A July 2023 report published by CBA ‘s Economic Insights division identified three key trade-offs influencing passenger Electric Vehicle (EV) purchasing decisions.
The report also considered supply and demand factors including current and potential rebates and fees that could accelerate EV uptake while meeting budget requirements.
A Fuel Efficiency Standard was considered as a specific tool, and the increasing importance of ‘cradle to grave’ reporting was highlighted including emissions from EV production as well as electricity generation.
Fuel Cell EVs (which use hydrogen as an energy source) are also considered briefly in the report in a way that emphasises there are more potential opportunities, in the short term at least, to focus on Battery EVs (BEVs).
While there may be limited ability to directly affect government policy there are principles in the report that fleet managers can consider and apply to their own operations.
The Importance of Passenger Vehicles
The report cited studies that showed passenger vehicles accounted for around 8% of Australia’s total greenhouse gas (GHG) emissions as well as the increasing percentage of EVs in new car sales. While Australia is well behind many other countries, the global trends are relevant indicators for the future.
Many fleet managers have responsibility for passenger vehicle selection in their organisations’ policies so it’s an area that justifies some focus in strategies to reduce fleet and organisational emissions.
Trade-off #1 – Driving Distance vs Purchase Price
A commonly heard objection to EVs is the purchase price premium relative to Internal Combustion Vehicle (ICE) options. This difference can be reduced by accepting a lower driving range in EVs, typically associated with smaller vehicles. International data shows that lower priced EVs with shorter driving ranges are available in the market. As an example, the sales-weighted average price of a small BEV in China was below $A15,000.
The Australian market has a preference for larger vehicles and there is limited availability of chargers. These factors are likely to constrain the availability of lower priced EVs.
Fleet managers can still consider the opportunity to purchase EVs at the lower end of the price range if the (typically) smaller size and shorter driving range does not prevent the vehicle from still being fit for purpose. As an example, pool vehicles often are used for short distances with limited carrying requirements.
Trade-off #2 – Purchase Cost vs Operational Cost
The purchase price premium for EVs results in long payback periods. However when the significant lower operating costs are factored in, an NPV analysis will show that the Whole of Life costs are far closer for EV and ICE options. One of the examples in the report shows that a BYD Atto 3 will have a lower total cost of ownership in comparison to a Toyota RAV4 (petrol).
The report considers various options available to the government that could support the affordability and attractiveness of purchasing EVs including examples from other countries. New Zealand especially is an interesting reference point given its many similarities and also the recency and immediate impact of the initiatives introduced there.
Many of the points and recommendations made in the report, such as the frequently-discussed Fuel Efficiency Standard, are designed for application at a government policy level (and the advantages of a national vs state approach are noted). However there are still principles and ideas that can be used by fleet managers.
In particular the ‘feebate’ approach used in New Zealand (effectively a combination of incentives and penalties) could be applied to an organisation’s policy regarding fleet vehicles with private use and is not restricted to EV takeup. The costs paid by employees in these arrangements could be calculated in a way that would encourage the selection of vehicles with lower emissions and improved fuel efficiency, possibly with additional incentives for EVs.
The report also highlights the limited effectiveness of voluntary standards for emissions control and reduction when compared with legislation. Again the implication for fleet managers is that an appropriate policy with mandates for targeted areas is much more likely to achieve results than relying only on education and awareness.
Trade-off #3 – Higher Production Emissions vs Lower Driving Emissions
The report provides a comprehensive description of the Life Cycle Analysis (LCA) approach to calculating vehicle emissions. LCA can also be considered as a ‘cradle to grave’ view of emissions so that all aspects are considered.
The production and disposal of batteries, the emissions associated with manufacturing processes, and the use of electricity generated from non-renewable sources are often raised as questions about the true environmental advantages of EVs. In some cases the absence of clear information may be used by those who resist the transition to EVs as validation of their objections. The use of LCA aims to address these areas and to provide reliable, objective information.
For fleet managers, the increased availability of relevant LCA data can be used to help improve decisions relating to fleet composition. It can also inform fleet and organisational sustainability policy development in regard to transitioning from ICE vehicles to EVs fleet and reducing emissions, ie it’s an opportunity for fleet managers to have a broader influence in their organisations.
