Cutting costs

Electric Cars Cut Costs – Yes or No

According to the Society of Motor Manufacturers and Traders, over 90% of electric cars in 2012 have been sold to businesses. However, charging points and battery range still need to be sorted before enough businesses decide to make that all important switch.

With petrol and diesel prices, heading forever upwards and the Exchequer taking more and more, the question is, can you save the company money by investing in electric cars.

The simple answer at the moment is that you probably won’t lose money and you could well make some savings. There are however a few caveats; for instance electric cars, as they are at present, are not going to appeal to drivers doing 20,000 or 30,000 miles per annum.

However, if you drive on a commuter run, around 10,000 miles a year, there is a strong financial case for going electric, especially if there is free parking when you arrive.

Just to dispel a couple of myths:

Electric cars cost pennies to run – a recharge will cost between £2.50 and £3.00 depending on your electric tariff. This should give you around 100 miles driving, that is a cost of £300 a year in electricity charges for your 10,000 miles. So, how does this compare with diesel and petrol cars? A diesel car will need to deliver 45 miles per gallon, on average, to cost the same in fuel for the year. Not only is this figure more easily achievable, the new eco-friendly diesels are surpassing that figure comfortably. A petrol car doing 35 miles per gallon, on average, would cost substantially more, even greater if stuck in traffic.

Only electric cars enjoy free car tax each year – not now as many diesel cars and a few petrol models have achieved the same status. Of course, electric vehicles have been around for many years, but not in the present form with the increases in new technologies. Therefore, it is difficult to quantify many of the costs involved. If there is a huge increase in the take-up of electric cars then many of the costs will reduce dramatically. But that take-up is still uncertain and the lesson of LPG cars is still with us.

Certainly, the costs of insuring appear to be higher by about 25% than a corresponding petrol or diesel car. The main reasons would appear to be the higher replacement cost and the complexity.

Servicing should be a little cheaper for electric, there are less parts or filters to check or change.

Depreciation is still the big unknown although the contract hire companies have now put their heads on the block by underwriting residuals. At present, they do appear low, but until there are electric cars coming back off contract and more is known about battery longevity, we cannot see a move upwards in residual values in the near future. Again, LPG cars give us a cautionary tale.

It is the reduction in some external costs which is pushing some businesses to use electric cars, especially in London. Electric users could save over £2,000 a year in congestion charges, although low CO2 petrol and diesel cars can also save the same. Just as appealing, perhaps even more so, is that many London boroughs including Westminster are now offering the drivers of electric cars only, free parking in certain bays.

Recent changes to the Benefit in Kind (BIK) rate could also have a negative effect on the uptake of electric vehicles among business drivers. At present, business drivers running electric vehicles do not pay any Benefit-In-Kind tax, while low-emission hybrids like the Vauxhall Ampera are in the 5% company car tax bracket.

However, the Government has decided to make business users pay company car tax on low-CO2 vehicles from 2015/16 and both types of vehicle will fall into the 13% band. This could have a negative effect.

The electric market will hope that:

  1. Electricity companies will offer more, smarter overnight tariffs.
  2. The cycle of more take-ups followed by lower purchase prices etc. accelerates.
  3. Oil prices continue to rise.

We shall see

The Other Options – Hydrogen

  1. Use on-board hydrogen fuel cells ie. Advance chemical batteries.
  2. Turn hydrogen into electricity then used to drive a motor.
  3. Water vapour is only exhaust pipe emission.
  4. Only a handful of hydrogen fuelling points in the UK.

The Other Options – Plug In Hybrids

  1. All electric battery with an internal combustion engine.
  2. Run a short distance, typically 12 to 40 miles using the battery before switching to an internal combustion engine.
  3. Alleviates the problem of ‘range anxiety’ associated with all electric cars.
  4. Chevrolet Volt is the world’s top selling plug-in hybrid followed by the Toyota Prius

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