Financial Hurdles and Making the Business Case (Continued)
The good news is that while sticker prices are higher, the total cost of ownership (TCO) for electric vehicles can be favorable in many use cases, but it requires a shift in perspective. Over the vehicle’s life, fuel and maintenance savings can outweigh the upfront premium. Electricity (especially off-peak) is significantly cheaper per mile than diesel. For instance, charging an EV on a typical overnight tariff (~14p/kWh) means driving 100 miles can cost only around £4–5 in electricity , which equates to roughly £0.02 per mile [25] . By contrast, an efficient diesel van might burn £12–£15 of fuel per 100 miles (around £0.12–£0.15 per mile). Maintenance costs are also lower EVs don’t need oil changes, have fewer moving parts, and often experience less brake wear due to regenerative braking. These operational savings, however, accrue over time and may not sway fleets that focus narrowly on year-one costs. Notably, only about 51% of fleets are currently using a TCO model when evaluating vehicle purchases ; the rest may be more focused on upfront costs [26] . Closing this “TCO understanding” gap is crucial to making the business case for EVs. Some fleets are now modeling scenarios that include fuel savings, avoided congestion/Clean Air Zone charges, and even potential revenue from vehicle-to-grid services in the future. Residual values are a related financial consideration. The used EV market in the UK has seen some volatility recently, with a surge of ex-lease EVs causing resale values to dip in 2023. This has made leasing companies cautious and can affect lease rates for fleets. However, as the market matures and more second-hand buyers enter (helped by initiatives to boost the used EV market), residual values should stabilise. The Government’s new Electric Car Grant (launched in 2025) and
efforts to stimulate demand for used EVs aim to support this [14] [27] . For fleet managers, it’s important to factor in conservative assumptions on residuals or consider operating leases where the risk is shared. Crucially, financial support schemes can tilt the economics in favor of electrification if leveraged effectively. We mentioned the Plug-in Van Grant and Depot Charging Grant above. Additionally, the Government offers a Workplace Charging Scheme that provides £350 per charging socket for businesses installing employee/work fleet chargers (up to 40 sockets) [28] . There are also incentives for electric trucks, infrastructure tax relief (the 130% first-year capital “super-deduction” was used by some firms to offset EV infrastructure costs [29] ), and no Vehicle Excise Duty for zero-emission vehicles until 2025. Savvy fleet operators are layering these incentives into their financial models. They are also negotiating volume discounts with manufacturers and seeking innovative financing (e.g. leases or battery-as-a-service models) to reduce upfront costs. In short, while the initial price tag of electrification is high, the smart application of incentives and a holistic view of lifetime costs can make the investment not only palatable but compelling . Developing realistic total cost models , accounting for vehicle price, grants, energy costs, maintenance, tax breaks, and residuals, is a near-term priority for fleet finance managers [30] .
Use of Total Cost of Ownership (TCO) Modelling
49%
51%
% of Fleets;
Not using TCO models Using TCO models
‘...only about 51% of fleets are currently using a TCO model when evaluating vehicle purchases’
7
Electrifying UK Fleet Operations: Challenges, Strategies, and the 2035 Deadline
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