Electric Vehicles (EVs) are nothing new. In fact, it might be hard to believe, but the first electric vehicle was invented in the 1800s around the same time gas powered automobiles were being developed. During that time, electric cars were promising because they didn’t have the same issues as gas-powered cars, which were difficult to drive, noisy, and produced exhaust fumes. It was expected that EVs were going to be the preferred choice due to these reasons, but the release of Henry Ford’s Model T made gas-powered engines much more affordable at a third of the cost. So began the movement of modern societies adopting gas vehicles as a primary mode of transportation.
Oil prices in the 1960s and 70s created a short peak in demand for EVs that had people excited. Some thought that this would be the boom they needed to catch on. But the upfront cost, low performance and range, and lack of charging infrastructure didn’t allow widespread adoption. Over the last decade, EVs, especially hybrid EVs, were met with increased popularity from environmentalists who were willing to pay more for a vehicle that had reduced impact on the environment, with fewer emissions coming from a hybrid and zero emissions coming from plug-in electric vehicles. Environmentalists pushed for businesses to adopt EVs, despite the greater cost associated with owning them.
But we all know that’s not how business works – without incentive to do so, businesses want to reduce costs and likewise, fleets strive for lowest total cost of ownership. Which brings us to today, and why I believe we are about to hit the TIPPING POINT for EVs in the fleet space. I’ve boiled it down to four big reasons why the time is right, which I will break down below.
- Increased Sustainability Policies & Incentives
- Increased Focus on Corporate Social Responsibility
- Reduced Cost of Ownership
- Greater Availability & Diversity of EV Models
Increased Sustainability Policies & Incentives
In recent years, the threat of climate change has rallied a call for interventions, especially targeted at the automotive industry, and for good reason. According to the US Environmental Protection Agency, the average passenger vehicle emits about 4.6 metric tons of carbon dioxide per year. Collectively, cars and trucks account for nearly one-fifth of all US emissions, emitting around 24 pounds of carbon dioxide and other global-warming gases for every gallon of gas.
Local and federal governments are starting to implement policy to combat climate change and incentivize EV adoption. One recent example is the State of California’s ban on sales of new gas cars by 2035, excluding medium- and heavy-duty vehicles such as trucks and construction equipment, which would need to be zero-emission by 2045. Across the globe, 17 countries have committed to phasing out gas-powered cars, including France, the U.K. and Germany.
There are also incentives to make EVs more affordable. There is a federal income tax incentive of up to $7,500 per eligible vehicle to make them cost competitive with diesel and gasoline powered automobiles. These incentives reduce up-front costs associated with purchasing EVs, which has been one of the major EV hurdles to date.
Increased Focus on Corporate Social Responsibility
Corporations are finding it increasingly important to make commitments to corporate social responsibility. This is driven by consumer expectations that the organizations they buy from match their own moral opinions and beliefs. In fact, in a 2017 study conducted by Cone Communications, 87% of consumers said they would be “willing to buy a product or service based on a company's advocacy concerning a social matter,” and 76% said they would “decline to do business with a company if it held views and supported issues that conflicted with their beliefs.”
Making a commitment to reduce their carbon footprint is a major initiative of many Fortune 500 companies, and the transition of their fleets to EVs is an obvious place to start. Take Walmart for example – just this month, the company announced its commitment to achieve zero-emission operations by 2040, starting with electrification of all of its vehicles. And they’re not the only one making corporate commitments. Amazon committed $2 billion to the Climate Pledge Fund, which supports reduction of carbon emissions; pledged to reach net zero carbon by 2040; and purchased 100,000 delivery vans from EV startup Rivian. Other major companies, including Best Buy, American Airlines, National Grid, Uber, and T-Mobile, to name a few, have joined the Corporate Electric Vehicle Alliance to make bold commitments to fleet electrification.
Reduced Cost of Ownership
One of the most important changes in the EV landscape has been in total cost of ownership. For the first time, owning an EV isn’t just about doing so out of the goodness of our hearts – it turns out it’s actually better for our pockets too in some cases.
EVs have always touted lower costs associated with the vehicle once you own it. They have lower maintenance costs because there are so few moving parts, meaning that you only need to bring it into the shop 1-2 times/year for a tire rotation and inspection. What business wouldn’t want to reduce down time? And of course, the big one is savings in fuel costs. Compared to an Internal Combustion Engine (ICE) vehicle, EVs provide 10 more miles for the same price per gallon of gasoline. This is what made hybrid electric models so big in the consumer space years ago.
The prices of EVs have also come down, due mostly to significant battery cost reduction over the last few years. In 2018, a battery pack that cost $200/kWh now costs roughly $150/kWh and will continue to decline over the next decade. Couple that with the rebates and incentives I mentioned before, and suddenly it can actually be less expensive for companies to own EVs than gas-powered ones. And if you believe the team of researchers at Carnegie Mellon University, some EVs will reach the same sticker price as their ICE counterparts by 2025.
Greater Availability & Diversity of EV Models
For years, EVs have been overlooked in the fleet space because they were almost always small city sedans like the Nissan Leaf, Tesla Model 3, and Chevy Bolt. All of these can be great for sales fleets, but like many of the companies we lease to, the availability of EV work trucks or delivery vans has been disappointing. It really wasn’t until this year that people in the fleet industry have started getting excited about EV vehicle inventory.
Now, it seems like another week can’t go by without another OEM announcing a new EV model that would be great for fleets. Ford announced an electric version of its popular Transit cargo van in March and broke ground on the plant to manufacture an electric F-150 this fall. Likewise, GM has committed to producing 20 new electric vehicle models by 2023 across its Chevrolet, Cadillac, GMC and Buick brands. Startups like Lordstown Motors and Xos Trucks are creating pickup trucks and cargo vans that rival those being produced by the major OEMs. Lordstown has already secured 40,000 orders for their new electric Endurance pickup truck. Never before have we seen so many options that are coming to market within the next 1-3 years.
The Time to Start Your EV Plan is Now
All of that is great, but how do you even get started thinking about if electrification makes sense for your fleet? First, start with asking if your company has any sustainability goals – if it does, then transitioning to EVs can be a welcome opportunity to live out a promise, and you can be a hero for bringing solutions to the table. If not, now is an excellent time to think about how a sustainability initiative might align to your company’s values. It’s also a great opportunity to start educating yourself and having internal conversations at your company about EVs and how they can help you reduce your total cost of ownership. Fleet management companies are a great resource for this because we can conduct feasibility analyses to help you determine parts of your fleet where it would be cost effective in the long-term.
I don’t think I’m too bold in saying that someday all of our vehicles will be run on alternative fuels, with electric being the most widely adopted. After years of waiting, the revolution is finally here, and the time for fleets to embrace EVs is now.
Brendan P. Keegan serves as Chief Executive Officer [CEO] at Merchants Fleet and was recently named the world’s Most Innovative CEO by CEO World Awards®; Executive of the Year, silver winner by Best in Biz Awards; and a Stevie Awards® bronze winner by American Business Awards®. He has been involved with Merchants since 2009—as a client, board member, and strategic advisor. Brendan is focused on transforming the company’s business model and creating a new category within the fleet industry known as FleetTech. Brendan’s innovative leadership has fueled the company’s strategic direction and positioned Merchants as the fastest-growing fleet management company in North America.