Rethink could be needed for EV leasing

Car leasing companies might have to rethink the duration and maximum mileages when they’re leasing electric vehicles (EVs) because of their capacity to run reliably over greater distances than petrol or diesel (ICE) cars.

That’s the word from Dennis Kelly, the director of Trans-Tasman fleet for one of Australasia’s major fleet leasing companies, FleetPartners.

“Some wise men say an ICE engine’s got something like 2000 moving parts, and EVs have got 200,” Kelly says.

“Talking to our (company’s) maintenance people, apart from tyres and changing the windscreen wipers and looking at brakes and so forth, there’s very little to be done with an EV drivetrain. So it’s a quantum shift from running an ICE engine.

“Typically, an ICE vehicle is leased for three or four years and 120,000km.

“On EVs, you (could) go 10 years and do 300,000 or 400,000 kilometres. It’s an absolute game-changer.”

However, there are factors that might see people wanting a shorter lease than that.

“Fashion will come into it, new technology will come into it, people will want to change their vehicle because it is a bit of a fashion statement for many.

“But if you just look at the hardware, the vehicle itself, it’ll last a lot longer, not only cost a lot less to service.”
Longer leases on EVs are something FleetPartners has discussed internally, Kelly says.

“I say, ‘why not?’, because it’ll really drive the monthly lease rental down.”

Kelly says the “significant” price disparity with ICE-powered vehicles continues to handicap EV sales, and is another factor that may lead to longer lease periods for electric vehicles.

“It just starts with a simple equation. If an EV’s got an RRP of, let’s say, $68,000, the ICE equivalent’s probably $36,000. Over a three year lease term, you just can’t make that work.

“The difference in running cost is real, but that’s a massive difference just in the cost price.

“There needs to be some support, there needs to be a drop in the RRP over time. I think we seriously need to look at leasing these vehicles for longer, putting all of those things together.”

Kelly agrees that a longer lease term could absorb the purchase price difference.

Lease companies’ focus used to be on finding a vehicle that was fit for purpose, helping the customer with implementation of a fleet policy.

“EV adds a whole new dimension, and that’s around charging infrastructure.”

FleetPartners has engaged a firm of consulting electrical engineers “to help with talking to our midsize and large corporates and government entities…”

They provide informed advice, technical expertise about what charging capability will be required, what the current building infrastructure can handle, and the investment required to upgrade the building to handle an EV fleet’s additional power draw.

“It’s a lot more complicated and that’s been a big learning curve for (the leasing) industry, picking up that requirement. That leads to even looking at eco-funding, again working with these consultants to support customers, to see where the government funding can be made available to support this transition to an EV fleet.”

The Government also needs to move quickly on financial incentives for EV uptake.

“With potential government legislation we need to get across that bridge quickly so that we don’t have customers holding back waiting for a change in the price of a new EV.

“The more that we can, I guess, get certainty on that, the better. The sooner we can get a clear picture as to what that looks like, the better.”

Until all-electric utes come on to the market, though, many Kiwis will be reluctant to commit to EVs, Kelly says.
Vehicle selection is “great in sedan, small hatch (but) the elephant in the room is there’s no ute, and 50% of our fleet is utes. That’s going to be a big opportunity for the first mover, any of the distributors, manufacturers that can bring a viable option for an EV ute.

“There are vans that are fully EV but carrying capacity is an issue still. So (vans are) still not quite there.”

The first of the new EVs that FleetPartners put into the market two to three years ago are now coming off lease.

“We’re surprised at the strength of the used market for these vehicles.

Part of that could be just a bit of an aberration we have post-COVID with the used vehicle market generally. But the good thing is that we’re now getting data that we can rely on.

“We ended up leasing some ex-UK grey import EVs three years ago to a significant corporate in New Zealand.

They’ve come back and we’ve done well in terms of the residual value.

What you’ll see is the residual values will start to firm now that there’s more data coming back and that there is a very robust secondhand market.

“We just sold four three-year-old (Hyundai Ioniq) EVs. They were all bought by Uber drivers.” They retailed for around $40,000.

“A key thing that needs to happen is the supply chain needs to ramp up and get that buying price down. The gap between an equivalent ICE or hybrid and an EV is still quite significant if you’re looking at a whole-of-life cost modelling exercise. Bringing that RRP down will make the biggest difference…

“I’m looking forward to the likes of Volkswagen coming on stream, and General Motors and Ford. That’s when we’ll see the economies of scale come to the fore.”

How soon might prices come down? “It’s outside my level of expertise, but I’m thinking it’s not any time soon. I think we’re a couple of years away, at least.”

Kelly says he can’t imagine getting his head around the risks facing government departments in switching to an all-EV fleet: “just in the applications that these vehicles are applied to. I would imagine there’s got to be an opportunity for some kind of pool fleet of EVs for the police. Just for general policing duties in the CBD. That would be the easy place to start, I think.

“Looking at other government entities that we’re working with, they’re going 100% EV, the entire fleet.

I’m talking substantial fleets where we’re talking to them about setting the infrastructure up, doing the analysis first and foremost.

“What are these vehicles being used for, how far from base do they go every day? Cut through the urban myths of what people say they do in a day and see what they actually do in the day in terms of kilometres.

“Once you’ve got that data, the rest of it, in terms of the sell job internally, is pretty easy.

“When you say, ‘well, this is the distance you’re travelling per day and this vehicle can more than cover it,’ the whole range anxiety thing goes away.

“I live 37 kilometres door-to-door from work. From an EV point of view, that’s one charge a week. Our approach is to look at what the vehicle is being used for and what kilometres it’s doing.

“We’ve got some large fleets in the rural sector and that’s a lot more challenging. That’s where we’re going to need a ute solution or something that’s able to tow as well.”