28 April 2022
EVs have different total costs of ownership to petrol and diesel vehicles and assessing how much they will cost your business over their fleet life can be complex. We look at the main considerations in 2022.
Many fleets are now examining the business case for running EVs, and in doing so, they are trying to ascertain the Total Cost of Ownership (TCO) for these vehicles.
Although sales of EVs are rising quickly, up 101% year-on-year for in the car segment. For example, there is still much discussion about their overall cost during a fleet cycle, compared to petrol and diesel models.
One of the issues fleets face is that the volumes have not been large enough, and running over several years, to create clear data on key aspects of TCO, such as service, maintenance and repair costs and residual values.
As an example of the difficulty, some experts will claim that the replacement costs for tyres on EVs are higher because tyres wear out more quickly due to the weight and torque of EVs. Yet there is not a consensus on this: slower driving and EV specific tyres see them wear 30% slower that on petrol and diesel vehicles, other firms claim.
So we asked Alex Georgianna, founder and principal consultant for fleet consultants Grace Automotive, to look at some concrete examples of EV TCO, and how they apply.
Are EVs more expensive to run than diesel/petrol-powered cars?
Alex Georgianna says: “It can be a tricky question to answer. Sure, there’s a difference in retail prices between electric vehicles and diesel/petrol-powered models, but what will either cost to run? The answer relies on a vast array of personal choices and structural realities.
“Total Cost of Ownership (TCO) considers monthly costs in roughly the way they will impact on your budget, and there’s no shortage of providers quoting real services that encompass the full gamut of holding and running costs.”
The first consideration to look at is up-front cost. There is no doubt that EVs are more expensive in outright purchase terms, as Alex shows with this example:
“The manufacturer’s on-the-road (OTR) price for the electric Mercedes EQA is nearly £11,000 more than that of the equivalent petrol GLA as our table below, based on 36 months at 10,000 miles/year, shows.”
He recommends leasing to limit up-front costs, and also any residual value risk at de-fleet time: “The lessee has less “up front” cost and no responsibility for the vehicle’s residual value. By taking on residual risk, leasing companies shield drivers both from retail price disparity and from the relative ability of EVs and ICE vehicles to ‘hold’ their value.”
Alex thinks, that in general, the residual value predictions by leasing companies for EVs are healthy.
“While the lease cost for the EV is higher, its retail value (RV) to OTR ratio indicates that leasing companies are depreciating EVs more slowly (1.4%/month) than ICEs (1.5%), anticipating a higher relative residual.”
What about ‘in-life’ costs such as servicing and charging?
Monthly maintenance for the EV is roughly half that for the internal combustion engine (ICE), Alex says, because there are fewer parts to replace and less work to undertake in a service.
Funded maintenance programmes can alleviate concern about the relative costs of service and wear and tear items, while pay-as-you-go servicing such as Allstar ServicePoint allows you to access competitive rates and streamline SMR for EVs, while you can search for replacement tyres through ServicePoint Tyres.
Fuel and electricity
One area where EVs hold an advantage over ICE vehicles is in the cost of fuel, or electricity.
As an example, an electric car with 75kWh batteries doing 1,000 miles a month and averaging 25kWh/100 miles, with home charging costing 28p per kWh would cost £70 in electricity.
An equivalent diesel car doing 40mpg, with diesel priced at 170p per litre, would cost £193.
With Allstar One Electric and Allstar Homecharge, whether at home or on the road, fleets can pay for all their charging through one provider. This allows clarity over costs so you can build a picture of pence per mile costs, and efficient payment for all charging. You can find out more about it here.
Other costs to consider
However there are new factors that need to be added into the TCO equation for EVs, such as the cost of infrastructure. If a driver has to install a home charger, or your business needs to put points in the company car park, these costs may have to be added in.
A home charger, for example, often costs between £800 and £1500. Once installed of course, it won’t impact on the TCO of future EVs so you will need to decide whether to budget it as a cost on a separate line or as part of the TCO for the initial vehicle.
According to Zap-Map, premiums are usually slightly higher with EV vehicles than ICE vehicles. Alex says, this could be down to insurance firms not having as much evidence for claims: “The higher insurance premium on the EQA in our example here is likely to reflect the much thinner pool of claims data on EVs.”
With insurance, is it simply a case of shopping around to find the best prices?
While company car drivers can benefit from lower Benefit-in-Kind costs for EVs, companies can take advantage of lower tax costs too.
Employers must pay National Insurance Contributions (NICs) on company cars, and the amount is calculated against a rate of 15.05% (from April 2022). A pure electric company car, is rated in the 2% P11D category because of its 0g/km CO2 output, while an ICE vehicle of 130g/km would pay NICs on 31% of its value.
Also, there is no Road Fund Licence to pay on EVs and if a business buys electric company cars outright they can claim the full cost against profits (as opposed to only 18% for a petrol or diesel vehicle) in the first year, saving Corporation Tax.
It is also possible to claim back VAT against leasing payments and maintenance costs too.
So, what’s the answer? Alex says: “It still remains a little unclear. In general, the same evidence holds across all makes/models that EVs are slightly more expensive to run.
“The good news is that the analysis above can be run for virtually any car, providing a baseline of monthly cost expectations. Whether or not this baseline represents the best pricing available depends largely on buying power.”
As more and more become interested in transitioning to an EV fleet, it’s important to know the TCO and the products and solutions that are available to help simplify charging on-the-road and at home. Click here to find out more about Allstar’s EV solutions and request a call back to speak to one of our experts.