February 15, 2024

An EV Fleet Perspective of the Total Cost of Ownership (TCO)

7 Min. Read

• Comprehensive TCO Analysis: Total cost of ownership (TCO) for EV fleets includes vehicle purchase, financing, maintenance, insurance, depreciation, and charging infrastructure, enabling fleet managers to set ROI targets and compare EV models for informed electrification decisions.
• Significant Long-Term Savings: EVs offer substantial fuel savings ($0.04-$0.05 per mile vs. $0.17 for gasoline vehicles) and 40-50% lower maintenance costs, with a fleet of 50 vehicles potentially saving $30,000-$55,000 annually on maintenance and $2,500-$2,700 per vehicle yearly on fuel.
• Incentives and Cost Optimization: Federal tax credits ($7,500 for light-duty, $40,000 for heavy-duty EVs), state/utility rebates, and strategies like off-peak charging, solar integration, and telematics for route optimization reduce TCO, making EV fleets financially attractive.

In the rapidly evolving landscape of transportation and technology, embracing electric vehicles (EVs) goes beyond environmental stewardship and fuel efficiency; it’s a strategic move that aligns with evolving business norms and consumer expectations for corporate accountability.

As companies navigate the transition, fleet managers should research the TCO over the lifespan of a fleet vehicle beyond the initial investment of purchasing EVs to truly understand the benefits of an electric vehicle fleet and for informed decision-making and the formulation of a robust fleet electrification strategy.

Assessing your TCO is a starting point for deciding to go electric and developing a sound fleet electrification plan and in this article we’ll explore what fleet managers need to know about the total cost of owning and maintaining an electric vehicle fleet.

Total Cost of Ownership (TCO) for EV Fleets

The total cost of ownership includes the initial purchase price of an asset, as well as any ongoing costs associated with maintaining or operating the asset.

According to Jake Lowe, Qmerit’s Director of Fleet & European Program Operations, “In the context of an EV fleet, the TCO can include the cost of the vehicles, the cost of financing or leasing the EVs, maintenance, registration fees, insurance, and asset depreciation. Investing in a charging infrastructure with professional EV charger installation and ongoing charging costs are other important elements of your fleet’s TCO.”

A fleet’s total cost of ownership is a benchmark for all your financial decisions as this number will help you set ROI targets for your fleet, determine when to replace vehicles, and even help as you compare different EV models and EV charger installation strategies.

With the average EV owner saving around $18,000 over ten years, your TCO should be lower after going electric—especially as your fleet vehicles will likely see considerably more mileage than an average driver, translating into even greater savings in fuel costs compared to any internal combustion engine (ICE) vehicles.

You can also expect to spend $6,000 to $12,000 less on maintenance over the lifespan of each electric vehicle, saving money and downtime as your electric vehicles will require fewer routine maintenance repairs.

Long-Term Savings for EV Fleets

Going electric represents a significant upfront cost but unlocks considerable long-term savings. The key is to find a balance by offsetting your initial investment and maximizing long-term savings.

EV charging will represent a significant portion of ongoing costs for your EV fleet and developing a sound EV charging strategy will help manage these costs.

Fuel Savings

Switching a fleet from gasoline vehicles to EVs can yield significant fuel savings, a major driver of cost reduction. EVs operate at a much lower cost per mile compared to ICE vehicles.

EVs achieve three to four miles per kWh, with an average electricity rate of $0.17 per kWh, translating to $0.04 to $0.05 per mile.

In contrast, gasoline vehicles, assuming an average fuel economy of 20 miles per gallon and a gas price of $3.50 per gallon, cost approximately $0.175 per mile.

For a fleet vehicle traveling 20,000 miles annually, this results in a fuel cost of about $800-$1,000 for EVs versus $3,500 for gasoline vehicles, saving $2,500-$2,700 per vehicle per year.

Integrating renewable energy, like solar panels, or charging during off-peak hours can further reduce electricity costs, amplifying savings.

Maintenance Savings

Maintenance savings also contribute significantly to the financial benefits of EV fleets. EVs have fewer moving parts than gasoline vehicles, lacking components like oil filters, spark plugs, and exhaust systems, which reduces routine maintenance needs.

Studies, such as those from the U.S. Department of Energy, indicate that EV maintenance costs are approximately 40-50% lower than for ICE vehicles.

For a gasoline fleet vehicle, annual maintenance might cost $1,000-$1,500, covering oil changes, brake repairs, and engine tune-ups.

In contrast, EV maintenance, primarily involving tire rotations, brake checks, and software updates, may only cost $400-$600 annually.

For a fleet of 50 vehicles, this translates to savings of $30,000-$55,000 per year, allowing fleet managers to reallocate funds to other operational needs.

Other Financial Savings: Incentives, Rebates, and Tax Credits

Additionally, EV fleets can leverage financial incentives to offset upfront costs, enhancing overall savings.

Federal tax credits of up to $7,500 are available for light-duty EVs and $40,000 for medium- to heavy-duty EVs, alongside state and utility rebates for vehicles and charging infrastructure, like the Alternative Fuel Vehicle Refueling Property Credit.

For example, a fleet of 10 light-duty EVs could claim $75,000 in federal credits, while a 30% tax credit on charging infrastructure installation further reduces expenses. These incentives lower the TCO, making EVs more affordable over time.

Combined with fuel and maintenance savings, a fleet of 10 vehicles could save over $30,000 annually on operational costs, not accounting for incentives, making electrification a financially compelling strategy.

Some businesses are also opting to invest in solar arrays to power their buildings and fuel their electric vehicles. This increases the initial cost of going electric but unlocks further savings on EV charging and building utilities in the long term.

For solar charging, the 30% Investment Tax Credit can reduce upfront and ongoing costs. Additional programs may be available at the state, municipal, and utility levels.

EV Fleet Operating Expenses

Lowe adds, “Going electric represents significant cost savings linked to lower fuel and maintenance costs. Prioritizing charging when low energy rates are available, optimizing routes, training drivers, and leveraging telematics are proven strategies for reducing ongoing expenses for your EV fleet.”

On average, driving an EV costs around $0.13 per mile with total costs for driving 20,000 miles a year averaging around $0.58 per mile.

The cost per mile will continue to decrease with greater use and this number can also vary based on factors like:

• The specific electric vehicle model
• Additional weight of any cargo or transported materials
• Fuel/energy efficiency rating of the vehicle
• Whether driving happens on the highway or in a city setting
• Where, how, and when an electric vehicle is charged
• And the driving habits of your fleet drivers

You can further reduce the cost per mile by taking advantage of the onboard technology found in EVs. These modern vehicles often come with advanced telematics and remote monitoring systems. You can leverage this tech to optimize route planning and take fleet management to the next level.

One main expense of EV maintenance that you won’t experience as significantly with ICE vehicles is battery degradation and the eventual need for a battery replacement in your electric vehicle. A recycling program can help offset this cost and you can mitigate these changes with proper EV charging on a regular basis, but you can also reuse old EV batteries by integrating them into an energy storage system that supports your overall EV charging infrastructure.

Finally, you can also explore time-of-use rates offered by your utility provider for charging when energy demand is low. 

Qmerit Is Your EV Fleet Charging Partner

Fleet electrification is an important decision that requires a careful calculation of your total cost of ownership. As a fleet manager, you need to assess upfront costs linked to vehicle acquisition and the development of your EV charging infrastructure, as well as ongoing expenses resulting from maintenance, EV charging, and more.

Partnering with an experienced electrification leader like Qmerit will give you an advantage. As the largest and most trusted electrification network in North America, our network of certified electricians has installed over 770,000 EV charging stations in homes and businesses across the U.S. and Canada.

We’ve earned our reputation as the most experienced and exceptional electrification service and installation network and can help make your transition easy with our experience and commitment to your business.

Find out how an electric vehicle fleet can help build your business for the future. Contact Qmerit today to learn how we can help with EV fleet charging solutions and help you enjoy the benefits of a seamless EV experience!