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Electric incentives won't tempt fleets

Despite the guarantees of significant financial support for fleets willing to use electric vehicles, it is unlikely that this support will have any real impact on the numbers of electric cars used by fleets.

In the latest of a string of announcements confirming financial incentives to encourage the adoption of electric vehicles – both cars and vans – the chancellor Alistair Darling said he is giving a Benefit-in-Kind holiday to drivers of electric company vehicles.

This will give basic tax-paying company vehicle drivers the equivalent of a £500 pay rise because they will no longer pay the 9% BiK for their vehicle.

Their employers will also save about £200 per electric vehicle per year in reduced National Insurance contributions.

"This may encourage employers to consider the provision of electricity propelled-vehicles for low-mileage drivers and also as pool cars for local business journeys,” said company car tax expert at Pricewaterhouse Coopers, Gary Hull.

However, experts warn this will not lead to significant uptake of electric cars, which they argue are still a long way off being fit for purpose.

“There isn’t an electric car that is suitable for the average fleet driver,” said Julie Jenner chairman of ACFO.

“We are pleased to see the encouragement the Government is giving for environmentally-friendly vehicles, and the future is undoubtedly electric, but the technology is still some way off for electric cars to be viable.”

The BiK holiday will begin in April 2010, a year before the introduction of a new showroom subsidy, which could see up to a £5,000 reduction in the cost of buying a new electric car.

The Government has set aside £230m to pay for these subsidies, which may be either in the form of a showroom discount or given to lease companies so they can reduce the cost of providing electric cars to fleets and private motorists.

In addition electric cars are exempt from road tax.

But even with these incentives, concerns over electric vehicles’ cost and practicality issues will still prevent fleets from using them in any great numbers.

These issues affect the uptake of electric company cars more, while electric vans are already being used by an increasing number of fleets, especially those involved in urban deliveries, where range and recharging issues are not as prohibitive.

But for electric cars, fleets still need major problems resolving.

“There are real issues over the recharging infrastructure for these vehicles,” said tax expert, Alastair Kendrick.

“In addition, costs are still prohibitive.

"Look at lease companies’ whole life costs for electric vehicles – they are appalling, they assume no residual value when they come back.

"Until this is addressed there is no incentive for fleets to take them [electric cars] up.”

The lease companies agree, saying while the risks associated with electric vehicles remain high so will the monthly lease cost.

“The Government needs to work to get a great deal more infrastructure in place before these vehicles are viable on a large scale,” said David Brennan, managing director at LeasePlan.

“If companies are to take this technology on board in significant numbers, it will take more than a tax break.

"Cost needs to be weighed against functionality and practicality.”

Robert Kingdom, head of marketing at Masterlease, agreed, although is a little more upbeat: “There are numerous issues to resolve - from expected battery-life to predicting the possible future used car market - but we expect electric vehicles to form a relatively small, but significant, element of our fleet within the five-year tax window.”

However, some issues are already being addressed.

The lack of a recharging infrastructure for example, looks like being addressed after Vinci Energies agreed a partnership with Elektromotive to guarantee that it can meet demand for installing charging points across the UK.

Its charging stations will be installed at homes, in public car parks, at the kerbside and at workplaces.

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