February 15, 2024

Electrification of Transportation and the Total Cost of Ownership (TCO): A Fleet Perspective

7 Min. Read

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.

Achieving Environmental, Social, and Governance (ESG) goals and saving on fuel and maintenance are powerful arguments for EV fleet adoption and as a growing number of businesses embrace EVs, the need to maintain a competitive edge will require the electrification of company vehicles.

As companies navigate the transition, fleet managers should research the total cost of ownership (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 Fundamentals: Beyond the Purchase Price

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.

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.

Acquisition Costs: Balancing Initial Investment and Long-Term Savings

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.

Options include investing in a centralized charging hub, deploying charging stations to make overnight at-home EV charging available to drivers, and supplementing charging with the existing public infrastructure. You should also know that on-premises electrical upgrades might be needed, an investment that will support further electrification projects a contribute to even greater savings and benefits in the future.

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.

Taking advantage of tax credits, rebates, and other programs effectively lowers upfront costs. The Commercial Electric Vehicle and Fuel Cell Electric Vehicle Tax Credit can offset 15% of the purchase price of a plug-in vehicle or 30% of an EV with a limit of $7,500. You can also claim the Alternative Fuel Vehicle Refueling Property Credit to reduce the cost of investing in a charging infrastructure by 30%.

For solar charging, the Investment Tax Credit and Production Tax Credit can reduce upfront and ongoing costs.

Additional programs are available at the state, municipal, and utility levels.

Operating Expenses: The Ongoing Financial Impact

Going electric represents significant cost savings linked to improved energy efficiency and charging costs being lower than fuel.

On average, driving an EV costs around $0.13 per mile with total costs for driving only 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 the electric vehicle model, weight of any cargo, fuel or energy efficiency for 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.

You can also offset operational expenses with incentives. While tax credits are available shortly after the initial purchase, you can also explore preferred Time-of-Use rates offered by your utility provider for charging when energy demand is low or by forming partnerships with other entities to use their charging infrastructure at a lowered rate.

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.

Maintenance Savings: Reducing Total Cost of Ownership Through Electrified Fleet Efficiency

Saving on maintenance is a major benefit of going electric, and it will significantly lower your total cost of ownership.

Simply put, EVs cost less to maintain than ICE vehicles since electric vehicles have fewer fluids and moving parts. The advanced use of telematics and monitoring software also makes it easier to track slight changes in performance and schedule electric vehicles of EV chargers for preventive maintenance before an issue causes downtime or more expensive repairs.

You’ll get better results if you partner with experienced technicians who thoroughly understand maintenance challenges unique to EVs. Additionally, working with a licensed electrician for your EV charger installation and any routine inspections is crucial. Your maintenance plan should also include keeping your EV charging infrastructure in optimal shape.

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.

Data-Driven Decision Making: Leveraging Insights for TCO Optimization

EVs create additional value thanks to onboard telematics. You should develop a process to incorporate this data into your fleet management strategy. This approach can support evidence-based decisions for your EV fleet and give you better visibility over operations.

Use cases include leveraging data to optimize routes, plan for EV charging, assign safety scores to drivers, identify any electric vehicles needing maintenance, and precisely track fleet ROI.

A smart EV charging station can similarly track EV charger performance over time and determine when maintenance is needed to further enhance efficiency or if a charger is experiencing an outage.

This data can inform important decisions such as adding more electric vehicles to your fleet, replacing current vehicles, or deploying additional EV charging points to a centralized EV charging hub or even into the homes of your EV fleet drivers.

Plan Your Fleet Electrification Project With Qmerit

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 450,000 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 your fleet electrification project and help you enjoy the benefits of a seamless EV experience!