Managing your company cars: Fleet Balance, Fleet News

Vehicle manufacturers are all launching electric vehicles. Are they suitable for fleets?

Fleet manager interest in electric vehicles is already evident, and many are keen to know when and whether the costs and benefits of introducing new vehicle technology will become attractive to fleets.

There are three main areas on which the future success of electric vehicles rests. The first is the need for government support and financial backing, along with close collaboration between governments, power companies and motor manufacturers.

It is expected that governments in many other major western European countries – including France, Germany, and the Netherlands – will follow the UK in offering significant incentives in the form of subsidies to purchasers of electric vehicles – or ‘eVehicles’.

Given the success of recent subsidies (in the guise of scrappage schemes) to new car sales in Europe, this could provide a timely and effective boost to the introduction of electric vehicles into the mainstream.

Secondly, batteries are presenting a key challenge that must be addressed. Batteries are currently expensive to produce and must be replaced up to three times during the life of the vehicle.

And ways must be found to recycle them effectively in order to minimise the environmental impact associated with their disposal. It has been suggested that these batteries could be reused for static power storage in public places such as hospitals, but an effective infrastructure for this must be established if electric vehicles are to succeed.

Finally - and crucially – we need a recharging infrastructure if electric vehicles are to become more than a solution for short journeys, because current batteries only offer a 100-mile range with each full charge.

There are already stated commitments from local governments in some major cities.

The Mayor of London, for instance, has committed to a network of 25,000 charging points by 2015. Contrast this with approximately 600 petrol stations that currently exist in Greater London.

For a significant number of motor manufacturers, electric vehicles are now at the advanced stages of development with a number of mass-produced electric vehicles expected to come to market over the next two years.

Expert forecasts vary, but it seems that by 2020, eVehicles could represent up to 10% of new car sales.

It is expected that their growth will follow a similar pattern to that of mobile phones during the late-1980s and early-1990s, with major cities and other highly-populated areas being the first to see wide-scale adoption, in this case through the introduction of publicly available ‘pay per charge’ points.

In leasing terms, we expect electric vehicle leasing to differ somewhat from conventional vehicle leasing, largely due to the investment required in batteries and the way in which these costs are spread through the life of the vehicle.

There are still question marks over the setting of service and maintenance budgets, especially with respect to the cost of replacement batteries.

It may even be that in time, if batteries are considered to have a ‘second life’ and therefore a residual value, they will be leased separately to the vehicles themselves.

Right now, the main issue for leasing companies is the uncertainty around how quickly eVehicles will be adopted by mainstream buyers of three- or four-year-old used cars.

How this plays out will have a significant bearing on resale values and currently makes residual value setting more challenging than for conventional vehicles.

There is also the real possibility that the pace of technological development could undermine residual values if eVehicle technology improves over a short period.

Having said all of this, it is still inevitable that eVehicles will begin to break into the mainstream within the next five years, with both fleets and consumers alike. Governments and motor manufacturers remain heavily committed to their development, with fiscal incentives and subsidies likely to ease concerns around high up-front costs and uncertain medium-term resale values.

How does the driver handbook differ from the fleet policy document and what should be included?

At LeasePlan we believe that the driver handbook should be an easy-to-digest summary of all the key topics a driver needs to know when living with their company vehicle on a day-to-day basis, and should include: