Felipe Smolka, executive vice president of transformation at LeasePlan USA, is fully aware of the challenges of deploying electric vehicles (EVs) in fleets, from firsthand experience — as part of its commitment as a founding member of the EV100 Global Initiative, LeasePlan will transition its own employee fleet globally to fully electric vehicles by 2021.
“We’re committed to being early adopters of EVs,” Smolka says. “We’re taking the first steps. This is a big task, but we’ll learn from this implementation and we’ll use our experience to help our fleet customers in their own transitions to electric vehicles.”
One of the primary challenges to implementation, he says, is educating fleets on the path to EV adoption. More than just vehicle knowledge, this entails understanding battery technology and charging infrastructure, analyzing lifecycle costs in new ways, educating drivers, and defining the use cases that are right for EVs — and those that aren’t.
While the market was hampered by limited model choice for years, automakers are planning an onslaught of new BEV (pure electric) and plug-in hybrid electric vehicles (PHEV) models in the near term.
Even more important, from an education, acceptance, and infrastructure standpoint, is the growth of the number of EVs on the road, Smolka says. According to Bloomberg New Energy Finance (BNEF), the first million EVs took 20 years to sell; the next million took 18 months; the third million took 8 months. Sales surpassed 4 million units this year. That number is projected to grow to 11 million globally by 2025, according to BNEF.
That said, “Adoption [of EVs] is still largely driven today by the policy environment,” Smolka says. “We have to make sure our legislators understand how effective policy, combined with rebates and incentives, are working to drive EV implementation with consumers and businesses, which has encouraged manufacturers to scale up production.”
The growth of charging infrastructure goes hand in hand with EV adoption. As most EV charging takes place at home, fleets must plan for installing Level II chargers at employees’ homes, Smolka says.
The growth of public charging stations will help to alleviate EV drivers’ “range anxiety.” There are more than 17,000 public charging stations in the U.S., Smolka points out, though that still only represents a one-in-10 ratio to gas stations.
“LeasePlan is just starting to work with charging station partners on effective deployment,” Smolka says.
Charging stations offer proprietary accounts, which limit availability. “Even if you have charging stations near you, you’d need a charge card from that provider,” he says. “There is no aggregator today. But that will happen.”
The other factor in range anxiety — battery technology — is evolving as well.
The average all-electric battery range of current EVs (minus Tesla models) is about 140 miles, while a few luxury models offer up to 350 miles on a charge. That average range is still not sufficient for many journeys, however the overall estimated range has increased significantly.
For example, base models of the Nissan Leaf and Tesla Model S grew from 75 and 208 miles per charge in 2013, respectively, to about 107 and up to 249 miles in 2017. The 2018 Chevrolet Bolt EV offers an EPA-estimated 238 miles range.
Along with range improvements, lowering battery prices — the largest cost of an EV — is critical. Among the large EV battery makers, battery costs have fallen 15% to 18% per year in the past four years, according to BNEF. Thus the Holy Grail of $100 per kWh battery pack price could be achieved by 2019 or 2020 — though prices could drop further to $50/kWh by 2023 or 2024.
“When battery prices achieve parity with internal combustion engines in a few years, that will greatly accelerate adoption,” Smolka says.
Defining total cost of ownership (TCO) — an integral part of fleet — remains elusive. “It’s too early to tell the TCO of a fleet EV in the U.S., due to a lack of data,” Smolka says.
This is primarily due to lack of supply and therefore pricing in the used car market. Greater used EV sales will drive a more reliable pool of wholesale values, which in turn will help shape TCO. This is another arena in which fleet management companies can become leaders, Smolka says, by fostering the development of the wholesale market for well-maintained off-lease EVs.
TCO for EVs also carries different cost factors. While EV models may have a higher capitalized cost, the cost to operate an EV is less than half of those for vehicles with internal combustion engines. This is owed to the lower price to “fill up” on electricity, fewer vehicle parts, and negligible scheduled maintenance.
Adoption will also differ based on fleet makeup, which differs by worldwide region. For instance, Smolka compares the U.S. and European markets.
In the U.S., 18% of all vehicles sold are to fleets, while that figure rises to about 57% in Europe. The dramatic difference is based on usage. In Europe, a greater percentage of fleet vehicles are given as job perks. In the U.S., the great majority of fleet vehicles are configured to a specific job function.
“For those who are only commuting back and forth, electric vehicles are perfect,” Smolka says. “In the U.S., it’s a little harder. They’re work tools. So the more consumer type of use cases will probably adopt EVs quicker because of their very good alignment to commuting.”
In the U.S., this makes the analysis of which fleet vehicles are appropriate to switch to electric all the more important.
“There are ways to determine which fleet applications are candidates to use EVs, and which EV models will fit those needs,” he says. “When we’re talking to a client, only a segment of their fleet will be eligible [for EV adoption] at first. For some, it’s an easy shift — but not for the guy who has to deliver 15 packages a day,” Smolka says.
Overall, Smolka is surprised to see the level of interest in EVs with LeasePlan clients. “They’re looking for alternatives,” he says. “We just need to be transparent about the challenges. At the same time, there is no turning back.”
Felipe Smolka will present the seminar “Blueprints for EV Fleet Adoption” along with David Peterson of ChargePoint will present the seminar "Blueprints for EV Fleet Adoption" at the 2018 Fleet Forward Conference, convening Oct. 8-10 in San Francisco. Click here for more information.