The result is that companies won’t be adopting EVs on a large scale until corporate managers change the way they lease and operate cars for their fleets. Such changes, combined with government incentives, could be enough to make EVs the lowest-cost option for some fleet vehicles. The key change, according to Hazimeh and some fleet managers, is how frequently vehicles are replaced.
Most fleet managers currently turn over their vehicles within six years, around the point when maintenance costs have traditionally tended to rise. That schedule probably won’t maximize the extent to which EVs, which have simpler mechanical components than conventional cars, can deliver long-term maintenance savings.
As an example, consider vehicles used for sales and service calls, which average 71 miles per day—a good fit for the 80-to-100-mile range offered by EVs such as the Nissan Leaf. Under that load, each car may need a new battery after five years. Replacing the car one year later would bring its cost for the company to 35 cents per mile traveled, according to PRTM. That’s seven cents per mile more than an equivalent gasoline car. Hold the car for nine years, however, and the EV’s ownership cost drops to that of the conventional car. With the $7,500 federal tax incentive for EVs factored in, the car becomes an economic winner.
AT&T’s unconventional practice of retaining fleet vehicles for 10 to 12 years helps explains why Jerome Webber, its vice president for fleet operations, projects a payoff from electric vans that AT&T began rolling out in December—Ford Transit Connect vans equipped with Azure Dynamics’ lithium-battery-powered drivetrain. He estimates that the vans will cost 10 to 12 cents per mile—less than half as much as a gas version of the Transit Connect and a third as much as the beefier gas-powered vans AT&T uses today. “If we were churning these vehicles every three to five years like most fleets do, we couldn’t do this,” says Webber.
Webber says AT&T will have 20 of the electric vans operating by the end of this year, and their performance will determine how quickly the switch progresses thereafter. He believes that EVs could already be a viable option for a quarter of AT&T’s 75,000-vehicle global fleet.
For some companies, the initial expense of the EVs will be an obstacle. James Steffen, director of fleet engineering and technical support for the Memphis-based lawn-maintenance firm ServiceMaster, says that’s the case for his firm’s 16,000-vehicle fleet. “Capital is a scarce resource,” says Steffen. “Sometimes you have to accept a higher total cost of ownership because you literally can’t afford the capital for the lower-cost-of-capital truck.”
Steffen says it is vehicle manufacturers and leasing firms that must adapt, breaking out electric batteries as a separate lease item to make EVs affordable. That’s not part of GE Capital Fleet Services’ strategy to move 10,000 EVs by 2015. At least not yet, says its chief strategy officer, Deb Frodl: “As of today, we are planning to lease the vehicle and battery combined. That said, as a fleet management company focused on finding the right business solutions for our customers, we will continue to monitor this emerging industry and to evaluate all options.”