The Transition To Electric Vehicles
By 2030, the sale of new petrol and diesel engine vehicles will be banned. While there is no requirement to change to providing alternatively fuelled vehicles until 1st January 2030, the transition to electrification has already begun.
In 2020 more alternatively fuelled cars were registered than diesels, this demonstrates there is increasing demand driving the uptake of fully electric vehicles (EVs), or vehicles with part-electric driving capability, hybrids. Hybrids fall into two broad categories; Plug-in Hybrid Electric Vehicles (PHEVs) and Mild Hybrids which are self-charging with no external charging capability. There is a real move away from vehicles driven purely by internal combustion engines (ICEs).
Reasons to start to introduce electrification include practical and political factors:
- The requirement to gain expertise ahead of the deadline
- Lower company car tax/Benefit In Kind (BIK) for lower/no emission vehicles
- Desire or requirement to be seen as a greener business – reducing emissions and carbon footprint for health and general environmental reasons
- Desire to be seen as forward thinking
- Individuals’ preferences not to use combustible fuels
- Fuel economy of electrically fuelled vehicles
- Individual circumstances to make electric more viable (driving patterns and behaviour - in commercial vehicle terms, the duty-cycle of the vehicle)
- Expansion/strengthening of green-air zones
As more products become available, the choice of alternatively fuelled vehicles is expanding all the time. It is becoming increasingly likely that there is something to suit all individual needs. From the list of factors above, company car tax has become a real driver for some. For many, the BIK burden for pure ICE vehicles has become prohibitive. Yet range anxiety associated with electric vehicles remains a huge counter-concern.
BIK on ICE vehicles has increased, largely due to the re-assessment of vehicle CO2 emissions through the introduction of Worldwide Harmonised Light Vehicle Test Procedure (WLTP), but CO2 thresholds are also increasing, meaning that the tax in subsequent years of the vehicle’s life could be higher than in the first year. Although BIK increases have been set to rise on all new vehicles, those with higher emissions have already been hit hard. Comparing a typical saloon available as plug in hybrid and diesel versions:-
- The PHEV, with an electric range of 36 miles and CO2 between 30 and 40g/km, from April 2021 is on 11% BIK, set to rise to 12% in 2022 year.
- An equivalent diesel might have CO2 emissions of 130g/km, which currently puts it on 30% BIK, rising to 31% in 2022. So the diesel vehicle attracts 2.5 times as much BIK as the hybrid.
Although the cost of the hybrid may be 15-20% higher than a diesel or petrol equivalent, the lower CO2 will generally result in lower BIK.
Providers of company vehicles need to better understand the practicalities surrounding vehicle choices so they are able to advise the business and individuals on how to balance their objectives whilst also ensuring the most suitable product is provided to fulfil the business and social needs of the employee.
For more information on how Midas can help your company with the transition to electric vehicles, please contact us.