EV tipping point ‘in one to two years’

Written by

Tim Greenhalgh

Posted on

December 30, 2019

Electric vehicles are set to match traditional models for total ownership cost within one to two years, according to recent reports.

Research by Deloitte predicts that electric vehicles (EVs) will reach cost parity with internal combustion-engine vehicles by the start of 2022 at the latest.

This will be fuelled by a big increase in production and significant falls in the battery costs.

It’s only been a decade since the modern electric car arrived with first sales of the Nissan LEAF, then providing 84 miles on a single charge, in December 2009, with battery costs tumbling recently.

Dr Jamie Hamilton, director, Deloitte LLP, told a key session at the British Vehicle Rental & Leasing Industry Outlook Conference that the company’s ‘Battery Electric Vehicles’ report envisaged rapid growth in the market.

He said:

“We think the tipping point is either next year or the year after, it’s somewhere in between really.

“And we think that tipping point will be due to two things, the number of new battery electric vehicles coming onto the market and it’s about total cost of ownership (TCO) for the everyday car driver.”

Total cost of ownership includes fuel, servicing, maintenance and tax efficiencies as well as finance costs.

Speed of EV growth

Reinforcing this view, Close Brothers Finance suggests that the tipping point might be within a year. The motor finance company market report ‘Britain Under the Bonnet’ says that two in five drivers are considering an EVs as their next car – an increase of 7.5 million drivers in the past two years.

Ian Semple, the company’s director of sales says:

“While sales are still relatively low in real terms, the speed of growth is accelerating, and it looks like we’re months, not years, from the tipping point.

“Consumers are becoming more aware of the benefits of AFVs or an electric vehicle – from environmental protection to lower costs of running a car after the initial outlay – and manufacturers are responding to this demand.”

Deloitte’s, the BVRLA and Close Brothers advise that more work needs to be done by the whole industry to ensure companies and drivers are aware of the financial advantages. And Close Brothers also feels that the Government has to play a bigger role in the adoption of EVs.

Dr Hamilton advised:

“There’s still some messaging to try and convince people they should care about TCO versus the lease cost or purchase price. But in the next two years, we should get to price parity anyway.

“Most of the forecasts, including Deloitte’s, assumes that 30% of total global sales will be battery electric vehicle by 2030. That means that essentially 30% of the in the UK will also likely be electric, because of the replenishment times we’re talking about as well.”

Price parity should be a major factor in EV adoption by fleets as well as private drivers and this should in turn give a boost to the Government’s target of all new car sales being zero emission by 2040.

Plug-in grants

In fact, a recent study by the Connected Places Catapult and Digital Catapult emphasises that fleet adoption is essential for the Net Zero goal.

The BVRLA underlines the importance of continued government incentives and more clarity on the Plug-in Grants as well as new inducements like the planned zero Benefit-in-Kind taxation on all full EVs from April 2020.

Dr Hamilton told the conference:

“In the next year, the rate of company car tax is set to fall from 16% to 0% on a battery electric vehicle. We’re expecting that all of the company car fleets, essentially, will be doubling the number of electric vehicles in their fleet. And all the people we’re talking to with the bigger fleets are really preparing for this.

“The income tax on a diesel hatchback is just under £4,000 pounds per year, and a petrol hatchback around £3,000 pounds a year. Today, on an EV it’s about £2,000. But, from next year it’s going to drop to zero. So, when combined with all the savings you get on fuel and servicing etc, we’re looking at potential savings of £12-15,000 per employee over a three-year lease.”

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