Transitioning to an EV fleet: the business case

Moving to EVs requires careful planning – and it begins with a pilot project.

Today’s business environment – both in Australia and globally – is tough.

From supply chain difficulties and labour shortages to inflation affecting consumer spending and price rises making almost everything more expensive, margins are tight and challenges are plentiful.

Add to that an increasingly litigious business landscape, and it’s easy to understand why projects that don’t appear day-to-day urgent – such as the transition to an EV fleet –can fall down the list of priorities.

However, the role of a business and risk adviser is to keep a focus on the medium-long-term, too – and for businesses with fleets, that includes the transition to new energy vehicles.

Not every business will be ready to transition right now, so it’s important to identify the most opportune organisations in the portfolio.

“There are definitely businesses that are easier transitions and those that are more difficult to transition right now,” says Georgina Turner, Divisional Sustainability Manager –Customer and Operations at Allianz.

“For example, businesses that drive locally every day, and return the vehicles back to base every night, are prime candidates to transition now.

“However, businesses that rely on light commercial will find it difficult as the right vehicles aren’t necessarily available yet, as will businesses that have vehicles that travel long distances each day and don’t return to one central location every night.”

The transition to EVs

The use of EVs in Australian businesses is growing, with a 2023 report finding 40% of business fleets are now ranked as ‘mature’ on the EV adoption index.1 While making a positive contribution to the planet is a great motivator, there’s also customer demand to consider.

Research shows that when Gen Z and Millennial customers believe a brand cares about its impact on people and the planet, they are 27% more likely to purchase it than older generations. 2

“We are in an increasingly conscientious marketplace, and the customer sentiment to brands and businesses that prioritise ESG is extremely positive,” says Anastasia Martinez, Senior Environmental Specialist at Allianz.

“Consumers are becoming more aware regarding the impact of their purchasing decisions, and are actively seeking out companies that demonstrate a commitment to sustainability.”

Of course, there are other factors at play, too, with government incentives and disincentives across the globe encouraging individuals and businesses to transition to EVs.

In Australia, the EV Discount policy – pending eligibility – means EVs purchased by companies and/or through salary sacrifice are exempt from Fringe Benefits Tax (FBT). 3

“We are in an increasingly conscientious marketplace, and the customer sentiment to brands and businesses that prioritise ESG is extremely positive.”

“Bringing electric vehicles into the vehicle fleet makes sense for businesses that are looking for ways to lower costs and reduce their environmental footprint,” says Samantha Johnson, CEO of the Electric Vehicle Council.

“EVs have significantly lower fuel and maintenance costs compared to petrol and diesel vehicles, and attract government financial incentives that can offset upfront costs. EVs also produce lower carbon emissions, helping businesses demonstrate their commitment to sustainability.

“On top of this, offering EVs as company vehicles can be an attractive perk for workers that can help businesses differentiate themselves.”

The EV sector continues to evolve rapidly, so businesses that are prime for transition would be smart to start making plans.

There’s a lot to consider, and a pilot scheme can help identify issues, evolve thinking and establish policies and procedures for the future.

Preparing for change

At Allianz Australia, Turner has been heavily involved with Allianz’s own transition to EVs, and says there are a number of key considerations for every business.

Choosing the right EVs for the business

While over recent years the EV market in Australia has been relatively slim pickings when it comes to variety, availability and affordability, things are changing. More than 40 new models are becoming available in Australia during 2024,4 adding to the 99 that were available at the end of 2023. 5 By trialling different vehicles with drivers, businesses can identify the models that will best suit the needs of both the company and the drivers themselves.

Neil Parker, Head of Automotive at Allianz, says that supply is still an issue for certain types of businesses.

“At the moment, there’s very low supply of commercial EVs in comparison to, for example, sedans, and that’s something to be mindful of when speaking with businesses.”

Identify your ambassadors

A select group of drivers should be invited into the pilot scheme – and these drivers should be the most likely advocates. For a successful EV transition, businesses need EV ambassadors when the vehicles are introduced more broadly, and by bringing key people ‘along for the journey’, businesses recruit the ambassadors that can help make the project a success.

Driver familiarisation

While EVs are vehicles and driving them is a largely similar experience, the torque and the lack of engine noise are two significant differences, which require familiarisation. Having a structured program in place to ensure drivers are comfortable behind the EV wheel is important.

The charging network

Many of the questions businesses need to answer about introducing EVs revolve around charging. Is the business a ‘back-to-base’ operation with shorter, more local journeys? If so, an on-site charging network where vehicles can be charged overnight is straightforward.

It becomes more complex when employees have vehicles full time, or take them home overnight – or travel and have overnight stays. Do you install chargers at employees’ homes? What happens if they move to another company? What about if they rent, or they live in a strata building, or an inner city home with no off-street parking?

From an insurance perspective, where does indemnification start and end?

Clients should start with the more easily solvable scenarios. For example, build policies for full-time employees that own their own home and have been with the company for more than 12 months, and recruit the pilot team from that cohort.

Once those policies have been established, more complex scenarios can be tackled.

The key here is incremental transition.

Reimbursement policies

Similarly, how do businesses track and reimburse employees that charge at home?

Making the business case

The business case for introducing EVs has to be linked to environmental, social and governance (ESG) targets and reduced emissions, and these will differ from business to business.

Upfront costs (once the sale of the fleet vehicles the EVs are replacing are taken into account) need to be offset against:

• savings in fuel costs

• maintenance savings

• other costs, including insurance.

When it comes to fuel, it costs the average Australian driving a petrol or diesel car around $0.20/km, while fuelling an EV costs $0.04/km. If travelling 12,000km per year, it would cost an EV driver $500, in comparison to the $2500 for a petrol or diesel vehicle.6

That means that with a fleet of 10 vehicles, a business could immediately save $20,000 on fuel alone.

Turner says, “As time goes on, things will become easier, and the opportunity now is to tackle all of these little challenges so by the time we get to 2030 we’re actually in a great position, and we’re only just having to transition the last few really hard use cases, rather than starting the transition process.”

Part of the business case is telling the sustainability story – and businesses need to be careful to avoid accusations or perceptions of greenwashing, as things aren’t always as linear as they may seem.

Chris Jones, President of the Australian Electric Vehicle Association, says, “The emissions savings in operation are

vast, and it only takes about three years for the EV and the petrol or diesel vehicle to come out equal in terms of emissions – and then from there the EV is better.

“It’s important, however, to also consider the emissions associated with manufacturing the vehicles. Like anything in modern life, it takes emissions and energy to produce something, and to produce EVs, the emissions are up to about 40% higher than a petrol equivalent.”

For brokers, the opportunity is to help those clients who have not started their EV journey to identify opportunities for a pilot EV project.

For those that have begun, the challenge is to learn, evolve and plan the next steps of EV transition.

1. Australian Business Fleets Driving the Transition to Electric Vehicles - AfMA

2. Research: Consumers’ Sustainability Demands Are Rising (hbr.org)

3. EVC-Australian-EV-Industry-Recap-2023.pdf (electricvehiclecouncil.com.au)

4. Best Electric Cars Australia 2024 - 34 New EVs Arriving Soon | CarsGuide

5. EVC-Australian-EV-Industry-Recap-2023.pdf (electricvehiclecouncil.com.au)

6. Will I save money by owning an electric vehicle in the long run? - Electric Vehicle Council

Tips for brokers

Help clients start with a small pilot project –covering about 5-10% of their fleet.

2. Select users based on ease of transition – for example, those who return the vehicle to base every night, or those who own a property with off-street parking.

3. Consider which employees will be the best ambassadors for the pilot project.

4. Form a working group to establish policies and procedures, and identify any aspects that need to be addressed as the pilot progresses.