Benefits and challenges of transitioning to electric or hybrid fleet vehicles

Electrification Fleet

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Businesses across the country are transitioning to electric or hybrid fleet vehicles. The movement is gaining momentum as corporate entities strive to meet industry and government sustainability goals to reduce carbon footprints. In this blog, we’ll explore the benefits and challenges of fleet electrification, as well as provide valuable insights for companies considering a green shift.

Sustainability goals and green energy options

Net zero emission goals

As efforts to combat climate change remain at the forefront of national attention, major organizations in the U.S. are increasingly vying for net-zero emission goals. It’s widely understood that the lion’s share of the responsibility is on businesses and large corporations, and less on the efforts of individuals. Reducing industrial carbon emissions is crucial for achieving these sustainability targets.

Current state of fleet electrification

Green energy options, such as fleet electrification, are becoming more and more popular as companies seek to reduce their dependence on fossil fuels. Instead of operating traditional fleets that run on increasingly expensive and polluting gasoline, businesses are investing in lithium-ion hybrid and electric vehicles. Despite these positive trends, 27% of surveyed U.S. surveyors have yet to take the necessary steps to decrease their carbon emissions. [1]

Benefits of transitioning to an electric or hybrid fleet

Reduction in fuel costs

Fuel is very expensive – it’s the primary expense for 32% of fleets. Those who have made the transition, or partial transition, to alternative energy fleets, however, are reporting an approximate 55% reduction in fuel costs.

Alternatively, AI technologies like GPS and route optimization can result in a roughly 30% annual savings on fuel costs. [2]

Lower operating and maintenance costs

Electric vehicles (EVs) can eliminate the increasingly high costs associated with traditional hydrocarbon fuels, leading to major cost savings for businesses. Over their lifetime, an EV can save its user approximately $14,480 less in fuel compared to internal combustion engine (ICE) vehicles to which most of us are accustomed. [3]

EVs generally require fewer fluids, like brake fluid, windshield fluid, and coolants, and also require fewer moving parts, dramatically reducing maintenance costs and garage fees. According to one report, New York City found that their EVs cost less than $400/year to maintain, compared to $1600 for traditional hydrocarbon vehicles. [4]

Environmental and social incentives

EVs run on lithium-ion batteries, thereby contributing to cleaner air quality and reduced air pollution, which is a major win for public health. By adopting EVs businesses can attract environmentally conscious consumers and positively differentiate their brand in the eyes of the environmentally minded.

Government incentives, like tax credits and rebates, make the adoption of electric vehicles more financially attractive to businesses who are looking for more areas of cost-savings than just fuel. [2]

Feasibility and infrastructure considerations

Increasing range and shelf life of EVs

Innovations and advancements in battery technology are continually extending the range and shelf life of EVs, easing the reticence of users and making them a viable choice for business fleets.

Expansion of charging infrastructure

There’s a growing network of EV charging stations across the United States, and the development of fast charging technology is improving accessibility to EV users. Despite the regional variations in electricity costs, charging an electric vehicle is generally more cost-efficient than refueling a conventional vehicle with gasoline.

Challenges of transitioning to an electric or hybrid fleet

High initial investment

The purchase price and upfront costs of electric or hybrid vehicles can be high, but it’s the long term ROI that should incentivize users. Significant investment is required to build and maintain EV charging infrastructure, but similar to the lithium-ion batteries, continual improvements are being made to ensure longevity of the technology.

Logistical challenges

Some logistical elements involved in managing a fleet of EVs include charging schedules and ensuring sufficient EV chargers. Most EV drivers plug their vehicles in overnight to ensure a full charge in the AM, which seems like the most intuitive option for businesses, as well.

Range anxiety and performance concerns

There are a lot of concerns about the range limitations of battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs), which is understandable as the electrification of vehicles is a vanguard movement. So, the onus is on EV private industry to assuage the anxiety of the consumers, reiterating the reliability of EVs and lithium-ion technology. [5]

Alternative solutions: reimbursing employees for using electric vehicles

Compatibility with standard reimbursement rules

Electric vehicles are eligible for all the same reimbursement rates set out by the IRS as traditional gasoline vehicles. Some individuals may find this as an incentive to make the switch to EVs because it’s seen as financially advantageous. [6]

Cost and administrative efficiency

Vehicle reimbursement programs, like Cardata’s IRS-compliant and tax-free FAVR (Fixed and Variable Rate) program, can be more cost-effective and administratively efficient than a fleet of company-owned vehicles. These programs are tailor-made to meet a business’ vehicle strategy, while simultaneously reducing liability, administrative overhead, and tax burden.

Employee-owned EV vehicles

Employees using their own EVs for business-related travel can charge them at home, reducing the need for extensive workplace charging infrastructure. This can lead to major cost savings for the business and simplified fleet management. Operating costs for employee-owned vehicles are significantly lower in general, employee-owned EVs even more so.

By transitioning to a vehicle reimbursement program with employee-owned vehicles or EVs a business can find efficiencies through offloading the cost of acquisition, depreciation, insurance, and much more.

Conclusion

Transitioning to electric or hybrid fleet vehicles offers numerous benefits, including major cost savings, reduced maintenance costs, and significant environmental advantages. Vehicle reimbursement programs for employee-owned EVs present an alternative solution, offering cost efficiency and reduced administrative burdens. As sustainability becomes a motivating factor in business decisions, companies must weigh these considerations to determine the best approach for their fleet management needs.

Explore more about Cardata’s solutions for fleet management and reimbursement programs. Contact us today for further inquiries and support in making your fleet more sustainable and cost-effective.