Electric Cars Bought By Fleets: Cost Still An Impediment

You may not have thought much about it, but fleet managers could play a huge role in electric-car adoption.

They're the people whose job it is to buy and manage the huge fleets of vehicles operated by companies, government agencies, and other organizations.

A recent study of fleet managers found that they initially bought a small number of plug-in electric cars to test what is, to them, still a new and unfamiliar technology.

After that, they increased the number of electric cars in their fleets for firm-specific reasons: first-mover advantage, specialized capabilities in operation...or a compelling business model based on lower operational costs.

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But so far, media coverage of electric vehicles has tended to focus on households, which admittedly are more numerous.

Such stories fail to recognize the importance of public and private fleets--which, according to a study from Frost and Sullivan, accounted for more than 50 percent of global plug-in vehicle sales through 2012.

Good candidates

Researchers cite several reasons that make organizations good candidates to adopt electric cars. These include their high vehicle purchase rates, intense usage, use of centralized refueling stations (in some cases), and limited number of decision makers.

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However, this research is problematic: It is either dated (from the 1990s) or relies on surveys of organizations that didn't actually purchase an electric car. Due to a phenomenon called the value-action gap, such surveys may not be reliable.

To address this shortcoming, I analyzed 14 fleet manager interviews and pilot project reports from organizations in the U.S. and the Netherlands that had actually purchased one or more electric cars. My goal was to identify the underlying factors that affected their purchase decisions.

The four reasons most commonly cited by fleet managers for purchasing a plug-in vehicle were: testing new technologies, lowering their environmental impact, improving the organization’s public image, and government grants.

Testing is key

More than any other factor, interviewees emphasized testing new technologies as influential in their decisions. While many fleet managers were not willing to invest heavily in electric cas, they did want "to gain practical information about the performance and usability of electric cars."

In addition, while most fleet managers seemed genuinely focused on reducing emissions, a small number of organizations adopted electric cars specifically to "say that they did"--a practice that could be termed greenwashing.

In those situations, organizations didn't say they planned to adopt a large number of electric cars, but rather used them to emphasize that the firm was green and eco-friendly.

Although fleet managers must always consider the financial impact of their purchase decisions, we sensed they were willing to pay extra to buy EVs. Even so, eight of the 14 organizations relied on government grants to overcome the uncertainty of such an innovation.

Such grants weren't seen as a reason to buy an electric car, but rather as an instrument that facilitated other goals: testing new technology or lowering emissions. This raises the possibility that many of the fleet managers in this study would not have adopted electric cars without such financial support.

Still more expensive

Organizations were willing to test one or more plug-in vehicles to see how they performed in meeting their operational needs. After experimenting with the cars, interviewees commonly said that while there were fuel savings, electric cars on the whole were more expensive than conventional cars.

MORE: Why An Electric Car Saves Fleet Operators $16,000 In Lifetime Cost

Based purely on costs, most fleet managers were discouraged from buying additional electric cars until initial prices fell substantially.

In the case of European fleets, it's important to note that many of the electric cars faced off against small and highly efficient diesel subcompacts that may average more than 40 miles per gallon. North American fleets typically purchase compact or mid-size passenger vehicles that may obtain only 25 miles per gallon, giving electric cars more of an advantage in comparing cost per mile.

Nonetheless, at least half the firms in the study showed an interest in expanding their EV fleets--despite high purchase costs--showing the importance of a host of other benefits including lower environmental impacts.

For those firms, a decision to buy more electric cars indicated that the firm was moving beyond testing to more permanent and widespread incorporation of these automobiles.

If other organizations display a similar approach to electric-car adoption, there could be many more plug-in vehicles in large fleets in the coming years.

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