The Transition to Electric Vehicles: Are You Ready to Switch Your Fleet?


Insights for ProfessionalsThe latest thought leadership for Management pros

Thursday, July 22, 2021

The transition to electric vehicles is set to gather pace in the coming years. If your business relies on your fleet, here's what this trend means for you.

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The Transition to Electric Vehicles: Are You Ready to Switch Your Fleet?
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American president Joe Biden marked Earth Day 2021 by saying the 2020s will be a "decisive decade" for tackling climate change. He pledged that the US will cut its carbon emissions by 50% from 2005 levels by 2030, effectively doubling its previous target.

Many other countries around the world have made similar commitments. Ireland, Sweden, Denmark and the Netherlands are among the nations planning to phase out all new sales of internal combustion engine (ICE) passenger cars by 2030. The UK and the state of California are planning to follow suit by 2035, while Canada, France and Spain have set a deadline of 2040 to stop new sales of ICE cars.

For companies, it's clear that ignoring the impact you're having on the environment or taking no action to mitigate it is no longer an option, especially if you rely on your fleet for your core business.

If you haven't started the process of transitioning from gasoline and diesel-powered transportation to electric vehicles (EVs), now's the time to do it.

The EV revolution

There’s been clear growth in use of EVs in recent years, and there's no doubt this will accelerate in the coming years. It's a trend you need to be on board with if you want to stay in line with changing rules and regulations, and also maintain a positive brand image.

The Global EV Outlook 2020 from the International Energy Agency revealed that global sales of electric cars topped 2.1 million in 2019, overtaking the figure for 2018 (which was already a record year). The total number of these vehicles on the road reached 7.2 million in 2019, compared to fewer than one million five years earlier.

An EY report focusing on the US showed that EVs are one of the fastest-growing modes of transport in the country, driven by increasing demand, improvements in charging infrastructure and an expanding selection of vehicle models to choose from.

It predicted that, by 2050, the percentage of EVs on the road will reach 65% in the US, up from only 2% estimated for 2020.

Benefits for businesses

Making the transition to an electric fleet isn't just about complying with the latest legislation. There are various commercial and financial benefits you can expect to gain from making this change.

While EVs might be more expensive to buy than ICE cars, vans and trucks (for now at least), you're likely to find that you recoup this cost over time through lower operating expenses. Electricity is much cheaper than diesel or gasoline, and what's more, fewer moving components in EVs means less need for maintenance, replacement of parts and routine work like oil changes.

These financial efficiencies have reportedly led to cost savings of up to 25% for businesses that made early moves to incorporate EVs into their fleets.

From a brand perspective, it will become increasingly important for all companies to show their customers what action they're taking to be more sustainable and environmentally friendly. Research by IBM revealed that nearly six out of ten consumers would be willing to change their shopping habits to reduce their environmental impact, and eight out of ten said sustainability was important to them. More than 70% of respondents said they would pay a premium of 35%, on average, for brands that are sustainable and environmentally responsible.

Making the transition

If you've decided that moving to a fully electric fleet is the right option for you, you'll need to start planning the steps required to make the transition.

1. Practicalities

It's important to take a practical approach to ensure that adopting EVs won't lead to any unintended consequences for your company. That will mean asking questions like:

  • Are there suitable EV replacements for the existing vehicles in your fleet?
  • Can you access the necessary charging infrastructure to ensure your fleet can continue operating properly?
  • What are the costs involved in making the transition?

2. Executive and staff buy-in

Replacing all of the ICE vehicles in your fleet with electric alternatives is a big undertaking that will require some initial investment, so executive-level backing is crucial before the project can go ahead. It's also important to make sure that your staff - the people who will be using the vehicles every day - are on board.

3. Understand total cost of ownership

A key part of making the business case for an electric fleet is coming up with figures around the total cost of ownership. Having a clear idea about this will help you understand the budgetary sustainability of your plans and how they connect to your wider financial situation.

4. Make the most of incentives

Some countries have introduced incentive schemes to encourage businesses to switch to EVs. In the UK, for example, there are various tax perks for organizations that go electric with their company cars or transportation fleets. If you'll be making this change in the near future, make sure you take advantage of every bonus and saving available to you.

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