If you have a fleet of vehicles for your business, you may be considering going EV for your next purchase. With good reason. There are now more choices for passenger and light-duty fleet vehicles. Here’s a basic guide to fleet electrification 101.
Summary: A business EV fleet may be for you if you have a cargo fleet that drives less than 120 miles a day or sedans/SUVs that drive 200-400 miles daily. Talk to your accountant about depreciation and any purchase incentives.
How to Decide if Electric Vehicles are Right for Your Company
Companies with electric vehicle fleets include UPS, FedEx, AT&T, Comcast, Amazon and IKEA. But smaller companies can also switch to electric fleet vehicles, especially for light-duty vehicles (Class 1, 2 and 3 up to 14,000 lbs).
These are some of the things you should consider when evaluating fleet electrification for your light-duty fleet vehicles.
Calculate Your Distance Range Requirements
An EV fleet may be right for your business if you have a local fleet of vehicles that run short distances. For example, if have a fleet of sedans and SUVs that drive 200-400 miles daily, EVs may be a good fit.
If your delivery cargo van drives 120 or less miles daily, EVs may be a good fit. (That’s the current maximum mileage for a Ford E-Transit 350 Cargo Van.)
And even if your distance range is beyond this, commercial electric vehicles may still be a good fit, as long as you plan for charging on the go.
EV charging stations typically have level 3 chargers that fill a battery at 75-1200 miles per hour, giving you a full charge in 20-30 minutes, according to EVConnect.
Equip your staff with the right charging app and locations along their route and they can find a charge during lunch break, with minimal disruption of operations.
As charging infrastructure develops across the country, range anxiety, the feeling you get when you don’t know where your next charge is coming from, will become less of an issue.
Consider the Type of Electric Vehicle for your Fleet
Commercial electric vehicle options have grown up. You can purchase electric vehicles whether you need sedans, SUVs, trucks or cargo vans.
Many of the vehicles you currently use in fleets are releasing EV models. These include the Chevy Silverado EV, Ford F150 Lightening, Mercedes-Benz Sprinter, Ford E-Transit Cargo Van and more.
Shopping? Edmunds, known for its reviews and rankings of vehicles, publishes their recommendations for best electric sedans and SUVs on the market.
Evaluate Electric Vehicle Charging Options
You’ll need to consider how and where you’ll charge your electric fleet vehicles. Will employees charge them at home? Or will you charge them at your fleet depot or office location?
Level 1 charging is the lowest cost option. This type of charging requires basic household electricity and a regular 120-volt (120V) outlet. If your employees typically take their work vehicles home? This is the charging option for you and your employees.
Here’s the catch: if the battery is fully drained each day, it can take up to 40 hours to charge at 120V. But there are also at-home options for 220V charging that cuts the fill-up time to 8-12 hours. This requires a plug like the kind you find for a typical household electric dryer.
Level 2 chargers can charge at a rate of 12 to 80 miles per hour, taking an EV from empty to full in around 4 hours on a 220V charger. This is the type of charging facility you may want to consider for your small commercial fleet of EVs. And you may consider buying them for employees that charge at home.
Leave Level 3 charging (fast charging) to commercial applications like service stations, truck stops and city bus fleets. Direct current fast charging (DCFC) equipment can charge a vehicle in 20-30 minutes. While that’s convenient, it’s too costly and requires too much infrastructure development to charge your small EV commercial fleet.
Investigate Utility, State and Tax Incentives
The US has set a goal of having 50% electrification of all vehicles sold in the US by 2030. All major manufacturers are shifting their models and production lines toward that goal as well with a combination of battery electric, fuel cell or plug-in hybrid electric vehicles.
With that push, there are numerous utility, state, local and federal electric vehicle incentives around.
Make a Transition Plan
The most cost effective approach to fleet electronification is to work out a plan based on your vehicle depreciation and regular replacement schedule.
Include your tax accountant when you plan. Vehicles and level 2 chargers purchased between January 1 2022 and December 31, 2032 may qualify for a tax credit up to 30% of the purchase price. (More on that below.)
Look for local resources in your city and state. For example, Evolve Houston is a non-profit that offers fleet assessments including a summary of economic savings, assessments including a summary of economic savings, environmental impact reduction calculations and recommendations on which electric vehicles can be integrated into your fleet. They can also provide an EV charging assessment, and fleet depot infrastructure and facility requirements for on-site chargers.
What are the Benefits of Fleet Electrification?
Here are four benefits of fleet electrification as you consider whether to move your commercial fleet from internal combustion engine (ICE) to electric battery (EV):
- Lower cost of ownership. While EVs may be more expensive than traditional vehicles, you’ll save on maintenance costs including oil changes and transmission flushes. Maintenance costs are about half that of traditional vehicles, according to one study. A traditional ICE vehicle costs around 10 cents per mile to maintain. A full electric vehicle costs around 6 cents per mile to maintain.
- Lower fuel costs. We’ve all seen what changes in the world economy can do to gasoline and diesel costs. While electricity costs are also subject to inflation, in many states you can lock in a business electricity price for up to 5 years and have some budget certainty.
- Put sustainability goals in reach. If sustainability matters for your business (and it should), having a green fleet can be part of lowering your carbon output. That’s good for the environment plus your marketing and employee messaging.
- Get tax credits for fleet electrification. You can offset some of your fleet electrification costs through tax credits. Vehicles purchased between January 1, 2023 and December 31, 2032 qualify for up to 30% tax credit. Section 14403 of The Inflation Reduction Act, also called the Qualified Commercial Clean Vehicle Tax Credit covers up to $7,500 for vehicles up to 14,000 pounds, and up to $40,000 for medium and heavy-duty electric vehicles. Check with your tax professional for more details.
What are the Drawbacks of Fleet Electrification?
There are some drawbacks to fleet electrification that you need to consider.
- Change is hard. And we say that with no sarcasm intended. You have policies and procedures in place with your current gas or diesel fleet. Moving to an EV fleet is no easy decision. You’ll need to have a thorough analysis of the costs and benefits before you move forward.
- Investment in current fleet. You have already invested hundreds of thousands of dollars in your current fleet. But changing to an EV fleet can be gradual. Consider moving to electric vehicles as your current commercial fleet ages.
- Infrastructure investment. In addition to purchasing your electric fleet vehicles, you will also need to invest in chargers for your vehicles. The type you purchase will depend on the level of charging you need. You’ll may need upgrades to your on-site power supply for heavy-duty electric vehicles.
- Driver anxiety. Range anxiety can be an issue for new EV fleets. You’ll need to get driver buy-in and commitment. Equipping drivers with EV charging memberships and an app that lets them easily find a charge on the road can help alleviate this concern.
- Backup plan. If there is an extended power outage, you will need a business continuity plan for power. On-site battery storage system or a natural gas generator are two options. You would need a similar continuity plan for ICE vehicles, since gas stations don’t operate without electricity.
TIP: Consider running a pilot program to see if EVs are the right fit for your company.
How to Estimate Charging Costs for Electric Vehicle Fleet
Your charging costs for your electric vehicle fleet will be significantly less than your gasoline or diesel fuel costs. This section evaluates charging all vehicles at a single site, also called fleet depot charging.
Cost to Charge Electric Vehicle Fleet
To calculate the cost of charging your electric fleet, you need to know the specs on your electric vehicle, and the price per kilowatt hour you pay.
For example, let’s consider the Ford E-Transit 350 Cargo Van, one of the more popular cargo vans for fleets.
At 9,500 pounds, it qualifies for the federal tax credit. It has a 68 kWh lithium-ion battery and a range of 126 miles, compared to 368 miles for the standard gas model with a 25 gallon tank.
The average price of commercial electricity in the US is 13.45 cents per kWH (EIA August 2022).
Assuming the battery is drained to zero, it would cost 13.45 cents per kWh multiplied by 68 kwh, or $9.15 to “fill the tank” of your EV cargo van.
Commercial vs. Residential electricity costs can also come into play for your charging strategy. If your employees take their vehicles home at night, consider asking them to switch to an EV Charging plan or a Free Nights Electricity plan. These electricity plans are very popular in deregulated electricity markets like Texas. Regulated markets also offer residential time of use electricity rates with low cost or free power during certain times.
Demand Charges for your Electric Vehicle Fleet
Depending on your commercial meter classification, you may also have a commercial demand charge from the utility.
Your demand charges are based on the amount of power you use during the times when the grid is at its highest usage level of usage. Your demand charges for each calendar year are based on the highest 15 minute usage intervals in June through September.
Most peak demand measurements occur during on-peak hours between 9am and 6pm.
Since you will be charging your vehicles at night during off-peak hours, your fleet vehicle charging should not have a major impact on your demand charges, but it’s something to monitor if you charge in the daytime.
If you are operating a commercial charging facility with Type 3 chargers, demand charges will be a bigger part of your cost structure.
FAQs About Electric Vehicles for Commercial Fleet
There are numerous programs that can help offset the costs of fleet electrification. EnelX has an excellent online guide on utility, federal and state electric car tax credits, incentives and rebates.
The biggest tax credit for commercial electric vehicles is the Qualified Commercial Clean Vehicle Tax Credit. This tax credit covers up to $7,500 for vehicles up to 14,000 pounds, and up to $40,000 for heavy machinery. Check with your tax professional for more details. This tax credit is in Section 14403 of The Inflation Reduction Act.
Your miles per kWh will depend on the efficiency rating of your car electric battery. You’ll be able to find this on the specifications sheet for your vehicle.
High efficiency electric vehicles get 4 miles per kWh. Most full electric vehicles get 3 miles per kWh. And low efficiency vehicles get 2 around 2 miles per kWh.
If the efficiency rating isn’t listed? Divide the miles per charge by the size of the battery. For example, The Ford E-Transit Cargo Van has a 68 kWh battery and can go 126 miles on a single charge. That means the efficiency rating is 1.85 miles per kWh.
Some manufacturers display the efficiency rating as watt-hours per mile (Wh per mile). Simply divide the number into 1,000 to convert to mile per kWh. For example, 300 Wh per mile = 3.33 miles per kWh.
Electric vehicle batteries have an energy capacity rating (kWh or kilowatt hours), an efficiency rating (miles per kWh) and a power rating (kW or kilowatts). The electric vehicle equivalent of horsepower (hp) is kilowatts (kW).
To compare horsepower between an ICE vehicle and an electric vehicle, use this calculation: hp= kW X 1.369. For example, if you usually purchase a standard truck with a 300 hp engine, you would want an E-Truck with a 220kW motor.
Depot charging refers to chargers and vehicles co-located at a facility where off-duty vehicles are stored. Vehicles charge overnight, typically with a type 2 charger. Depot charging may also let you qualify for lower cost electricity, typically available at night. With the advances in battery storage, you may also be able to charge on-site batteries using cheap nighttime power. Then you can charge your fleets using the cheapest electricity rates.
The cost of operating an electric vehicle is lower than the cost of operating a gasoline vehicle because electric vehicles are more efficient. They convert a higher percentage of the energy in their batteries into power that propels the vehicle. Gasoline vehicles only convert a small percentage of the energy in their fuel into power.
Electric vehicles are cheaper to operate and maintain than gasoline vehicles, and they have the potential to significantly reduce long-term costs associated with vehicle ownership.
Electric vehicles are powered by electricity, which is cheaper than gasoline. In addition, electric vehicles do not require oil changes, tune-ups, or other routine maintenance that gasoline vehicles do. Electric vehicles also have fewer moving parts than gasoline vehicles, which means they are less likely to break down.
Shopping Electricity Rates for Your Fleet Electrification
So now you’re ready to start the process of electrifying your commercial vehicle fleet. But to keep charging costs low, you’ll want to get the best electricity rates.
That’s where we come in.
Business owners in deregulated electricity markets like Texas, Ohio, Connecticut, Pennsylvania, Illinois and New York can shop for business electricity rates online. Or, if you spend over $2,500 monthly on electricity for your business, give us a call at 844-214-5559 to discuss custom rates.
Business owners in regulated markets can contact their local utility company. Ask about time of use rates or EV Fleet electricity rates.
Additional Resources
https://www.selectcarleasing.co.uk/hybrid-electric-cars/guides/miles-per-kwh
https://www.samsara.com/fleet/research/electric-vehicle-benefits/
https://www.nrdc.org/stories/electric-vehicle-charging-explained
https://www.transportation.gov/rural/ev/toolkit/ev-basics/charging-speeds
https://www.ampcontrol.io/post/3-top-tips-for-ev-fleet-charging
