An understanding of the wholelife cost of an EV fleet will drive the electrification switch, says Mark Rose, Managing Director, Tracker UK
Price tag, in addition to range anxiety, is still one of the main reasons fleet managers hesitate to purchase electric vehicles (EVs). And yes, many EVs cost more up front than their internal combustion engine (ICE) counterparts. But focusing solely on the price of a car is a mistake. In the end, EVs are often the better deal. Understanding a vehicle’s wholelife cost will enable fleet managers to decide whether an EV will save them money over the span of its life on fleet.
What is wholelife cost?
Wholelife cost is the total cost of buying and owning a vehicle, minus any money received back, such as a government grant. Here’s the formula in a nutshell:
- Add the purchase price, VAT, financing and warranty costs, licensing and administration costs, insurance costs and the cost of operating and maintaining the vehicle over the time planned to own it. Some fleets go as far as including the cost of vehicle downtime due to maintenance.
- Subtract any rebates or incentives and the likely depreciation value when you sell the vehicle.
Calculating wholelife cost
There are an increasing number of online calculators available to help fleet managers evaluate the cost of ownership, and most manufacturers offering EVs provide tools to demonstrate the ownership costs of their new models.
Factoring in how the vehicle will be used is critical to arriving at an accurate wholelife cost. That’s where vehicle telematics comes in. It can provide data on miles driven/hours of use and battery and fuel (if any) usage. With fleet management software, managers can access historical utilisation trends that will help them calculate the wholelife cost of new vehicles and benchmark the performance of their EVs compared to their ICE vehicles over time.
Factors driving EV wholelife costs
Low maintenance and superior efficiency often make the wholelife cost of EVs lower than many might think. However, these factors should be considered:
- Initial price. The initial price of an EV is often, though not always, higher than that of a comparable ICE. The cost will vary by model. A higher price tag also means more VAT. But EV pricing is changing. The prices of batteries — the most expensive component of an electric car — are falling. UBS has reported that the price gap between electric cars and petrol peers has been narrowing, with parity just three years away.
- Financial incentives. The Government’s EV chargepoint grant provides up to 75% (up to a maximum of £350) towards the cost of a home charging point for owners of flats and people in rental accommodation, while the voucher-based Workplace Charging Scheme offers support towards the up-front costs of the purchase and installation of electric vehicle charge-points provides £350 per socket (up to a maximum of 40) per company.
- Depreciation rates. For multiple reasons, not least that the battery accounts for 50-60% of the EV’s value and many last between 2 and 4 years while others are predicted to last up to 20 years, it is difficult to accurately calculate EV depreciation. Typically, in the UK, EVs tend to depreciate between 15% and 35% each year from the first year – based on 10,000 miles per year, the average EV loses around 60% of its value after three years. In theory, this means that an EV bought for approximately £20,000 would only be worth around £8,000 after three years.
- Maintenance costs. An EV’s low maintenance costs often make up for its sale price premium. The drivetrain in an ICE has more than 2,000 moving parts, most of which will need maintenance or replacement, whereas an EV has only 20 moving parts. EVs will require new windshield wipers and tire rotations, but no oil changes or transmission or catalytic converter repairs. Their brake pads last longer due to regenerative braking. And there’s no need for emissions tests. Research by automotive data experts KeeResources revealed that an electric car is at least 30% less to service and maintain than an internal combustion-engined vehicle. This will, of course, depend on the make and model and how it’s driven. One thing that will still be comparable between traditional ICE vehicles and electric cars and vans, is tyre wear. Tyres will need to be changed regularly.
- Battery replacement. The average cost of an electric car battery in 2021 was c.£87 per kWh. While this is still expensive, it is much lower than in 2010 when an electric car battery cost c.£763 per kWh. Unfortunately, this does make an electric car battery replacement a very expensive job. As of October 2022, the average electric car battery costs £5,626.04 in the UK (estimated).
- Electricity costs. According to Deloitte, 90% of owners have access to a charging point for their EVs at home, and this is the cheapest way to charge. As of October 1st 2022, the average domestic electricity rate in the whole of the UK has been capped at 34p per kWh. Pod Point says that fully charging a 60kWh electric car will cost around £15.10 (depending on where people live) and give about 200 miles of range. Of course, it depends on the car that is charging and the tariff of the electricity supplier, but overall, it won’t cost nearly as much to ‘fuel’ an EV as a traditional ICE vehicle. Adding to the ‘cost efficiency’ good news, is all new homes and offices in the UK will boast EV chargers.
Most fleet managers have already begun to electrify their fleets or plan to do so. As the market share of EVs continues to increase, their wholelife cost is likely to trend downward. In 2020 McKinsey & Co. estimated that EV wholelife costs could be 15% to 25% lower than that of comparable ICE vehicles by 2030. Don’t be fooled by an EV’s ticket price, they can help reduce fleet costs and crucially, reduce a business’s carbon footprint.