Fleet News

Electric vehicles are tip of the iceberg

Mention alternative fuels and most minds will turn automatically to electric vehicles.

Considering the number of newspaper column inches that have been devoted to EVs, that’s no surprise. But there are currently just four models available (excluding the Tesla roadster and G-Wiz), while the Government’s incentive scheme has paid out on only 800 vehicles.
It’s early days, of course, and with the multitude of launches due next year, these numbers will inevitable rise.

Look beyond pure EVs, however, and there are many other alternatives to the traditional combustion engine, including the familiar, petrol hybrids like the Toyota Prius; those trying to make a comeback, such as LPG; the relatively untested (biofuels); and other variants on familiar themes, such as Peugeot-Citroën’s diesel hybrids and forthcoming plug-in hybrids.

Combined, they offer companies many options when considering less environ-mentally damaging vehicles for their fleets. Yet they are all competing against ever-more efficient diesel engines.
Consider that three years ago just a handful of diesel cars dipped below the 100g/km mark for CO2 emissions. Today, almost 30 models do just that.

With emissions as low as 85g/km – the new Kia Rio – it might appear difficult to make a financial case for dropping diesel in favour of electric cars that have a considerable price premium, even with the £5,000 plug-in grant included.

However, there is a viable case; the cost of ownership for electric cars can actually be lower than the diesel equivalent.

Many commentators point to EVs and their ilk as stop-gap measures until hydrogen fuel cell becomes viable. This, they claim, is the real future for vehicles.

But when? For the past decade, experts have been saying that fuel cells are around 10 years away. Some still say that – certainly in terms of the commercial viability which is a prerequisite to widespread take-up.

In 2010, Kia was one of seven manufacturers to sign an agreement to make fuel cell vehicles available by the middle of this decade.

It believes this technology is the key to long-distance driving with zero emissions.

Fuel cells combine hydrogen and oxygen in a fuel stack. The resulting chemical reaction creates electricity with pure water as the only waste by-product.

Kia has an SUV under development which can cover more than 500 miles on a tank of hydrogen and manages the equivalent of 54mpg. Both Kia and its parent Hyundai plan to bring models to market by 2015.

They will be joined by Honda, which has in the FCX Clarity the world’s first mass-produced hydrogen car, and Toyota.

The latter has suggested a price tag of £85,000 for its car, possibly an SUV, in Europe. However, it might follow the example of Honda, which leases its hydrogen fuel cell vehicles in America.

Honda expects to lease about 200 over the next three years, primarily in Southern California, on three-year deals at $600 (£377) per month. That equates to $21,600 (£13,570) over 36 months.

Like Toyota with the original hybrid Prius, this is likely to be a loss maker for the manufacturer in order to get the technology out into the market and accepted.

Leasing, therefore, could remove much of the cost issue – although the cost of buying clean hydrogen is still quite pricey. The bigger issue, however, is infrastructure.

Although the UK’s first public hydrogen fuelling station opened last month in Swindon, creating a nationwide network will be expensive – just look at how tortuous progress in an electric network has been.

The more immediate alternative to diesel, therefore, certainly for those fleets that have a lot of city-based work, will be EVs and the latest generation of petrol and diesel hybrids plus so-called range extenders like the Vauxhall Ampera.

Leasing companies have been slow to embrace pure EV technology, not helped by the reluctance of the pricing guides to indicate re-sale values. Progress has been made this year, although the two main guides, CAP and Glass’s, have clashed over Renault’s plan to lease the battery separate to the car.

Glass’s believes it’s the ideal solution and has granted a generous three-year residual value for the Renault Kangoo ZE of 45%; CAP, meanwhile, refuses to quote.

Renault’s logic is that leasing the battery removes uncertainty over how long it will last. Effectively, paying a monthly fee is the equivalent to paying a monthly fuel bill; and if the battery deteriorates, it is simply replaced by a new one.

Many questions remain over EVs, however. They include setting service and maintenance budgets, especially with respect to the cost of replacement batteries where it is part of the total package. Two models might emerge: one based on the traditional ‘with maintenance’ lease; the other on a pay per use model.

There is also uncertainty about how quickly EVs will be adopted by the mainstream consumer sector, especially via the used car market. This will impact on resale values.

Meanwhile, Arval’s Corporate Vehicle Observatory survey suggests fleets’ views towards electric vehicles might be softening.

Two-thirds of large companies said they intended to acquire electric vehicles in the next three years.

Further evidence of a change in attitudes comes from a five-month Cenex trial of Smart Eds and Mitsubishi i-Mievs with 12 UK fleets. Almost two-thirds (63%) of fleet managers said they could see EVs integrated into their fleets before 2013, compared to just 25% prior to the trial. They were willing to spend up to 50% more to buy one, attracted by lower operating costs and emissions.

Taking current energy prices and the mileage experienced in the Cenex trial, the average annual EV ownership cost premium was £462 per vehicle, which fell to £202 when the daily mileage is stretched to 38 miles (representing 12,000 miles a year).

Based on a linear rise in energy costs, a marginal and in some cases significant operating cost reduction is available from the EVs, especially when combining high mileage with off-peak electricity prices.

Using the Cenex Fleet Carbon Reduction tool, modelling showed emissions savings of up to 15% were achievable even when compared to the diesel Smart Cdi, which has CO2 emissions of just 86g/km.

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