The Uses of AI for Commercial EV Fleets
Rather than delve into the usual prophesizing that comes with AI,...
In this blog: What are the key differences? | The cost of ownership | Why you should consider an EV as a company car
*Updated in August 2024.
Even though we’re only a few years away from the end of the sale of new internal combustion engine (ICE) cars and vans, they were still a dominant market contender in 2023. According to the Society of Motor Manufacturers and Traders (SMMT), petrol retained its top position, with a market share of 42.3%. However, this is a decline from its 46.3% share in 2021. Also promising is the fact that the electric vehicle (EV) market is continuing to experience growth. Battery electric vehicles took a 16.6% market share of registrations last year, an increase from 11.6% in 2021 and above diesel, which saw a drop from 8.2% in 2021 to 5.1% in 2022.
But are electric cars worth it? How do ICE cars stack up against EVs or hybrids? For those considering making a new vehicle purchase, offering company EVs, or upgrading their fleet, we have created:
When it comes to EV efficiency vs ICE, many people ask how efficient ICE engines are. It’s not even close. Even with modern technology, the average Internal Combustion Engine (ICE) has an efficiency of only around 40%, with 60% lost via heat and friction. This means they consume far more energy traveling the same distance as an EV. EVs also consume less energy in stop-and-start traffic, which is where most people drive. On a motorway, ICE cars do improve their efficiency, but EVs still come out top.
EVs are well known for running smoothly and silently. As they use an electric engine instead of an exhaust system, they naturally operate with less noise pollution, whilst also having a smoother acceleration and deceleration. Fewer moving parts in the motor for an EV vs an ICE car also make them smoother to use, with less vibration throughout the range.
On top of this, their lower centre of gravity provides better handling and comfort. What’s more, EVs provide huge amounts of instant torque which means excellent responsiveness and acceleration. This is why EVs tend to use less energy in stop-and-go city traffic.
Are electric cars cheaper to maintain? Yes. The relatively high initial outlay cost of buying an EV is offset by reduced costs in other areas, such as maintenance. EVs have far fewer moving parts and therefore cost less to maintain. They experience less wear and tear compared to a traditional petrol or diesel engine which can have hundreds of parts which can eventually need replacing.
That being said, EVs do still require some maintenance. Brakes, tyres, and other consumables should be inspected periodically, in line with the manufacturer’s instructions. These inspection schedules tend to occur less frequently than combustion engine vehicles as EVs are lighter on tyres and brakes because of regenerative braking.
However, when EVs do need maintenance, it can cost more. EV-specific tyres are more expensive than regular ones, although this is coming down, and the battery will eventually need replacing. A replacement EV battery could be anywhere between £5000 and £10000, although most will last between 10 and 20 years.
Most EVs can be supported by main dealerships. However, independent service centres equipped to service EVs are currently few and far between.
Transport is the UK’s largest emitting domestic sector. Road transport is the main source of nitrogen dioxide, which comes from ICEs, alongside other pollutants. Driving an EV means you are not contributing any tailpipe emissions to the atmosphere during your journeys.
According to Bloomberg, a standard combustion engine passenger vehicle in the U.S. uses approximately 11 barrels of oil equivalent per annum. And, as they are not powered by fossil fuels, EVs are much more friendly to our environment.
This is even more so the case when the energy used to charge EVs is clean and generated via renewables. The overall life-cycle emissions from EVs with a decarbonised power system could be 70-90% lower than those of ICE cars. A Reuters study found that a Tesla Model 3 would need to be driven for 13,500 miles (21,725 km) before it does less harm to the environment than a Toyota Corolla. To put this in context, according to Britannia Car Leasing, the average UK driver clocks around 7500 miles per year.
Prolonging life and reducing negative health impacts are another bonus of making the switch to an EV. An independent review of the UK government’s approach to net zero highlighted that air pollution contributes to between 28,000 and 36,000 deaths in the UK annually, before confirming that cars and taxis contributed 58% of domestic transport carbon monoxide emissions and 32% of nitrogen oxide emissions in 2020.
Thousands of people with health conditions (such as asthma) stand to benefit from the cleaner air. One study in China suggested 17,500 deaths could be prevented if just over a quarter of privately owned cars and a slightly larger share of commercial vehicles were electric.
It is no secret that EVs are, at present, an expensive purchase. As demand for EVs increases, however, it is expected that costs will come down. An alternative is to buy a second-hand EV – MoneySavingExpert found an 11-year-old Nissan Leaf starting at about £5,000.
However, when you compare the total cost of ownership of an EV vs an ICE, it’s a different story. Maintenance and running costs are all lower with EVs, and if you have renewable energy generation such as solar at home, or EV charging at your workplace, then this is even less. Finally, EVs are often exempt from emissions-based charges such as road tax (Vehicle Excise Duty) and ULEZ. Let’s explore further.
Because fully electric models have fewer moving parts, they cost less to maintain. Research suggests on average, EV maintenance costs are 30% less than petrol vehicles over the life of the vehicle. As ultra-low emission zones (ULEZ) become more and more prevalent, you will not have to worry about being charged when driving through these areas. And, until April 2025, EVs are exempt from Vehicle Exercise Duty (VED). Insurance costs are also becoming comparable with insurance for petrol or diesel cars.
EV owners are exempt from charges when travelling in certain areas, such as London’s Ultra-Low Emission Zone (ULEZ). Other than Christmas Day, the Zone operates 24/7 and covers all areas within the North and South Circular Roads. Vehicles not meeting the emission standards (unless exempt) are required to pay the £12.50 daily charge.
Bath, Birmingham, Bradford, Bristol, Portsmouth, Sheffield and Tyneside also have clean air zones of varying levels, whilst Greater Manchester is listed as having a zone in the future.
Additionally, EVs are currently exempt from vehicle excise duty (VED), though that is due to change from April 2025 as per the Chancellor’s announcement of policy changes in November last year. Other benefits include those for company car drivers, who currently only pay 2% Benefit in Kind (BIK) tax until 2025.
AutoTrader found that a 1-year-old EV only loses 12% of its value versus a 24% loss for ICEs. As used EVs are becoming more popular, their residual value has increased. On the contrary, petrol cars have a lot more depreciation, as do diesel vehicles, due to reputation damage in recent years.
Given current low BiK rates and VED exemptions for EVs (until April 2025), leasing EVs to your employees via a salary sacrifice scheme can provide a lucrative benefit.
All vehicle owners must go through the process of taxing their vehicle, but because Vehicle Excise Duty (VED) is calculated according to CO2 tailpipe emissions for all vehicles registered since March 2001, most EV owners will be exempt from any charge.
But what about EVs vs hybrids? Depending on emissions, plug-in hybrids are subject to a £0-105 charge in the first year of ownership, and a £145 annual charge for subsequent years.
Benefit in Kind (BiK) Rates were as low as 0% for the 2020/21 tax year. Although they have now increased to 2% until 2025, it is still a great bonus and a massive area of saving compared to ICEs, which can incur BiK rates up to 37% based on their emissions. And, from 2025, the BIK tax rate increase will be limited to only 1% a year for three years.
Many businesses (such as Mer) are now offering their employees the opportunity to lease their EV via a salary sacrifice scheme – i.e. pay for it in a similar way they make their pension contributions. Such an arrangement will involve a business purchasing/leasing an EV as a business expense and passing the cost straight onto the employee. They can deduct the cost of the EV from the employee salary pre-PAYE, where tax and NI are taken. So, the employee pays less tax and the net cost of leasing the EV is reduced – all at no cost to the employer, other than administration time.
Putting it into context: a 20% standard rate taxpayer will save £20 in tax for every £100 of a monthly lease, with 40% taxpayers saving £40. Additionally, those earning less than £4,189 can save £12 in National Insurance, or £2 a month if earning above this threshold.
So what about EVs vs hybrids?
A hybrid EV (HEV) has both a conventional petrol or diesel engine and an electric motor and batteries. The internal combustion engine (ICE) charges the vehicle’s battery (most vehicles achieve this by repurposing wasted energy), and the electric motor typically engages when extra power is required, like when the vehicle is accelerating.
Plug-in hybrids (PHEVs) are very similar. They have a battery and electric motor as well as a petrol or diesel engine, however, they can drive for much longer distances on electric power than hybrids can, as their batteries are larger. Unlike ‘normal’ hybrids which can only charge the battery via the ICE, a PHEV can charge from an EV charger as well. Therefore, setting out with a full battery can provide emission-free, long-range driving, which can be topped up by the ICE when needed.
So, are EV cars worth it? Yes! While they require a different approach to driving and car ownership, EVs offer significant financial and environmental advantages of ICE vehicles, and to a lesser extent, hybrids.
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