Fleet Contract Periods: Charging into the future
Establishing the most cost effective holding period for electric vehicles is proving a headache for corporate fleet operators and vehicle leasing companies. Still too many uncertainties make a reliable prognosis about the ideal holding period for EVs almost impossible.
Electric vehicles challenge conventional wisdom about optimum fleet holding periods. In the absence of historic residual value and maintenance data, forecasts for the most cost effective fleet contract can be little more than best guesses.
The evidence that does exist points towards extended holding periods that allow fleets and leasing companies to amortise the higher depreciation of EVs over a longer period. Moreover, EV maintenance and repairs ought to be cheaper than combustion engine powered cars, with fewer moving mechanical parts. Finally, given the limited range of battery-powered vehicles, the distances they cover tend to be shorter, so a longer holding period should not lead to an intergalactic mileage.
When skepticism reigns
But major uncertainties still jeopardise EV residual value forecasts and thus the possible holding period. How long will batteries last? Will demand for second hand EVs increase to meet ex-fleet supply? And will the next generation of EVs be so far advanced of today’s models that corporate fleets will struggle to find any buyers for their current EVs?
“Technological obsolescence is a real issue that we have to take account of,” said Stéphane Renie, Sales and Marketing Director of ALD International. He added that ALD Automotive’s EV contracts tend to be of a similar duration to petrol and diesel cars, but a much lower mileage – 40,000 to 70,000km.
Such relatively short distances can pave the way for longer contracts, said Andy Hartley, Commercial Director at Lex Autolease, market leader in the UK.
“Depending on the customer’s confidence over the technology and warranties involved, this can result in longer contract lengths than a typical fleet customer, partly in order to spread the investment cost and vehicle depreciation over a longer period of time to optimise monthly costs,” he said.
Further complications arise, however, in the form of shared ownership structures for EVs, whereby some manufacturers, like Renault, lease the battery separately.
“We’ve found that customers buying a used electric car are put off by the prospect of then having to lease the battery on top of the price of the vehicle,” said Gil Kelly, operations director for Venson Automotive Solutions. “This is not a buying model that car owners are used to. Anything that needs a mind-set change from buyers, takes time and education.”
In the Light Commercial Vehicle world, manufacturers are realising that to have any chance of strengthening the residual value proposition of EVs, they require a dedicated used vehicle network that can inspect the vehicle, including its battery, electrical elements and cooling system, and a used vehicle warranty offered, said Andy Picton, Senior Commercial Vehicle Editor at Glass’s, part of EurotaxGlass’s Group. “Some are even offering free rapid charging points, free car rental and train journeys as incentives to entice potential customers,” he said.
Image: Nissan
