The road to 2035 for international fleets

Climate change top of agenda

The automotive industry is embarking on the biggest change in its 136-year history, and it's happening quickly. Climate change and air quality are at the top of the political agenda in Europe, and road transport - which contributes 21% of the region's greenhouse gas emissions [1] is in the regulatory spotlight. The combustion engine - the foundation of mobility for over a century - is about to step aside.

Net zero carbon by 2050

Individual countries have already announced deadlines for phasing out petrol, diesel and even hybrid cars, but recent European Commission proposals highlight the scale of change required to become net-zero carbon by 2050. Announced in July, these set out plans for a 100% reduction in car and van CO2 emissions in 2035 [2], which amounts to a combustion engine sales ban for those vehicles in line with targets in the UK [3].

Fleets at the forefront

Fleets, which operate the newest vehicles on the road and, according to Deloitte, account for 63% of new car registrations [4] will be at the forefront of that adoption.

Tightening Targets

The European Commission has set tightening CO2 targets for light-duty vehicles since 2015. For 2020/21, the industry-wide average is 95g/km for cars and 147g/km for commercial vehicles, with individual CO2 targets for manufacturers based on the size of vehicles they sell. Penalties for non-compliance are severe, at €95 (£81) per g/km CO2 over target, per vehicle registered that year [5].

WLTP measures

Forthcoming targets will be based on the tougher new Worldwide Harmonised Light Vehicle Test Procedure (WLTP) for measuring fuel efficiency. Manufacturers will be required to achieve percentage reductions using their WLTP-derived 2021 CO2 average as a baseline, and the UK has adopted an identical system after Brexit [6].

A Changing Market

Demand for diesel engines has declined quickly across Europe, falling from 44.4% of new car registered in 2017 to 28.0% in 2020, according to ACEA. With petrol almost stable during the same period, electrified vehicles appear to be filling that gap. PHEV and BEV registrations increased from 1.4% to 10.5% during the same period, while hybrids (including mild hybrids) quadrupled their share, from 2.9% to 11.9% [7].

Growing regulatory pressure

Diesel, which had once been the favoured fuel for fleets, is facing growing regulatory pressure even ahead of incoming sales bans. Alongside CO2 targets, Euro 6 and incoming Euro 7 pollutant limits are requiring exhaust after-treatment technologies which add to the cost of the car. It's led to diesel options being withdrawn from some smaller vehicle segments.

Electrified options opening up

Meanwhile, electrified options are becoming more accessible. BloombergNEF reports an 87.5% reduction in battery pack costs (from $1,100/kWh to $137/kWh) between 2010 and 2020 - cutting the price of the most expensive component and making longer ranges possible [8]. Most large manufacturers are also moving to shared electric vehicle platforms to create economies of scale and spread development costs. With battery production set to be localised to 'gigafactories' in Europe - Transport & Environment has identified plans for 38 of them across the region [9] - the business case is improving all the time.

What types of electrified vehicle are available?

The combustion engine is being phased out in stages, and there are several different technologies available to fleets:

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  Mild Hybrids (MHEVs) are light form of electrification, using a low-powered motor/generator to assist the combustion engine and charge a small battery. Some can also ‘coast’ with the engine switched off, or de-coupled, under low loads.
• •
  Full Hybrids (HEVs) feature one or more electric motors which not only provide assistance to the combustion engine but are usually also powerful enough to enable fully electric driving for short bursts during a journey, reducing fuel consumption.
• •
  Plug-in Hybrids (PHEVs) work similarly to HEVs, but with a larger battery that can be charged from a mains supply. They typically offer a zero-emission range of 25-30 miles and can be refuelled like a petrol or diesel car for longer journeys.
• •
  Battery-Electric Vehicles (BEVs) have no combustion engine and don’t emit anything at the point of use. No longer just for cities, many new models offer ranges of over 250 miles, and some can recharge to 80% capacity in half an hour.
• •
  Fuel Cell Electric Vehicles (FCEVs) are similar to a BEV, but produce their own electricity using a reaction between oxygen and hydrogen. They offer hundreds of miles of range, short refuelling times and emit only water vapour.

Whole-Life Costs

CO2-based taxation is nothing new in Europe, it's used in 24 of the 27 EU member states, according to ACEA [10] as well as in countries such as the United Kingdom and Norway. Most offer purchase incentives [18] or tax breaks for acquiring [19] electric vehicles, and a growing number [9] provide specific tax advantages for fleets [11] to help offset what's usually a higher list price.

Reduced running costs

That advantage is furthered by reduced running costs. Fleet operators can take advantage of significantly lower 'fuel' costs, exemption from tolls and clean air zone charging in cities, and reduced maintenance bills. Electric motors have fewer moving parts than a combustion engine and assist with braking, which reduces wear on the friction brakes and extends their lifespan.

Driver perception

Importantly, drivers are also more open to making the switch. A record 65% of those studied by the latest LeasePlan Mobility Insights Report said they had a favourable view of electric vehicles, and almost half of those said their perception had improved during the last three years [12].

More appealing

Lower running costs and reduced CO2 emissions are a big selling point, while only a third cited ‘range anxiety’ as a barrier. Quieter, smoother and more comfortable to drive than their petrol or diesel counterparts, they’re appealing even without the reduced tax bills.

Considerations for Electric Fleets

Where will drivers charge?

The most convenient place to plug in is at home. Drivers get the advantage of charging where they park, a full battery every morning and cheaper electricity costs than using public networks. Some utility companies offer discounted rates for plugging in during off-peak hours (usually after midnight) when demand is lowest and the electricity is from the greenest sources. Convenient charging is particularly important for plug-in hybrids, which require regular top-ups to maximise fuel efficiency.

Workplace charging

Providing workplace chargepoints can also help make the transition easier. These can serve not only job-need vehicles but could also encourage drivers who aren't on a company car scheme to choose an electric or plug-in hybrid vehicle by filling gaps in public networks. Members of the EV100 initiative - of which LeasePlan is a founding member - have installed more than 2,000 units at their own facilities, en route to a planned roll-out of 6,500 globally [14].

Managing home and workplace charging is also getting easier. International provider NewMotion provides a back-office system which integrate chargers with businesses' payroll systems, reimbursing drivers for the energy they use at home [15], and (where necessary) invoicing them for the energy used to top up at work.

What does your mileage profile look like?

Electric vehicle ranges are improving, but high-mileage users will still depend on public charging. These networks are improving every day, though there is a disparity across Europe. ACEA found an average of one chargepoint every 1.2 miles of road in the Netherlands, compared to one in every 150 miles in Poland - a much larger country [16].

On the go charging

Access isn't as challenging as it once was. Several providers offer roaming solutions which enable drivers to use different networks via a single account, and some have specific memberships aimed at fleets. However, it's worth considering whether to restrict drivers to specific networks to control costs, as is the case with liquid fuels, the most convenient roadside top-ups are also the most expensive.

EV versus PHEV

Long-distance drivers might also not be suited to PHEVs. Many new electric vehicles offer ranges of more than 250 miles and can be charged quickly at an ever-expanding network of ultra-fast roadside chargepoints. A PHEV will typically travel around 25-30 miles on battery power alone, and only a handful can charge quickly. There's no range anxiety - as they can be filled up at a regular fuel station - but efficiency could be lower than a diesel car if they are regularly used for long journeys or infrequently charged.

What vehicles do you need?

Although the vehicle availability is improving, two thirds of EV100 members (64%) said limited choice of variants was an issue [14]. This is especially true for commercial vehicles - there are no pick-up trucks, and vans have compromises between payload and range due to the weight of the batteries. A diesel Vauxhall Vivaro has a 1,458kg payload, compared to 1,002kg for its electric counterpart, which reduces applications for inter-city duty cycles.

New entrants

However, the options for fleets are improving. LeasePlan recently became the preferred operational leasing partner for Arrival's light weight, space-efficient electric vans, with an initial order of 3,000 units [17]. Customers will be able to choose from a range of body styles and battery capacities, and the manufacturer is targeting price parity with a diesel van.

Alternative fuels

Hydrogen is another potential alternative, as fuel cells provide long ranges and short refuelling times without the payload compromise. Stellantis recently unveiled fuel cell versions of its mid-size vans [18], while Renault Group and Plug Power are adding the technology to the Master van platform later this year, supported by refuelling infrastructure and green hydrogen supply [19]. The partnership is aimed at solving one of the biggest hurdles for the technology.

Where can you find the help you need?

There is expertise available to make the transition easier. LeasePlan is the world's largest supplier of electric lease vehicles, managing 1.8 million vehicles across 29 countries. We are a founder member of the Climate Group's EV100, a member of the Business for Clean Air Task Force (BCAT) and supporter of Global Action Plan's Clean Van Commitment. It's a contributed to us being named GreenFleet's Leasing Company of the Year in 2018 and 2019, as well as being Highly Commended in 2020.

To find out more speak to a member of our International Consultancy Team.

REFERENCES:

[1] European Commission. (n.d.). Road transport: Reducing CO2 emissions from vehicles. [online] Available at: https://ec.europa.eu/clima/policies/transport/vehicles_en [Accessed 5 Oct. 2021].

[2] European Commission. (2021) Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Regulation (EU) 2019/631 as regards strengthening the CO2 emission performance standards for new passenger cars and new light commercial vehicles in line with the Union's increased climate ambition. [online] Available at: https://ec.europa.eu/info/sites/default/files/amendment-regulation-co2-emission-standards-cars-vans-with-annexes_en.pdf [Accessed 5 Oct. 2021].

[3] Department for Transport (2020). Government takes historic step towards net-zero with end of sale of new petrol and diesel cars by 2030. [online] Available at: https://www.gov.uk/government/news/government-takes-historic-step-towards-net-zero-with-end-of-sale-of-new-petrol-and-diesel-cars-by-2030 [Accessed 5 Oct. 2021].

[4] Deloitte (2017) Fleet management in Europe Growing importance in a world of changing mobility. [online] Available at: https://www2.deloitte.com/content/dam/Deloitte/cz/Documents/consumer-and-industrial/cz-fleet-management-in-europe.pdf [Accessed 5 Oct. 2021].

[5] European Commission (2017). Post-2020 CO2 Emission Performance Standards for Cars and Vans. [online] Available at: https://ec.europa.eu/clima/policies/transport/vehicles/regulation_en [Accessed 5 Oct. 2021].

[6] Department for Transport. (2020). CO2 emission performance standards for new passenger cars and light commercial vehicles. [online] Available at: https://www.gov.uk/government/consultations/regulating-co2-emission-standards-for-new-cars-and-vans-after-transition/co2-emission-performance-standards-for-new-passenger-cars-and-light-commercial-vehicles [Accessed 5 Oct. 2021].

[7] ACEA. (2021). Fuel types of new passenger cars in the EU. [online] Available at: https://www.acea.auto/figure/fuel-types-of-new-passenger-cars-in-eu/ [Accessed 5 Oct. 2021].

[8] Henze, V. (2020). Battery Pack Prices Cited Below $100/kWh for the First Time in 2020, While Market Average Sits at $137/kWh. [online] Available at: https://about.bnef.com/blog/battery-pack-prices-cited-below-100-kwh-for-the-first-time-in-2020-while-market-average-sits-at-137-kwh/ [Accessed 5 Oct. 2021].

[9] Transport & Environment. (2021). Europe risks wasting £27bn battery opportunity with weak CO2 targets - study. [online] Available at: https://www.transportenvironment.org/discover/europe-risks-wasting-e27bn-battery-opportunity-with-weak-co2-targets-study/ [Accessed 5 Oct. 2021].

[10] ACEA. (2020). Overview - CO2-based motor vehicle taxes in the European Union. [online] Available at: https://www.acea.auto/fact/overview-co2-based-motor-vehicle-taxes-in-the-european-union/ [Accessed 5 Oct. 2021].

[11] ACEA. (2021). Electric vehicles: tax benefits and purchase incentives in the EU, by country. [online] Available at: https://www.acea.auto/figure/electric-vehicles-tax-benefits-and-purchase-incentives-in-eu-by-country/ [Accessed 5 Oct. 2021].

[12] LeasePlan UK. (2021). Mobility Insights Report 2021 EV edition. [online] Available at: https://insights.leaseplan.co.uk/fleet-management/sustainability/mobility-insights-report-2021-ev/ [Accessed 5 Oct. 2021].

[13] ACEA. (2021). Fuel types of new cars: electric 10.5%, hybrid 11.9%, petrol 47.5% market share full-year 2020. [online] Available at: https://www.acea.auto/fuel-pc/fuel-types-of-new-cars-electric-10-5-hybrid-11-9-petrol-47-5-market-share-full-year-2020/. [Accessed 5 Oct. 2021]

[14] Climate Group. (2021). EV100 Progress and Insights Report 2021. [online] Available at: https://www.theclimategroup.org/ev100-annual-report-2021. [Accessed 5 Oct. 2021].

[15] NewMotion (n.d.). How does automatic reimbursement work?[online] Available at: https://newmotion.com/en/support/faq/automatic-reimbursement-faq [Accessed 5 Oct. 2021].

[16] ACEA. (2021). Electric cars: 10 EU countries do not have a single charging point per 100km of road. [online] Available at: https://www.acea.auto/press-release/electric-cars-10-eu-countries-do-not-have-a-single-charging-point-per-100km-of-road/ [Accessed 5 Oct. 2021].

[17] LeasePlan. (2021). LeasePlan and Arrival sign partnership to bring revolutionary electric vans to European cities. [online] Available at: https://www.leaseplan.com/corporate/news-and-media/newsroom/2021/15-07-2021/ [Accessed 5 Oct. 2021].

[18] Opel Media International. (2021). Opel Vivaro-e HYDROGEN: Plug-In Fuel Cell Electric Vehicle Offers Zero Emissions and Quick Refuelling. [online] Available at: https://int-media.opel.com/en/05-17-opel-vivaro-e-hydrogen [Accessed 5 Oct. 2021].

[19] Plug Power. (2021). HYVIA: Renault Group and Plug Power's Joint Venture Leads the Way to a Complete Ecosystem of Fuel Cell Powered LCVs, Green Hydrogen and Refueling Stations Across Europe. [online] Available at: https://www.ir.plugpower.com/Press-Releases/Press-Release-Details/2021/HYVIA-Renault-Group-and-Plug-Powers-Joint-Venture--Leads-the-Way-to-a-Complete-Ecosystem-of-Fuel-Cell-Powered-LCVs-Green-Hydrogen-and-Refueling-Stations-Across-Europe/default.aspx [Accessed 5 Oct. 2021].