Four Reasons Why Electric Fleets Will Maintain Growth Beyond COVID-19
The economic impacts of the global COVID-19 pandemic and wider market forces have slowed the growth of electric vehicle (EV) uptake, with a recent McKinsey analysis showing that EV sales declined by 25% during the first quarter of 2020.
The days of rapid global expansion appear to have slowed for the moment.
But many commercial fleets are continuing to accelerate plans to electrify vehicles in these uncertain times – because the transition remains inevitable.
We see the driving forces behind this accelerated transition
Let’s look at these items in turn.
Climate Change Recognition
Sustainability is no longer just a in transportation. The real-world impacts of climate change and rising consumer awareness clearly the need for significant action in our sector.
Transportation accounts for a quarter of greenhouse gas (G) emissions globally. This highlights the extent of the problem that we face, but also the size of the opportunity for fleet operators to make a difference.
In the UK, BT Group and recently founded the UK electric fleets coalition to tackle climate change with the accelerated adoption of electric fleet vehicles. Philip Jansen, BT Group chief executive, said: “We have an outstanding record in reducing carbon emissions and have plans to be a net zero emissions business by 2045. The switch to low and zero emissions vehicles is a key element in our carbon strategy and this new partnership will be critical in allowing us to make the switch.”
As fleet companies take a hard look at how to reduce the impact of their operations on the environment, the most straightforward and logical method is to transition their fleet vehicles to electric powertrains.
Fleets are generally commercial businesses that are highly cost-conscious. In trying to reduce their cost base, the fuel saving economics for highly utilised fleets of electric vehicles will pay off the capital investment differential in only a couple of years and rapidly provide net benefit to ongoing costs. This includes Battery Electric Vehicles (BEVs) and the renewed interest in Fuel Cell Electric Vehicles (FCEVs).
Total Cost of Ownership (TCO) is an effective performance indicator for most fleet managers, and much of the purchase decision for will trade off higher upfront capital costs with lower ongoing operating costs. In general, higher utilisation and higher mileage will produce greater cost advantages for the EV compared to the Internal Combustion Engine () vehicle.
Even if we consider the historic low oil prices over the last few months, projections show a likely rise again in the future. Fuel price volatility leaves uncertainty on the future operating costs for an ICE fleet, so if operators want to ensure a more stable, secure and resilient future, they are more likely to invest in EVs.
As governments face rising regulatory pressure to meet emissions targets and social pressure to improve air quality, local transport regulation will continue to be enforced to accelerate the uptake of clean vehicles (i.e ultra-low emissions zones).
With cities the obvious target due to vehicle density and resultant congestion, the greatest impact is likely to be felt by large urban fleets. The additional cost to operate high emission vehicles will therefore drive the uptake of low emission vehicles (as is the intention of the regulation).
In London, the Ultra-Low Emission Zone (ULEZ) and the T-Charge regulations have seen NO2 pollution reduce by 36% in the zone and an increase of vehicles now meeting the ULEZ emissions standards in the zone by 38%, which proves that regulation is having the desired.
There are plans to replicate this style of regulation across the UK, with ‘Clean Air Zones’ planned for Birmingham, Leeds, Southampton, Bath, Bristol, Liverpool and several others, whilst Oxford is set to be the first city to introduce a Zero Emission Zone (ZEZ), charging all petrol and diesel-powered vehicles that enter its city centre.
A shift is occurring in consumer expectations as they require greater transparency, honesty, and global impact from companies. In recent times, several major fleet operators have outlined their commitment to electric vehicles, and their reputation will largely depend upon their ability to execute these plans:
- Addison Lee will be entirely zero-emissions capable by 2023
- Uber want all journeys in London to be emission-free by 2025
- DHL are targeting 70% clean last-mile operations by 2025
- Lyft has committed to 100% electric vehicles by 2030
- UPS has signed a deal with Arrival to buy 10,000 of its electric delivery vans between now and 2024 and to possibly purchase another 10,000 after that.
- Amazon has placed an order for 100,000 electric delivery vans Rivian, to be on the road by 2024.
Despite the great economic and business uncertainty around the world right now, it still seems unlikely that businesses will roll back on their plans for sustainable fleets, given the potential damage to their reputation in the eyes of consumers around the world.
In summary, sustainable fleets have reached a tipping point: the need for global action on climate change is driving significant action in our sector; highly utilised EVs are producing greater cost advantages over ICE vehicles; environmental pressure is warranting increased transportation regulation; and evolving consumer expectations require businesses to execute their sustainability plans. These factors remain largely resistant to the effects of COVID-19 and will ensure the momentum behind electric vehicle fleets is and accelerated.
Are you navigating the e-mobility transition? Check out this short report that provides an insight into the challenges and strategies that we’ve learned from operators around the world https://immense.ai/2020/07/21/navigate-the-e-mobility-transition-and-deploy-the-right-electric-fleet-first-time/