Electric vehicle demand hits record high as fleets embrace tax savings

Electric vehicle demand hits record high as fleets embrace tax savings

Electric vehicle demand hits record high as fleets embrace tax savings
13 July 2020

The desire for electric vehicles is visibly increasing among fleets

Leasing companies are experiencing record levels of requests from company car drivers. The move away from standard vehicles has been pushed, in part, by new benefit-in-kind (BIK) tax rates. Company car drivers will pay no tax on a pure electric vehicle (EV) this tax year, while drivers of plug-in hybrid vehicles (PHEVs) are also enjoying much lower rates.

A recent Survation study commissioned by London First of more than 500 UK companies found that almost a third (30%) of fleets are already using EVs, while 46% have plans in place to make the transition and a further 16% have begun to consider it. For those who have not yet made the switch, 50% think they will have transitioned within five years and a third (35%) think it will be within two years -  well before the ban on the sale of new petrol, diesel, or hybrid cars due in 2035.

Customers moving away from diesel

“Many businesses are looking to either partially or fully electrify their fleet. This is being driven by the desirability of longer-range models coming to market and the enhanced tax position over other drivetrains" - said Jon Lawes, managing director of Hitachi Capital Vehicle Solution. Looking at the distribution of fuel type on vehicles over the past six months, Lawes says, the share of PHEVs and battery electric vehicles (BEVs) has more than doubled, with diesel market clearly declining. Its renewals in Q1 of this year found further evidence of the move to hybrids or pure EVs. It showed that only 44% of diesel drivers have chosen to replace their car with another diesel. They appear to be shifting to hybrids instead,  with just 2% of customers making the full leap from diesel to electric, while three quarters (74%) of petrol hybrid drivers replaced their vehicle with another hybrid and a further 22% made the switch to a BEV.

Alan Bastey, customer relationship director and EV specialist at Zenith, says it has also seen a “clear growth in demand” for EVs in comparison with petrol or diesel engine vehicles. Zenith’s total order bank currently sits at 22% BEV and it’s tracking at 30% BEV orders for June. The Tesla product is appealing to many fleet drivers with the Model 3, accounting for 41% of all BEV orders taken so far, the company said. Bastey continued: “The long-term financial incentives are now enabling employees to look past some of the perceived barriers of adoption, the majority finding the switch easy and their biggest fear of finding a charging solution, not realised.”

Arval UK is also reporting that EVs are now the most popular vehicles ordered by some of its larger customers.   Consultant David Watts said: “To put that into context, as the Government’s promises became commitments in 2020, during the first quarter of the year we took more EV orders than we’d taken for the whole of 2019.” An Arval Mobility Observatory report, which gains insight from 5,600 businesses across Europe, shows that more than half (53%) of UK businesses are already running BEVs or plan to do so in the next three years, contrasting with 41% answering the same question in 2019. When it comes to plug-in hybrids, the figures were 63% now against 46% last year – the largest increase was seen for any type of EV – and 64% compared to 53% for hybrids. Shaun Sadlier, head of Arval Mobility Observatory in the UK, said: “These results show just how much additional impetus now exists behind the adoption of electric vehicles, plug-in hybrids and hybrids among UK fleets at this moment compared to just 12 months ago."

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Cutting Emissions

There is a growing awareness from the fleet industry of the need to cut transport emissions to support the Government in archiving net zero emissions by 2050.

Dr Mike Brown, the director, strategic partnerships at The University of Salford, hopes the UK Government will follow both the French and German governments’ lead. Germany is doubling incentives offered to buyers of battery-powered cars as part of a €130 billion (£115bn) economic recovery package and France is making EVs and plug-in hybrids the basis for €8bn (£7bn) incentive programme. Brown said: “We went a whole two months without burning coal to produce electricity and levels of pollutants such as nitrogen dioxide, from vehicle exhausts, and fine particles known as PM2.5 have fallen significantly.” He continued: “The UK needs to de-carbonise road transport as quickly as possible to stand any chance of hitting its climate change targets. “To quote Mark Carney, former Governor of the Bank of England, ‘we can’t self-isolate from climate change’ and with 20% of greenhouse gas emissions in the UK coming from road transport, we need to rip off the petrol/diesel sticking plaster and move to electric.”

Network Rail has set ambitious targets for its fleet operations to help it achieve net-zero. Its goal is one in four cars (25%) to be classed as ultra-low emission vehicles (ULEVs) by 2022 and 100% by 2030. By 2035, it wants a 100% of its fleet – including vans and trucks – to be ULEVs. Meanwhile, Tusker, Rentokil Initial, OVO, Tarmac and Drover have committed to switching their fleets to electric by 2030. They have joined a growing list of leasing companies and fleets by signing up to The Climate Group’s global electric vehicle initiative EV100.

Lauren Pamma, electrification propositions lead at Lloyds Banking Group, is charged with helping to drive EV take-up at Lex Autolease and Black Horse. She believes lockdown’s short-term benefit to the climate and clean air will further “galvanise” policymakers. “People have realised the benefits of clean air from suddenly having no cars on the road,” she said.

Plug-in Availability

Matthew Walters, head of consultancy and customer data services at LeasePlan UK, explained: “Supply is paramount to a UK-wide transition from internal combustion vehicles to EVs. Therefore, we need to ensure we are at the forefront of manufacturers’ thinking when it comes to supply, not just now but post-Brexit.” Furthermore, he says the introduction of clean air zones (CAZs) across the UK and Government initiatives incentivising EV uptake only make sense if fleets have access to lowest emitting vehicles.

Members of the Association of Fleet Professionals (AFP) have also voiced their concerns about the availability of EVs, particularly electric vans, according to chairman Paul Hollick. “There’s been a scarcity of (electric) vans this year,” he explained. “Even though there are more models and derivatives coming through, there just isn’t the availability.” Hollick is also concerned Brexit may aggravate the situation because tariffs could be imposed on imports. Short-term, however, Pamma expects the stock to be available, which has been held back since pre-lockdown, but says it will be a question of how quickly factories will be able to produce vehicles. The speed of economic recovery could also influence how many vehicles are allocated to the UK market. If it’s expected to be slower than European counterparts, Pamma thinks the UK could miss out.

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Decarbonisation Plan in the UK - the switch to electric vehicles

Bob Moran, head of the environment strategy at the Department for Transport (DfT), states that if a long-term change is to be delivered, a plan that spells out who is going to do what, by when, and how, is required.

The DfT has produced a plethora of plans and strategies across all sectors of transport, but most recently, in March, it took the first step towards producing its Transport Decarbonisation Plan (TDP) by looking at the challenges the UK faces. The plan of action, which will set out in detail what Government, business and society will need to do to deliver the significant reduction in emissions needed across all modes of transport, will be published later this year.

Contact us for free, friendly advice on making the switch to electric. We have great offers on the Renault Kangoo Z.E. and Mercedes eVito vans, Nissan eNV200 and Volkswagen increasing popular e-Transporter lease. All sought-after finance choices for customers moving away from diesel and petrol vans.



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