Fleet & business

Fuel savings

Companies and their employees can potentially save thousands of pounds on fuel by going electric

Costs for running electric vehicles can be up to 90% less than for a conventional vehicle, returning significant savings for your business.

Key points:

  • A 100% electric car could cost less than 2p per mile* to drive, compared to around 7p per mile for even a highly efficient diesel car.
  • Best cost-savings are made by driving in electric mode
  • Experts say 2.5p-3p per mile for reimbursing private electricity use is acceptable

Electric savings can stack-up

100% electric vehicles can be fueled for as little as 2p per mile, compared with 7p or more for even the most efficient conventionally powered cars, potentially saving your business thousands of pounds per year. Employees who pay for fuel used privately could also make significant financial savings by choosing an electric vehicle as a company car.

When considering an electric car for your fleet, or as a user chooser, it’s best to consider the vehicle’s whole life costs. This approach considers fuel costs as well as all other operating costs, resulting in the most rounded picture to compare a plug-in car or van with its petrol or diesel equivalent. There’s more detail on whole life costs here.

This is good news for workplace charging because it removes any issues around employees charging their company cars at work, and whether that is a taxable benefit akin to paying fuel for a petrol or diesel model.

Reimbursement for employees

Advisory Fuel Rates (AFR) can also have some bearing on the savings on offer – if you have a petrol-hybrid car, you can use AFR petrol rates; if you have a diesel-hybrid car, you can use AFR diesel rates. Advisory Fuel Rates for plug-in hybrids and range-extended electric vehicles are based on the size of the car’s petrol or diesel-fuelled engine.

As electricity is not classed as a fuel by HM Revenue and Customs (HMRC) there is no AFR equivalent for pure electric vehicles.

Experts (see box out) have established a figure of 2.5p-3p as an acceptable reimbursement rate on pure electric vehicles, which is a huge saving for companies versus the government’s 7p-20p Advisory Fuel Rates for petrol or diesel models, depending on engine size.

Plug-in hybrid models are reimbursed as if all the miles were driven on the internal combustion engine, giving your drivers an extra incentive to charge the vehicle in order to claim back at a higher mileage rate than it has actually cost them.

A word of warning – plug-in hybrid cars not correctly deployed, like doing too many miles on the petrol or diesel engine before being recharged, won’t necessarily return big savings.

Expert view:

Fleets should reimburse ‘fuel’ used by EVs at a pence per mile rate calculated to closely reflect actual cost using available data: manufacturers’ figures for miles per kilowatt (kW) and electricity cost data.

For example, a car with a 25kWh battery and a typical range of 85 miles returns 3.4 miles per kWh. Using an average cost of 10p per kWh – assuming the vehicle is primarily charged at home overnight, the cost per mile is 2.94p. That should be the mileage reimbursement rate.

This approach enables the company to agree a pence per mile rate for an electric car based on known parameters: car’s battery capacity, range in real world conditions and the average cost of electricity from typical sources – home, workplace, and public chargepoint.

Paul Hollick, The Miles Consultancy

* Electric pence per mile figures include journey fuel (electricity) costs only, calculated using the Go Ultra Low Journey Cost Savings calculator with independent data provided by Next Green Car, assuming overnight home charging using off-peak electricity priced at 7p/kWh (source: Dept for Business, Energy & Industrial Strategy average annual Economy 7 domestic energy price statistics 2016). Less than 2p per mile applies to BMW i3; Hyundai IONIQ electric; Nissan LEAF; Renault Zoe ZE40; VW e-Golf and VW e-Up! Comparative diesel fuel cost of 7p per mile based upon a diesel car achieving 77mpg using diesel priced at 120p/litre. All costs based upon the official NEDC economy and range figures which are obtained from official EU test data, are intended for comparisons between vehicles and may not reflect real driving results. Please bear in mind that you may achieve very different results in real life. These results should be used for comparative purposes only.

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