Electric Cars & Trucks Save Fleet Operators 9% On Operating Costs

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People who own cars and trucks are largely unaware of the total cost of ownership for their vehicles. Pretty much the only thing the typical buyer focuses on is the purchase price and the monthly payment. Things like depreciation, cost of fuel, maintenance, and repairs seldom enter into their calculations because they are all in the future and hard to know accurately in advance. State and local taxes are also part of the equation. Fleet operators, on the other hand, factor their costs down to the hundredth of a penny per mile.

According to RMI, there are over 12 million fleet vehicles in the US. Many of them belong to government agencies like police and fire departments, water and sewer agencies, and administrative offices. Then there are commercial fleets operated by utility companies and private corporations.

Analyzing Fleet TCO For Electric Vehicles

RMI analyzed data using the Dashboard for Rapid Vehicle Electrification, a tool developed by Atlas Public Policy and the Electrification Coalition to analyze data across a wide range of scenarios. The result? Electric vehicles have a 9% lower total cost of ownership than equivalent fossil fuel vehicles, even when the cost of charging infrastructure is included. The RMI analysis only incorporates the federal tax incentive for buying a new commercial EV, but dozens of states have established additional vehicle and charging subsidies that can stack on federal incentives, making EVs an even more cost effective choice.

There are intangible benefits as well. Switching to electric vehicles eliminates 100% of tailpipe emissions and over 75% of climate pollution from vehicles when including the upstream emissions of electricity generation. Nitrogen oxide emissions decrease by 90% while fine particulate pollution is 50% less per vehicle.

When professional fleet managers do a total cost of ownership analysis, they include the purchase price of each vehicle, financing, depreciation, and expected fuel and maintenance costs. RMI compared the total cost of ownership for electric vehicles to equivalent fossil fuel vehicles in five different use case scenarios — private security, patrol cars, construction contractors, paratransit, and a large delivery company. Each comparison is between a fossil fuel vehicle commonly used in that scenario (e.g., a Ford F-150 truck for construction contractors) to its nearest possible electric equivalent (a Ford F-150 Lightning truck) for the same amount of annual mileage and expected years of use.

The DRVE tool made it possible to adjust various factors in each of our five scenarios, including different electricity, gasoline, and diesel fuel costs, whether the installation and maintenance of charging stations would be included in the TCO, and if public Level 3 chargers were used instead of Level 2 charging in depots and fleet parking areas.

The cost of fuel is a vital factor when computing total cost of ownership. At the national average fuel price of $3.50 per gallon or higher, all scenarios found EV savings or cost parity presuming no charging infrastructure installation costs. In addition, all scenarios except delivery vehicles found EV savings or cost parity including the cost of installing Level 2 depot charging. Even at the lowest gas price of $2.75, most vehicle scenarios were at cost parity or better with no or depot-only charging installation costs.

Additional Factors

Another important metric is the rate of vehicle turnover in a fleet. Given the historically higher upfront cost but lower fuel and maintenance costs for electric vehicles, the number of miles put on a fleet vehicle before retirement impacts the cost parity between EV and fossil fuel vehicles. For instance, patrol cars drive more per year than construction contractors — 20,000 miles per year versus 12,000 miles per year — and so switching patrol cars to EVs tend to be more cost effective in more situations compared to switching construction contractors to EVs.

The RMI analysis found that relying on public DC fast charging was cost prohibitive in nearly all cases examined, due to the higher cost per kilowatt-hour of electricity and “on-the-clock” time wasted while parked at a public DCFC. It’s usually more economical for fleet owners to invest in Level 2 depot charging infrastructure, which may also qualify for IRA subsidies. The same can be said for privately owned electric cars and trucks. Charging at home overnight is significantly less expensive than using Level 3 chargers on a regular basis.

Fleet operators can take advantage of the 45W Tax Credit for Qualified Commercial Clean Vehicles provided for by the Inflation Reduction Act when purchasing a vehicle to reduce the upfront cost difference between an electric vehicle and a conventional vehicle. They can also look into the 30C Alternative Fuel Vehicle Refueling Property Credit when installing charging infrastructure if the are located in a qualifying census tract. In some places, state and local incentives can be worth thousands of dollars as well. Attractive financing may also be secured through a Green Bank or state energy financing institution.

The RMI analysis suggests transitioning to electric vehicles is financially rewarding for fleet operators in most cases, especially for light and medium duty vehicles in states with fuel prices at or above the national average. Where fuel costs are lower, available state level incentives for Level 2 depot charger installations may be preferable to relying on the federal 30C tax credit, which has siting requirements that make it more difficult for fleet operators to qualify. As an added benefit, those Level 2 chargers could be made available for public use when not needed for fleet charging duties.

The upfront costs for larger fleet vehicles, such as the Kenworth K270 heavy duty truck modeled by RMI, can be prohibitive even after including the 45W tax credits. Accelerating the use of large and medium electric heavy duty trucks may require purchase incentives in addition to charger installation incentives in order to make them competitive on a TCO basis with conventional trucks.

To promote the use of cleaner vehicles in their fleets, states can adopt the Advanced Clean Cars II regulations for light duty vehicles, and Advanced Clean Trucks regulations for medium and heavy duty models. That would encourage automakers to offer more competitive prices for electric models sold in their respective states. Finally, state governments and electric utilities could also help accelerate private fleet electrification by employing “navigators” to provide technical assistance and economic analysis to fleet operators looking to go electric.

Setting The Example

Electric vehicle technology and supporting policy have advanced rapidly to the point that now it makes economic and environmental sense to choose electric vehicles over fossil fuel vehicles in a wide variety of fleet use cases, RMI says. Lowering the total cost of ownership for vehicles puts more money back into community budgets, and adopting electric vehicles improves local air pollution by reducing climate emissions. Additional state policies and incentives would make electric vehicles an even more attractive option for all vehicle drivers, and fleet owners in particular.

In the Priority Climate Action Plans submitted to the EPA this year, 23 states identified electrification of their public fleets as a priority measure. If 80% of state and local government light duty vehicles were electrified over the next five years it would result in a cumulative climate pollution reduction of 37.4 million metric tons by 2050 —  equivalent to the emissions associated with powering 4.8 million homes for one year. State and local governments can seize this opportunity to upgrade their own fleets and support their local businesses to invest in their companies. Private fleet owners now have a stronger business case to transition their fleets as well. By supporting the transition to electric vehicles, public and private fleet operators can lead the way to an electric future, RMI says.

The Takeaway

Advocacy position papers like this one from RMI often overlook one important factor. No study can account for every use case. Just as an electric car may not be the best choice for some drivers because they drive 200 to 300 miles a day or live in an especially cold climate, or cannot afford the price of an EV, transitioning to electric vehicles will not be the best choice for every fleet operator everywhere all the time.

That being said, public fleets especially should be setting the example. The United Nations today released a report which claims at the current rate, the average surface temperature of the Earth will be 3.1º C (5.7º F) hotter than pre-industrial temperatures by 2100 if we keep doing what we have always done. We can natter all we want about electric vs conventional cars, but the trajectory we are on will make life extremely difficult for the vast majority of humans by the end of this century. Some things are more important than saving one hundredth of a penny per mile. If we don’t get serious about reducing emissions soon — like this week — there will be dire consequences for humanity. Does anyone care, or are we all too wrapped up in how many followers we have on antisocial media to even notice the gathering storm?