Understanding the True Cost of the Electric Vehicle Transition

While electric vehicles may seem a fantastic solution to pollution problems, they create a whole new suite of economic and environmental challenges. What’s the cost – and the price – of going green?

Over the next few decades, corporate fleets will have little choice but go green. To meet international climate goals, governments are mandating the end of petrol and diesel vehicles. Procurement teams will have to figure out how to integrate electric vehicles (EV) into their fleets and incentivise their suppliers to do the same.

The EV future will be here soon. Norway and South Korea plan to end sales of gas and diesel cars by 2025, and China will follow in 2035. The UK has a similar goal for 2030 and will also ban plug-in hybrid sales by 2035. Several US states, including California, have made similar commitments.

Consumer sales of electrified vehicles keep climbing. In the US, EV sales rose over 20% in one quarter, driven partly by high fuel prices. When gas prices go up, EV sales increase as well.

A transition to EVs figures prominently in emissions reduction projections to meet the goals of the Paris Agreement to reduce greenhouse gas emission to zero by 2050.

Procurement Teams Must Prepare for EVs

While consumer vehicles like the Tesla line grab headlines, procurement teams are working to integrate EVs into their buying plans. At this point, public procurement is leading the way. For public fleets, fuel costs are only part of the procurement picture. Public expenditures are seen as instruments of social policy as much as providing services. Government should model the behavior they expect from their citizens, leading to large-scale improvements. Although the strategies are different, corporate procurement leaders can learn much from their public sector colleagues.

In the US, the Biden administration has announced plans to phase out gas engines from the government’s fleet of 675,000 vehicles by 2035. State and local jurisdictions are following along, taking advantage of federal subsidies to install charging infrastructure.

Norway has mandated electric cars, vans, and city buses, except for large cargo vehicles that require extended capacity and range and buses already powered by biogas. Germany plans to convert 20% of the Federation’s fleet to EVs. Meanwhile, the government of Australia is still formulating its EV adoption strategy.

In addition to the genuine reduction in GHG emissions, EV adoption has other, less tangible effects. Employees want to work for an employer that shares their environmental concerns. Employees who drive EVs value the opportunity to be seen as environmentally responsible by their friends and neighbors.

One of the critical objections to EV adoption— range anxiety— is less of a factor in commercial use. Driving patterns and habits are more well defined, and the vehicle will return to its home at the end of each day to recharge. The average EV range is well within the average miles traveled per day, even for consumer use.

The availability of public charging infrastructure could be a factor for drivers, like salespeople, who drive an above-average amount of miles per day. For many drivers, the reluctance to switch to an EV ebbs when they feel the rapid acceleration and quiet cabin compared to the gas vehicle they’re giving up.

Understanding employees’ acceptance of EVs is critical to managing the GHG emissions reduction strategy. People who are pro-environment in other parts of their life will likely be eager to adopt EVs. The first step is to let people experience an EV for the first time. The driving experience will probably win over people who are not as concerned about the environment.

Getting over the initial psychological barriers is critical for long-term adoption. Efforts combining corporate communication, training and large-scale test drives can inform employees about the benefits of EVs.

Early adopters can be peer leaders in influencing others to embrace the transition. Your organization can influence its suppliers to adopt EV as part of their GHG reduction commitments, which will also help your organization meet its goals. The scale of EV commitment could be included in supplier evaluations and contract negotiations.

An EV fleet can be a recruiting tool to attract environmentally minded people to the company.

Research has shown that the environmental benefits of EVs are top of mind before employees drive one. As time passes, performance and ease of use are more important as drivers become accustomed to their new vehicles.

Before your company invests in EVs and the charging infrastructure, understand by whom and how the cars will be used. There are two levels of charging systems that serve different users.

Level 1. It can be plugged into a standard wall outlet and takes 8 to 16 hours to charge a vehicle. This is the solution for vehicles charged at home by employees.

Level 2. Will charge a vehicle in 4 to 6 hours, so use these in company-supported locations with the necessary electrical service.

Building the charging network is just as important as selecting the best vehicles for your fleet. Otherwise, it’s like buying diesel trucks without knowing how you’ll refuel them.

Electric Vehicles’ True Environmental Impact

At some point, your company will have to invest in EVs to reduce its environmental impact and follow government mandates. That’s a reasonable thing to do. But it’s essential to understand the full scope of EVs relative to your company’s environmental strategy and how you measure and monitor your organization’s environmental impact.

Even the most ardent fossil fuel proponent concedes electric vehicles produce fewer GHG emissions in operations. But the full impact of the vehicle’s lifecycle is still in debate. Electric vehicles are not a faultless solution, from open pit lithium mines to the harmful processing chemicals to the increased use of hydrocarbon-based polymers. Disposal of lithium batteries at the end of life is still a problem that should be solved. In the traditional mature automotive market, metal and plastic components are recycled regularly through a network of refuse collection businesses. Recycling and disposal of dead batteries will be a long-term issue. And the cost of replacing batteries maybe half as much or more as the car is worth. So, when the battery is dead, the entire vehicle may be headed for a landfill.

Keep in mind, EV batteries only store electricity. They don’t create it. So, the energy must be sourced from somewhere. If it’s emissions-free renewables like solar and wind, so much the better. But most grids still rely on some form of stored energy like coal, natural gas, fuel oil, biomass or other sources with some emissions. It’s an admirable goal to eliminate emissions from EVs that travel in populated areas. But for now, the GHG emissions are being shifted to other locations. Keep that in mind if your company is serious about identifying and monitoring its total GHG picture.