Petrol, Hybrid or Pure Electric – Which Is the Best Alternative to a Diesel Company Car?
Ongoing confusion over new WLTP fuel economy figures and continuing concerns about the impact of diesel particulate emissions on urban air quality could prompt some fleet operators to speed up plans to switch to pure electric vehicles.
Escalating concerns about the contribution of diesel engine emissions on urban air quality and continuing confusion over the Worldwide Harmonised Light Vehicle Test Procedure (WLTP) ‘real world’ fuel consumption are persuading many fleet managers to accelerate their plans to switch at least a portion of their fleet to alternatively fuelled vehicles.
Planning Ahead for Future Vehicle Acquisitions
There is a growing consensus that the future of transportation will be electric and it’s just a matter of time before we’re all driving around in clean, green EVs with a range of 500 km and easy access to charging points on every street corner. Although many new EVs and Hybrids are due to launch in 2019, the choice of EVs remains limited. Many fleet managers remain sceptical that EVs are capable of replacing some of their Internal Combustion Engine (ICE) fleet cars and – especially – high-utilisation vans.
For many company cars and vans, this remains the case, but the situation is evolving rapidly and with many fleets using three- or four-year replacement cycles, it is vital to plan ahead for a smooth transition to electric power. In the case of urban delivery vehicles, the prospect of city-wide bans or additional levies on diesel vehicles may provide additional urgency to switch to alternative fuels to meet future operational needs. And company car drivers are also likely to be affected as the introduction of the new WTLP fuel consumption figures look likely to place cars in a significantly higher band for benefit in kind tax.
Car manufacturers are trying to bring clarity to the situation, but the likelihood is that many vehicles’ ‘real world’ fuel consumption will increase by about 20% and some cars that were previously considered to be economical and tax-efficient will disappear from manufacturers’ ranges. In the face of all this uncertainty, the understandable temptation for fleet managers who need to replace vehicles now is to opt for a compromise such as one of the new generation of small volume, high output petrol engines or maybe a diesel- or petrol-electric hybrid. But in as little as three years’ time, these vehicles may become regarded as redundant technology, which could adversely impact their residual values on disposal.
Act Soon to Secure Tax Breaks
Tax breaks in some countries have made hybrid vehicles extremely popular with company car drivers across Europe in the last decade. The ongoing debate over the impact of diesel on air quality has spurred car-makers to expand their hybrid engine ranges. But the effective electric range of a Plug-in Hybrid Electric Vehicle (PHEV) seldom exceeds 40 km in real world conditions and once the battery expires, it’s effectively a standard ICE vehicle which has to work extra hard to carry around a 200-250 kg battery which makes no contribution to the power output. The tax breaks are also being phased out.
In the medium term, as the price of EVs continues to fall, Government subsidies are likely to be reduced in line (this has already happened in Norway and the UK) so delaying the acquisition of EVs could mean missing out on these valuable incentives.
Look Beyond Purchase Price to Calculate Cost Savings
While depreciation is a large component in the Total Cost of Ownership (TCO) matrix, the next generation of EVs will offer additional significant advantages over hybrids or petrol vehicles. Fuel is clearly one of the clearest benefits. On average, the fuel component of running an EV is around 2-3.5 cents per km compared with 5-7 cents per km for the typical hybrid – a figure which increases significantly once the battery is drained.
In some countries, the cost of running an EV in certain environments – especially cities – is already cheaper than a conventional ICE vehicle. And as more cities consider pollution levies and congestion charges, this advantage could become more pronounced. And there’s also Service, Maintenance & Repair (SMR). Although the benefits of EVs in this area aren’t yet clearly defined by operational experience, EVs have simpler engines with fewer moving parts and consumable items like clutches and exhausts. Within a few years, it will become clear that EVs offer superior reliability, with fewer wear and tear items which need replacing on a regular basis. This means fewer breakdowns, less downtime and – potentially – extended operating cycles.
The latest petrol engines offer strong performance and lower particulate emissions, but their fuel economy and CO2 emissions can’t match a diesel and the useful life of such highly tuned engines is likely to be shorter than diesels – which still command higher residual values due to their proven longevity.
Finally, every company’s carbon footprint will come under increasingly intense scrutiny by customers and regulators over the next few years. Switching a proportion of the car fleet to electric is one of the most effective ways to reduce a corporate carbon footprint and send out a clear message to increasingly environmentally-aware customers.
How Going Electric Can Reduce Costs
There are additional advantages of considering an early switch to EVs than simply reducing residual value exposure to increasingly obsolete technology.
Within three years, the next generation of electric vehicles will offer the following operational and cost advantages:
Reduced fuel costs
Reduced service and maintenance costs
Stronger residual values
Reduced CO2 emissions
Continued ability to operate within urban environments
Extending current replacement cycles by 12 to 18 months to facilitate the switch to pure EVs in 2020 may be a more cost-effective option than buying into intermediate technologies. Alternatively, replacing priority vehicles with leased vehicles on shorter 12- or 24-month contracts may provide the flexibility to make the switch to EVs as soon as it becomes operationally viable.
For some high utilisation vehicles, electrification will remain unsuitable for several years, but there will almost certainly be vehicles on many fleets that could be replaced with electric vehicles immediately – or in the very near future. Identifying these vehicles and securing senior management buy-in to plan an orderly transition as they come due for replacement will be one of the most important priorities for proactive, value-focused fleet managers over the next year.
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