Watt’s the Cost of Electric Fleets? 6 Insights for Business Owners

Fleet managers must consider a wide range of factors when deciding whether transitioning to electric vehicles (EVs) is affordable. Although regulators might demand a reduction in carbon emissions, moving to a different type of engine may not be as simple as it looks at first glance. Infrastructure must be in place to support EVs and the cost of installing it adds up.

Business owners might struggle to crunch the numbers and get to the bottom line of how much EVs will cost in the long run. 

Average Cost of an Electric Vehicle

According to CarEdge, the average cost of an EV is 17% more than cars with traditional fuel combustion engines. As of January 2024, the average electric car was $55,353 with fleet vehicles running significantly more as size and features increase. 

Although the cost is higher upfront, price stickers are dropping. The cost dropped between June 2022 and 20204 by 21% as Tesla reduced their retail cost and forced other automobile companies to follow suit. 

How Much Will Transitioning to EV for Fleets Be?

One reason fleet managers resist moving to electric vehicles is due to the perceived costs. However, when you take a step back and look at the total cost of ownership (TCO).

When you look at the overall costs over time, the move might not add up to as much as you thought. However, there is an initial output that may seem steep to some small businesses. One option is to transition in stages. Replace a few service vans each year. Install charging stations as needed. 

Let’s break down all the categories for a clearer picture of TCO. 

1. Ongoing Maintenance

Maintaining a fleet is critical to providing reliable service to customers and keeping employees safe. Regular checks can also extend the life of any vehicle. Converting to electric reduces fleet maintenance costs by 50% or more.

Combustion engines have more moving parts than EVs. The cost to repair is often higher and more frequent. The cost of oil might seem miniscule but adds up across an entire fleet of vehicles.

2. Incentives and Rebates

Although the incentives and rules change from year to year, you can grab tax credits and rebates for purchasing electric vehicles for your business. It’s best to consult with a tax professional about how to utilize the credit to your advantage. 

It works differently than many deductions by reducing the amount owed in taxes for the year. Your tax professional can guide you through how much to pay throughout the year to reduce your tax burden and take full advantage of any credits.

Check local power companies for additional rebates. Some also offer credits for installing electric charging stations. 

3. Fuel Costs

Fuel savings add up over time and can make the price of a new fleet vehicle more affordable. According to the U.S. Department of Energy, EVs have better fuel economy. A light-duty, fully electric vehicle averages around three cents per mile. The government also points to the stability of electricity prices compared to fuel rates that can go up or down rapidly.

4. Replacement Batteries

While manufacturers keep promising reduced costs for replacement batteries, for now, the expense is staggering in some cases. If the vehicle is still under the manufacturer’s warranty, they may replace it for free. 

However, combustion engine vehicles also require repair and parts replacement. Those costs can balance the cost of batteries, depending on how long you keep the purchase in your fleet. 

5. Upfront Infrastructure Expenses

When you switch to an EV fleet, you’ll need somewhere to charge them. You may even have to tap into public charging stations and pay a small fee to top up range during the work day. The upfront costs of installing the infrastructure dissuade some business owners from switching.

Some of the costs involved in building a charging station include time spent choosing a location, costs of permits, purchase and installation. You may also have some maintenance with them. Not only is infrastructure costly but it can take time to implement. You may need to pay a consultant to ensure everything operates as intended. 

Utility Dive reports the cost of a distribution grid for EV commercial charging could run around 30% of total costs and limit companies’ ability to afford a new fleet. Some utility companies are partnering with businesses and covering some or all of the costs with an eye on future revenues from repeated energy use. Analysts believe if utility companies pay for the infrastructure needed, they will recoup the money from large electricity use. 

6. Depreciation

EVs may lose their value faster than any other type of car. Due to the battery life, people may be reluctant to invest in an EV that is older. A hybrid option might be an attractive choice as it will hold value much like a combustion engine.

However, they are just as expensive as EVs and you may lose out on crucial tax savings and electric utility rebates. Do your research before choosing which model to adopt into your fleet. 

Analyze Your Total Cost of Ownership

Coming up with figures for the TCO of electric fleet vehicles and comparing them to the expense of traditional combustion engines is complex. You must weigh various factors and crunch a lot of numbers to see if the prices vary in the long run. 

Much of the comparison is a balance between lower maintenance, higher battery replacement, lower fuel costs and setting up and maintaining infrastructure. However, there are other considerations that don’t include a financial price tag. Going electric can help reduce carbon emissions and meet local regulations. If the company made a commitment to improve the environment, embracing an electric fleet can fulfill that promise. 

The benefits to the local community, the cost savings on a daily basis and the decision on how much to invest will be highly personalized to each brand and their financial situation. Consult with experts in EV fleets and crunch numbers. Consider adding a few vehicles at first for a more accurate comparison. With time and the price of EVs going down, you’ll get a clearer picture of how well a transition might work for your business.