Could your next vehicle be electric?

Blogs 12 Sep 2022

There are many reasons why small businesses should consider buying or leasing electric vehicles, including the fact that sales of new petrol and diesel cars are set to be phased out in the UK from 2030.

 This article was first published in First Voice. 

Just a few years ago, many people still viewed electric vehicles (EVs) as a strange, expensive novelty. Today there are many reasons why small businesses should consider buying or leasing them, including the fact that sales of new petrol and diesel cars and vans are set to be phased out in the UK from 2030. While there are still relatively few EVs on the road today – about 460,000, according to the RAC – you probably know someone who drives one.

“A lot of businesses are interested but there are still many questions and concerns, around charging and the purchase cost in particular,” says FSB policy advisor Friederike Andres. FSB research suggests that only 9 per cent of small businesses expect to switch some or all their vehicles to EVs by 2030. Almost half (46 per cent) said the purchase cost was a barrier to adoption – understandably, given current economic conditions.

Grants to help buy the vehicles and install chargepoints are available from the Office for Zero Emission Vehicles, but have been cut in England, Wales and Northern Ireland. They do include a 35 per cent reduction in the cost of small electric vans up to a maximum of £2,500; and of up to £5,000 for large electric vans. In Scotland, interest-free loans are available from the Scottish Government: up to £28,000 to buy a new EV and up to £20,000 for a used vehicle.

EV choice is expanding, including new cars from Renault, Vauxhall, Volkswagen, MG and Hyundai – alongside premium vehicles from Audi, Jaguar, Mercedes, Porsche and Tesla. “There is a car and a model for every purpose and budget: price is no longer a barrier to entry,” claims Lash Saranna, founder and CEO at FSB member Electric Zoo, which provides EVs on a subscription basis.

That is debatable, but EV running costs are certainly lower than for petrol or diesel vehicles. Driving an electric car 6,700 miles in a year would, on average, cost £600 less than a petrol car: £1,264 compared to £1,834, including insurance, MOT and fuel, according to April 2022 research from Compare the Market. The cost of charging an EV, between one third and half of the equivalent cost in petrol or diesel, would be lower still if the EV were charged at a home or business premises using a special EV electricity tariff and/or electricity generated by solar panels on the premises.

Purchase options

One way to sample EV use without making a long-term commitment is via subscription, such as that offered by Electric Zoo. “The monthly fee includes the car, insurance, road tax and maintenance, on a minimum contract for 30 days, or for three, six, nine, 12, 18 or 24 months,” says Mr Saranna. Cars can be used for business purposes, with the exception of food delivery and ride-hailing, and the company will soon launch a dedicated business service.

Alternatively, if you take a personal contract purchase from a leasing provider, the vehicle can be listed as a depreciating business asset, eligible for capital allowances, even if you don’t make the final payment to buy it. Lease with a personal contract hire arrangement and you can claim 100 per cent of VAT on leasing and maintenance costs if the vehicle is only used for business; 50% if also used for other purposes.

EVs are also exempt from vehicle excise duty, van benefit charge and fuel benefit charge. The benefit-in-kind tax rate for electric company cars or vans will be 2 per cent until at least 2025, but is in double figures even for low emission petrol or diesel vehicles, and 30 per cent or above for high emission vehicles.

You can also claim first year capital allowances if you buy a new EV, and main rate allowances on used EVs. You can claim business travel mileage at the same rate as for petrol cars, despite the actual cost being much lower. And you can drive through congestion or low emission zones free of charge.

About 8 per cent of small businesses have installed chargepoints at their premises for employees’ use, according to FSB figures. The government’s Workplace Charging Scheme can cover up to 75 per cent of the cost, or a maximum of £350 each for up to 40 sockets. And if employees want to buy an EV but fear they cannot afford it, businesses can offer staff the option of paying via salary sacrifice as a tax-efficient employee benefit (see box). In addition, of course, EVs are good for both sales prospects among consumers who want to buy from green firms as well as the environment.

Nagging doubts

Still, practical worries remain. If a vehicle only drives within a small local area or region, ‘range anxiety’ will not be a problem – but every EV driver seems to have a nightmarish story about creeping along a road with 1 per cent charge left, desperately searching for somewhere to plug in.

Ranges are increasing: while manufacturers’ claims may be overblown, with maximum distances cut by cold weather and by turning up the air conditioning, real ranges are often now at least 200 miles for mid-market cars, and 300 miles or more for top-end models. However, installing chargepoints could be challenging for small businesses, especially those that rent their workspace.

Meanwhile, public chargepoint numbers are increasing, but there are still too many different networks, each with their own app and user account. EV drivers have been delighted by the appearance of new chargepoints that allow contactless card payment instead.

Whichever network you use, there are three broad chargepoint categories: 7kwh-22kwh, which charge most vehicles in six to seven hours and are often installed outside offices, food outlets and at EV owners’ homes; 50kwh ‘rapid’ chargepoints, which might take 90 minutes to charge a car; and ‘superfast rapid’ chargepoints of 150kwh or beyond, which are much faster, but only if the EV also has a higher voltage battery.

At present there are just under 30,000 public chargepoints in the UK, including about 5,400 that are rapid or superfast. However, there are geographical variations: in London there is one public chargepoint for every nine EVs, but in north-west England the ratio is 1:55.

Tesla drivers have an advantage, as its Supercharger network appears to be reliable and does not have to cater for so many vehicles. In recent months government sources have suggested that Tesla may open its network to other EVs at some point soon, which would be a very useful development. The UK government’s EV infrastructure strategy, published in March 2022, pledges that by 2030 there should be 300,000 EV chargepoints in the UK. The Scottish and Welsh governments are also keen to increase charging capacity.

The final problem is a shortage of new EVs coming into the UK, caused in part by the long-running semi-conductor shortage, but also by shortages in nickel, lithium, cobalt and graphite, exacerbated by the war in Ukraine. As a result, some customers are currently waiting for months – in some cases more than a year – for a new car or van.

Low maintenance

Once you do have the vehicle, how easy is it to maintain? “One big advantage of a fully electric vehicle is that it is actually a fairly simple machine: there’s less to go wrong,” says FSB member Hayley Pells, a mechanic who runs a garage and MOT test centre, Avia, at Bridgend in South Wales, where she works on vehicles of all kinds.

Are there enough mechanics out there who are qualified to work on the vehicles? “Yes – although at the current rate a skills gap may emerge in around 2026,” says Ms Pells. “But there is a huge amount of effort going into changing that.”

Clearly many small businesses don’t think they can make the numbers add up to go electric at present. But it is getting easier, and FSB is lobbying government for further policy changes, including an extension of grant support and a scrappage scheme for old diesel vehicles.

Finally, it’s worth noting that almost everyone who starts driving EVs seems to enjoy it. That includes Paul Clarke, founder and editor of the Green Car Guide, by his own account “an ex-petrolhead”. “I now hate driving petrol cars,” he says. “An EV has an electric motor that responds at 100 per cent torque at all times. If I drive a petrol car it feels horrendous by comparison.” He says the contrast is even more glaring with an electric van. EVs may still be a novelty for many at the moment – but one day, perhaps quite soon, you may drive one yourself.

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