Electric vehicles have been swiftly gaining popularity thanks to their sustainability over typical gas-guzzling models, especially in the business sector. That's why many companies are considering starting the process of fleet electrification, or replacing traditional internal combustion engine (ICE) models with electric vehicles (EVs). Not only will it make your operations more sustainable, but it will also project a good company image to customers or clients who value sustainability.
Electric vehicle fleet conversion takes time, money, and strategy. It's unlikely that you'll be able to buy an entire fleet of EVs at once. A gradual transition is a more reasonable expectation, and unique solutions like those offered by SIXT business can help. Long-term car rentals and SIXT+ car subscriptions provide the opportunity to mix some EVs into your fleet without high upfront costs or long-term commitments.
In this article, you'll discover:
- What fleet electrification is and why it's important
- The benefits of electric vehicle fleet conversion
- Tax incentives for electrifying your fleet
- How to effectively plan for the conversion
What is Fleet Electrification?
Fleet electrification is the strategic process of replacing your traditional ICE fleet vehicles with electric cars. Many businesses are prioritizing vehicle fleet electrification for several reasons, including environmental and financial ones, and commercial fleet electrification is crucial when it comes to meeting global emissions reduction goals.
There are several processes involved in electric vehicle fleet conversion, including assessment of your current fleet and current vehicle usage, financial planning, planning for charging infrastructure and organizational changes, and EV procurement.
Key Advantages of Electrifying Your Fleet
The main benefits of fleet electrification are environmental and economic in nature—there's a reason why fleet electrification in the US is trending. Let's dive into these benefits in detail.
Environmental Benefits
Environmentally, switching to EVs will reduce your emissions, making your day-to-day operations more sustainable. In fact, the transportation sector accounts for 28% of US greenhouse gas emissions, and electric vehicles typically reduce these emissions by between 40% and 50%. In addition, EVs can also reduce noise pollution, contributing to better public health.
Economic Benefits
There are also multiple economic benefits of electrification fleet conversion:
- Lower TCOs (total costs of ownership): While EVs may cost more up front, over time they reduce the amount of money spent on fuel—they're more energy-efficient, and electricity prices tend to be lower and more stable than gas prices. Maintenance and repair also cost less, with necessities like oil changes eliminated.
- Brand image: Many people value sustainability these days, and when customers and clients see you're making an effort to go green, they'll gravitate towards you over competitors.
- Future-proof: Many states in the US, like California, have mandated that by 2035, all vehicles manufactured and sold must be zero-emission models. By electrifying your fleet now, you'll be ahead of the game, as electrification of your fleet will eventually become inevitable.
- Tax incentives: Businesses with fleets of EVs are eligible for commercial clean vehicle tax credits.
US Government Incentives for Fleet Electrification
There are several federal and state incentives for fleet electrification. Let's explore them both in detail.
Federal Incentives
Federal incentives include the following:
- Commercial clean vehicle tax credit: You can claim a tax credit based on the gross vehicle weight rating, with a maximum credit of $7500 for a vehicle less than 14,000 pounds and a maximum of $40,000 for one over 14,000 pounds. Consult a tax professional to calculate your credit.
- Alternative Fuel Infrastructure tax credit: You can claim a tax credit for up to 30% of the cost of installing EV chargers in certain places.
State Incentives
State incentives will, of course, vary by state law. Some states provide rebates and tax credits for EV vehicle purchase and operation. Examples include the following:
- New Jersey runs the Charge Up New Jersey program, offering incentives of up to $4000 towards buying or leasing a new EV.
- Oregon has a Clean Vehicle Rebate program that offers up to $7500 for the purchase or lease of an electric vehicle.
- New York has the Drive Clean Rebate program that gives up to $2000 off the purchase price of over 60 EV models.
Several other states also offer programs and tax incentives, including those for the installation of alternative fuel sources like EV chargers—consult a local tax professional to find out more about programs in your area.
How to Start Electrifying Your Fleet If You're Not Ready to Buy
If you're not ready to purchase EVs just yet, you can still begin your fleet electrification plan and take advantage of tax incentives. Long-term rentals and car subscriptions with SIXT come without the high upfront costs, but they allow you to dip your toe into EV fleet management. You can also install your EV chargers during the rental or subscription period, allowing you to take advantage of the Alternative Fuel Infrastructure tax credit.
Fleet Electrification Step By Step
Fleet electrification planning goes a long way in making your transition smooth. Follow these steps.
Step 1: Decide Which Cars to Convert First
First, assess your current fleet and vehicle usage so you can prioritize which vehicles make sense to electrify first. For maximum cost savings, consider converting these vehicles first:
- Those near the end of their lifecycle or lease period
- Those with the highest fuel consumption
- Those that are typically driven on short, consistent routes
Focusing on these vehicles allows you to cut costs on fuel consumption almost immediately without the need for frequent charging for the new EVs.
Step 2: Build an EV Charging Infrastructure
One of the most challenging aspects of your fleet electrification strategy will be the EV chargers. You need to decide which type of chargers you want or need, how many chargers you want to install, and where to install them. There are several types of charges available:
- Level 2 stationary chargers: Good for overnight charging.
- Portable fast chargers: If you want to avoid being at a specific location to charge, these are the way to go.
- DC fast chargers: Placed at strategic locations to be used for quick charges throughout the day.
- Off-grid chargers: Placed in remote locations in case of emergencies.
If you're planning to install any charging stations (not applicable for the portable ones), you'll need to get permission from the government.
Other infrastructure includes software and maintenance. You can use telematics software to track your vehicles' operational efficiency, and you may also want to invest in fleet management software that compiles data like maintenance schedules.
Step 3: Plan Your Timeline and Budget
A gradual transition is key to avoid overspending. This is why you need to have a detailed timeline for deployment and plan out your budget accordingly.
For example, how many EVs do you want to deploy at once? How much will these cost you compared to the money you may make back by selling one of your ICE vehicles? It's important not to rush the transition, as this can have financial and operational consequences.
Step 4: Make the Transition with a Mixed Fleet
At some point along the way, you'll have a mixed fleet during your gradual transition to EVs. This requires flexibility, and SIXT business solutions can help.
Long-term car rentals and car subscriptions give you the option of renting or subscribing to electric vehicles on your own terms. Car subscriptions, for example, can be paused and reactivated on short notice, so you're not paying for more than what you actually need. You can also swap out your car models as you wish, giving you the opportunity to test drive multiple EVs so you can decide which kind you eventually want to purchase.
Fleet Electrification Example Roadmap
Now that you know what to consider, here's an example of how to plan for fleet electrification:
| Timeline | Stage of electrification |
|---|---|
Months 1-3 | Current fleet assessment and prioritization: Select which vehicles to convert and use fleet usage date to choose which type of EVs you want. Create your timeline and budget. |
Months 4-5 | Infrastructure planning and implementation: Choose and build a small number of your preferred EV chargers. |
Months 5-10 | Pilot EV deployment: It's a good idea to test your infrastructure during this time via long-term car rentals or subscriptions. Gather data on vehicle use, costs, and other key metrics that you can use for expansion. |
Months 10-13 | Expansion: Expand your fleet of EVs by converting more of your vehicles according to the data gathered in the previous phase. This may mean procuring more vehicles, building more charging stations, or making a purchase. |
Months 14-24 | Full implementation: Deploy your full fleet of EVs, all the while gathering data for optimization wherever possible. |
Once you've begun your electric vehicle fleet conversion, you can also plan year-over-year goals. Ask questions like how many EVs you want to deploy over the next year, or utilize metrics relating to your business's sustainability. Your work isn't done after you complete the conversion; you can always set fleet electrification goals to work towards as you expand and optimize your fleet.
Let SIXT Help Electrify Your Fleet
Electric vehicle fleet conversion is becoming inevitable, but it doesn't have to be terribly complex or costly. Gradual transitions utilizing solutions like SIXT business long-term car rentals, and car subscriptions can mitigate risks by offering flexibility and scalability. Don't pay for more than what you need, and pause your subscription at a moment's notice in case of any infrastructure delays or budget hiccups.
FAQs About Fleet Electrification
Three types of fleet electrification are battery electric vehicles (BEVs) that are 100% electric, plug-in hybrid electric vehicles (PHEVs) that use electricity for shorter trips and gas for longer ones, and hybrid electric vehicles (HEVs) that aren't plugged in to charge.
Costs vary based on the size of your fleet and the types of EVs you'll be procuring. If you purchase EVs up front, costs can range from $26,500 to $250,000 for buying, plus $3,500 or more per charging port you install. These costs can be mitigated via flexible solutions like long-term car rentals and car subscriptions since you won't be paying down payments or full purchase price.
It's suggested that you keep your vehicle's charge-level at somewhere between 20% and 80% of its full capacity to keep the battery healthy and operating efficiently.