. Greenhouse gases released into the atmosphere are causing global warming which if left unchecked will have disastrous consequences. There are many greenhouse gases but the combined effect is measured as tonnes of CO2 equivalent. In June 2019 the government committed the UK to a legally binding target of net zero carbon by 2050. The Digest of UK Energy Statistics shows that transport account for the biggest energy consumption and hence greenhouse gas emissions in the UK.
Digest of United Kingdom Energy Statistics 2019
Government bans sale of internal combustion engine vehicles from 2030
As transport is a major contributor to greenhouse gas emission it is essential that cleaner alternative technologies are introduced. To achieve this transition the government has introduced a range of policies and initiatives which include the banning sale of internal combustion engine vehicles from 2030. The intention is to replace fossils fuels with electricity generated from renewable source such as wind and solar.
There is rapid technological development on many fronts but batteries and fuel cells are most advanced alternatives to the internal combustion engine. Hydrogen fuel cells can meet some requirements but it will be many years before there is the infrastructure to support their widespread use. By comparison there is already massive investment in electric vehicles and battery technology and manufacturing.
Making the case for electric vehicles
While the cost of EVs is generally higher than the fossil fuel equivalent, when tax incentives and grants are taken into account, the business case for EVs is becoming compelling but there are many factors that need to be taken into account.
The list cost of a vehicle is made up of the basic cost plus vehicle excise duty (VED). For zero emission vehicles there is no VED to pay but for other vehicles the VED is based on the CO2 emissions with the first year rate of £10-25 for Ultra Low Emission Vehicles up to £2135 for the most polluting vehicles. The full details can be found here
The government scheme provides discounts on brand new low emissions vehicles. Vehicles eligible for the grant include cars, motorcycles, mopeds, small vans, large vans, taxis and trucks. Only approved low emission vehicles qualify for the grant. For example, cars with CO2 emissions of less than 50g/km and can travel at least 112km (70miles) without any emissions at all. For eligible cars costing less than £35,000 the grant will pay 35% of the purchase price (including VAT and delivery charges) up to a maximum of £2500. Full details can be found here
Employee Benefit in Kind (BIK)
For employees using a company vehicle for private use there are considerable benefits of choosing an electric alternative. The tax payable on the P11D value of the vehicle is determined by the CO2emissions of the vehicle. A sample of the current rates is shown below
The tax payable by the employee on their company car is calculated as
The P11D value X Bik rating X the marginal tax rate (usually 20 or 40%)
The tax payable on an electric vehicle is considerably lower than that for an equivalent fossil fuel vehicle.
Further guidance and tax calculators can be found here
Employer Class 1A National Insurance
Under the current tax system employers are required to pay Class 1A NI on benefits in kind including company cars. The NIC is determined by the
P11D value X BIK rate based on CO2 X 13.8%
The lower BIK rate for electric vehicles reduces the employer NI costs compared to fossil fuel vehicle.
The running cost of EVs are generally much lower than their fossil fuel equivalent. The actual cost will depend on the vehicle type and engine size but some typical figures illustrate the case for EVs. The average UK electricity price is around 14p per kWh. Assuming the typical electric vehicle travel 3.5 miles per kWh the cost is 4p per mile. By comparison the average cost of petrol/diesel in April 2021 is around £1.20 per litre and the average fuel consumption for new vehicles is around 49 mpg equivalent to 11p per mile. In addition electric cars have fewer mechanical parts to go wrong and on some estimates cost 30% less to maintain than internal combustion engine cars.
Congestion and Ultra Low Emission Zone (ULEZ) charges
Electric vehicles are exempt from both the London congestion and the ULEZ charges saving up to £27.50 per day compared to unregistered vehicles that do not meet the emission standard. Other cities are also considering introducing congestion charges.
Let our experts help you manage your business’s transition to electric vehicles
As part of our comprehensive energy management services we offer a review of your current vehicle fleet to enable your business to plan for the inevitable transition to electric vehicles. Developing the business case for electric vehicles is not straightforward. It requires detailed knowledge of the vehicle supply market taking into account all the factors described above. Working through our associate companies we review the vehicle in your fleet, identify those due to be replaced and make the business case for an electric replacement. Our associates specialise in electric vehicles and can source vehicles form all brands and models, arrange finance if required and obtain the best discount in the market. Any data provided to us will be treated in confidence and only used by Colin Lillicrap and associated companies for the purposes of helping your business make the transition to electric vehicles.
A major consideration when purchasing or leasing an electric vehicle is its range which depends on the battery capacity in kWh. Small vehicles like the Renault Kangoo ZE 33 with a 33 kWh battery have a quoted range of 147 miles per charge. Allowing for a charge to discharge efficiency of 85% it will take around 5.5 hours for a full charge using a 7kW charger. Using a 50 kW charger would reduce the charging time to around 50 minutes. Larger capacity vehicles have a longer range but require longer to fully charge.
When planning the transition to electric vehicles it is important to identify how the vehicles are to be charged to meet the transport demands of the business. Where practical installing charging points in the company car park offers a solution. Alternatively it might be possible to install a charger at the employee’s home provided there is off road parking. Where neither of these options is available it becomes necessary to depend on public charging points. The charging network is in its infancy with incomplete coverage and issues of non-standardisation of socket and a variety of apps to enable payment. In these circumstances we would need to work with you to identify where charging points are located in the area to be covered and the time slots that can be made available around the work schedule. We have been advised that Zap-Map will be offering a fleet service later this year which we understand will help fleet managers to identify charging points and arrange automated payment.
Speak to our experts on 01442 873439 to see how we can help your business manage the inevitable transition to electric vehicles.