Is it time to make the switch?
With all the buzz around electric vehicles at the moment, it’s no wonder many businesses are considering making the switch to electric or hybrid.
The short answer to the question is YES. Certainly to looking at it seriously but you must consider many factors before you make the switch namely driving/journeys/usage/mileage but also cost, taxation, image, driver and business needs.
If you get it right – you can save a tonne and it’s a win win win for company. driver and the environment.
There is much conjecture around the TRUE environmental impact involving both the production of these vehicles, and batteries, in addition to the disposal of the batteries and the impact on the National Grid. However, the UK is committed to the Road to Zero – it’s happening. The UK transport industry has a target to have at least half of all new vehicles sold to be ULEV (Ultra Low Emission Vehicles) by 2030 and some are predicting a quicker take up than that. This topic is somewhat divisive in that many are routing for alternative fuels such as Hydrogen but for this article I’m just dealing with where we are now and for the foreseeable future. Electricity has arrived.
The wider implications of these co2 targets are set to impact our lives in ways we can’t even imagine yet. I was talking to an industry expert recently who tells me that it will mean the complete replacement of gas in our homes! That’s another story for another day…
Back to motoring….
Choosing the correct electric vehicle for your business needs can be crucial.
There are three main types of electric vehicles-
BEVs – Battery Electric Vehicles
A BEV is an electric vehicle powered solely by a battery. There are no other ways of making them go. A BEV is basically a 100% pure electric car. Electric vehicles have a typical range of 80 – 100 miles on a full charge, sufficient for the commuting and daily driving patterns of many people . Some available BEV models are-
- Tesla Model 3
- Nissan Leaf
- Renault Zoe
- Jaguar I- Pace
PHEVs – Plug-in hybrid electric vehicles
Plug-in hybrids combine petrol or diesel engines with a battery and electric motor. They can also be plugged into the mains electricity in order to provide a much longer driving range on electric-only power. The batteries have a greater storage capacity than an existing hybrid, making it possible to drive considerably further using the electric motor only. For most commuting and domestic journeys it will be possible to drive in the electric mode with zero exhaust emissions. Examples of available PHEV are-
- Mitsubishi Outlander
- Volvo XC60 Twin Engine
- BMW 330e
- Volkswagen Golf GTE
- Toyota Prius Plug-in
- Mercedes-Benz E350 e SE
HEVs – Hybrid electric vehicles
Hybrid electric vehicles or HEV are predominately normal petrol / diesel cars. Their very small battery typically either helps the car go further and/or improves its performance (such as acceleration).The car will often run on the battery alone at low speeds. As soon as the car needs to go faster, the petrol / diesel engine kicks in. The driver of a HEV will hear the petrol /diesel engine running most of the time.
The battery itself charges partly via ‘regenerative braking’. When you press the brake pedal, it makes the electric motor go in reverse and act as a generator. As a generator, the electric motor can charge the battery.
So, braking charges the battery. This is one of the ways how HEVs get round the problem of not being able to plug in like a PHEV. Some examples of HEV are-
- Toyota Corolla Hybrid
- Toyota Yaris Hybrid
- Lexus RX450h
- Ford Mondeo Hybrid
- Honda NSX
How to charge your electric car
Electric cars charge by being plugged into a power outlet. The amount of time to charge an electric vehicle will depend on both the car itself and the power of the charging source. Most electric cars will fully charge between 4-8 depending on the charger type and the range of the car’s battery. So make sure you take this into consideration when looking for an electric vehicle and charging points.
Where and when will you charge?
Power outlets can be found now in most car parks and service stations, you can also now charge in locations such supermarkets, gyms, cinemas, retail parks, town-centre car parks.
It’s not always necessary to fully charge your battery at your destination, but frequent top-ups mean that you don’t run low or have to wait while your battery recharges from empty.
- Destination charging stations usually offer 7kW charging, giving 20-30 miles of range per hour plugged in for full battery electric vehicles (BEVs).
- Some businesses offer this free to those who use them as an incentive for people to visit.
- You’ll need to bring your own charging cable and often need to download a smartphone app to start your charge (although in some cases it’s as simple as just plugging in).
Charging at home is usually the most convenient place to charge, particularly when you can plug-in overnight. To charge an electric car at home, you will need a home charging point installed where you park your electric car.
- Drivers usually choose a dedicated home charging point because it’s faster and has built-in safety features.
- A home charging point is a compact weatherproof unit that mounts to a wall with a connected charging cable or a socket for plugging in a portable charging cable.
- Dedicated home charging points are installed by qualified specialist installers.
Grants for charge points
Good news…. there is a government grant in place – the OLEV GRANT also known as Electric Vehicle Homecharge Scheme (EVHS) provides up to £500 off the cost of purchasing & installing a home charging point for a private home.
Companies don’t enjoy the same grants however they can offset the cost of supply and install by making the charge point available on the national network for public use AND/OR speaking to your local Chamber of Commerce who may be able to obtain some funding for you (SMB/SME only) as part of a holistic carbon footprint reduction for your business.
As a rough guide, pre grant/funding, a charge point price range would be £500 to £1500 depending on the complexity of your solution.
We recommend Avon Electrical (Lancashire) and Lantei Appliances (Lancs and UK Wide) if you want some more advice around grants and charge point solutions.
Range anxiety is the fear that the electric vehicle won’t have the sufficient charge to complete the journey or enough to get to the nearest charge point, and is one of the greatest barriers preventing fleets from making the switch to electric. Most electric vehicles are currently capable of about 100 miles of driving before they need to be recharged. There are a few exceptions, the following models are said to have an estimated range of over 200 miles. However , something to bear in mind, these vehicles are tested in ideal driving conditions and are almost impossible to replicate on today’s roads. That said, technology is moving quickly and it wouldn’t surprise me to see a 500 range electric car before the end of 2021!
- Tesla model 3
- Jaguar I-pace
- Nissan Leaf
- Audi e-tron
The interesting thing about range anxiety is that it’s a bit of a misnomer in that people assume that they will charge their electric vehicle in the same way they refuel their ICE vehicle – at a garage! The reality is that, if you get this right, you won’t even visit a garage that often and 90%+ of your charging can be done at work or at home. it will actually change your habits – think of all time and the cash you will save by not going into the garage shop!
Top tips for your drivers to maximise range!
Driving at sensible speeds and limiting harsh acceleration and braking) maximises battery life and increases range. The use of heating and air-conditioning systems can decrease a vehicle’s range by as much as 30%.
Travel light- reducing a vehicle’s weight is the easiest way to boost its efficiency. ‘Get the junk out of the trunk’, as carrying an additional 100 pounds in the boot can increase a vehicle’s energy consumption by 1-2% percent.
Plan ahead- It may be quicker for your drivers to reach their destination by using the motorway, but they can help maximise the vehicles range by choosing a alternative route that allows them to drive steadily at lower speeds. Not always possible, but if they can try to avoid areas known for heavy traffic. Also by avoiding climbing hills/steep roads range will most definitely improve.
Maintaining the correct tyre pressures helps to get the best mileage out of each charge. Excessively low tyre pressure and heavy loads will increase the tyre’s rolling resistance as well as electricity consumption. Always try and keep your tyre pressure 0.2 bar above the car manufacturer’s recommendation.
IMPORTANT! CONSIDER YOUR USAGE AND PERSONALITY BEFORE YOU LEAP!
I spoke to a friend of mine I hadn’t seen for a while recently.
“How are you getting on with the Jaguar iPace?” I said.
“Worst car I’ve ever had! Hate it…” she replied.
Now the car has been fine – it’s the type of journeys she is doing that aren’t suitable (often 150-200 miles in a single day) and the fact the she just doesn’t enjoy being that methodical around planning charge stops etc.
My advice is that any reliance on the public charge network outside of occasional use should be an alarm bell that it might not be worth the hassle and could affect productivity.
Making the switch
You’ve now decided that electric vehicles are the way forward for your fleet, but now its the decision of how to fund them? Which way would benefit your business? Should your business purchase them outright or lease them?
In fact, the decision around funding, and taxation – or certainly the financial benefits generally of choosing these vehicles could be your primary motivation – and who would blame you?
Getting this bit right and understanding the full implications of funding, tax and running costs is VITAL to your decision making.
Most modern EVs in the UK market can be expensive to buy outright, therefore contract hire or lease purchase (HP with balloon) can be more appealing, sometimes with additional dealer discounts available for leasing but that hasnt quite kicked in yet as demand is high. Leasing allows you to drive away with a brand new, high-tech EV for a reasonable initial rental and affordable monthly cost, instead of having to wait years just to afford to buy one outright. Add to this the fact that with leasing you have the option of upgrading your vehicle every 3 years or so.
Maintenance – As mentioned earlier in this blog, EVs are easier to run and maintain. They have fewer moving parts than a conventional car and because EVs use ‘regenerative braking’, the brake pads can last longer and are a lot more durable, resulting in further costs saved. You also have the option of including a maintenance package on your lease agreement for an additional monthly cost, there are no unplanned expenses throughout your leasing agreement.
The main consideration or funding is around the tax treatment which is based on the co2 but also whether or not the vehicle sits on or off your balance sheet…
Notably – when you use cash or HP type finance you can, for a vehicle that has a co2 of less than 50, claim 100% of the vehicles p11d value (circa OTR cost) from your taxable profits in year one! But note – unless the vehicle is 100% commercial use you wouldn’t have any VAT reclaim route for this type of deal and the initial deposit is generally higher than the initial rental on contract hire. Note that higher co2 vehicles take much longer to write down in the other two pools/rates – only 18-8%pa.
Example: Company makes £100,000 pre tax profit, would pay £19,000 corporation tax. If that company purchased (cash/finance) a £50,000 sub 50 co2 vehicle they could offset that against the £100k, reduce their profit to £50,000 and their corporation tax bill would reduce to £9500 saving them the same.
If you lease (Business Contract Hire/Finance Lease) then the treatment is a little different but still efficient. For vehicle with a co2 of under 110 you would be able to offset 100% of the lease cost ex vat from your taxable profits in addition to being able to claim 50/100% of the VAT on the rental for a car/commercial vehicle. Also it is true that the lease co, as the purchaser and owner of the vehicle, can command discount terms on vehicles that far exceed that of a single or fleet buyer. However I should note that this isn’t as pronounced currently due to the high demand and relatively recent model release dates.
Another general benefit to ULEVS, in addition to the funding advantages, fuel cost reductions, environmental and CSR pro’s is that the the companies National Insurance contribution is linked directly to the vehicles BIK rate. i.e. Vehicle value and co2. So, for example the company would pay 13.8% of ZERO for a fully electric vehicle. Compare this to an Audi A4 Diesel S SLine and the annual NI for the business would be c.£1400.
A final thing to consider on funding is – do you want to take the residual value risk? If you do take a purchase/finance agreement rather than risk see if you can do so with some form of guaranteed future value similar to that of a PCP – or at least pay attention to the deferred payment amount and be cautious as future values on this new tech could be volatile.
Company Car Tax for the Driver
This one is easy – low co2 = low tax for your driver! This is the reason why they have been knocking down your door this past 6 months. See table below showing the benefits of the low c02 vehicles but also how their range affects the % too. See my article and recent video to learn more about this topic.
I hope this has been helpful. I think it covers most of what you would need to know when it comes to making the decision about whether or not the time is right for you and your business.
As always – if I can be of service please just ask.