Is there a small business niche for electric vehicles?

SmallBusiness.co.uk sheds light on electric vehicles for company car fleets and alternative car technology.

By Richard Schooling, CEO, Alphabet

If you are looking for a growth hotspot in the UK economy, look no further than the plethora of websites promoting the virtues of electric cars.

Even though annual sales of electric vehicles (EVs) in the UK were under the 200 mark just three years ago, there are now dozens of sites dedicated to exploiting the pressure on companies and private individuals to cut their costs and carbon emissions.

Most of this effort is aimed at consumers, marshalling seductive arguments about cleanliness and cost to persuade them to choose an EV as their next private or company car.

See also: 8 of the best electric cars for small business leasing

Of course, if it is a company car, the employee will want your business to take on the financial risk of switching them away from petrol or diesel to electrical power. So when, rather than if, the situation arises, you need to know the pros and cons of EVs./p>

Untried technology?

No-one wants to risk company money on an untried technology. However, ‘untried’ is a word that definitely doesn’t apply to electrical vehicles.

In fact, EVs are less than 25 years away from their second centenary thanks to an enterprising Scot named Robert Anderson, who put the first full size electric car on the road sometime around 1830.

Electrical cars ruled the roost at the start of the 20th century but were displaced after 1911 by longer-range petrol rivals incorporating the new ‘killer app’ of an electric starter motor, which spared drivers from the risk of spraining a wrist while using a crank handle.

A hundred years on, soaring fossil fuel prices and climate worries are turning the tide in favour of EVs again.

But even though today’s electric cars are far ahead of their Edwardian predecessors in some ways, they are still little more than electrified copies of conventional cars. They have the same heavy steel monocoque bodies, only with a 40-stone battery instead of an internal combustion engine.
 
The upcoming generation of electrical cars will have superior batteries, which form part of their chassis. They will also feature super-strong, lightweight, carbon fibre bodies for comfort, safety and enhanced range and performance.
 
These cars will start to appear on the roads in around 2013, so companies and drivers will benefit by waiting a little longer before plugging into electrical power.

EVs – ‘environmentally vague’

“OK”, your employee might say, “but I rarely drive more than 60 miles a day and I want a zero emission car now.” But while wanting to be a green pioneer is laudable, EVs emissions add up to a great deal more than zero.

The generally pro-electric Environmental Transport Association has recently published a white paper on cars’ lifetime carbon emissions. It showed that today’s electric cars are only marginally cleaner than many medium-sized diesel cars when CO2 emissions from manufacturing and electricity generation are taken into account.
 
This finding is supported by a comparison standard devised by the Argonne National Lab in the US, which suggests that existing electric cars emit up to 60 per cent more carbon over their lifetime than the most highly fuel-efficient diesels currently on the market.
 
Of course, EVs’ carbon footprints will eventually shrink as technology improves. And unlike conventional cars, EVs don’t affect local air quality by puffing out particulates or nitrogen or sulphur oxide emissions, which is a significant benefit in urban areas.
 
Nevertheless, the jury is still out on the question of whether EVs are automatically a greener solution than low-CO2 conventional cars.
 
Tax exempt, but…
Another reason why EVs will appeal to some company car drivers is that they are currently exempt from Benefit-in-Kind tax as well as Vehicle Excise Duty and the London congestion charge.
 
If you also add in the government’s £5,000 subsidy for every electric car sold, it means that a company driver who goes electric could drive a £30,000-plus car, tax free, without having to worry about rising pump prices.
 
It looks like a good deal for the driver but it isn’t for the employer. If the driver needs to travel more than 60-100 miles in a day, which is the maximum range of today’s EVs, the company will have to meet the cost of a hire car or other alternative.

One option would be to ask employees to pay for the cost of the alternative vehicle whenever their EV can’t be used.

Unknown costs

Then there’s the cost to the company of buying or leasing electric cars. Current lease rates for electric cars are nearly twice those of similarly-sized models and are on par with low-CO2 premium cars like the BMW 3-Series EfficientDynamics.

Fleet decisions need take the ‘whole life’ operating costs of vehicles into account. That means factoring-in major costs such as depreciation – which is still a largely unknown quantity for hybrids, let alone purely electric cars.

Rentals on EVs are high because there are still of the many unknowns for lessors. How long will batteries last? What will residual values look like in three or four years? These unknowns add up to a significant degree of additional financial risk for EVs, which will only diminish in a few years’ time when the market has more data.

Until then, businesses should regard EVs as experimental in every way. If you do decide to take the plunge, whatever you do be sure to lease your electric vehicle as that leaves the bulk of the risk with the leasing company.

Whatever you do, also be sure to check the warranty on the battery and clarify who would bear the cost of a premature failure (which may happen if the driver fast-charges the car too often). At around £10,000 a pop, replacement electric car batteries are far from cheap.

Positive image

So is there a small business niche for electric cars? As an all-round replacement for a conventional car, the answer is still ‘no’. But for specific roles – such as daily, low-mileage, urban use, allowing overnight recharging – the answer is ‘perhaps’ although, even in ideal EV conditions for an EV, a conventional car is likely to prove cheaper to run over its whole lifetime.

At the same time, there’s no doubt that running an electric car does project a positive, sustainable and forward looking image of your company.

EVs literally make great publicity vehicles. Expect to see plenty of them appearing in corporate signage as enterprising businesses capitalise on the millions that their manufacturers and the government are pouring into promoting their desirability.

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