Why EVs can give businesses the edge

Is it time to consider switching to electric vehicles? Making the transition can help boost market competitiveness, says Jon Hanson from NatWest’s Future Mobility Group.

Over the coming weeks, NatWest is publishing in-depth help for those businesses that have not yet explored the EV option, looking at topics such as staff engagement and carbon offsetting. But for now, I’d recommend keeping the following five points in mind.

1. Could early EV adoption be your next advantage?

Many businesses have outdated vehicle policies that are based on fixed replacement cycles, price, vehicle type and assumed running costs. These are fine for modelling the costs of combustion-engine vehicles, but tend to exclude the wider business benefits that EVs deliver.

Consider first the Greta Thunberg effect and the growing concern that many people have about climate change. With CO2 emissions and degradation of air quality a particular consideration, society’s conscience is changing fast, leading consumers and businesses to maximise sustainability.

Early adopters can harness this societal change and use it to drive their own sustainability agenda. And EVs will play a key role by reducing businesses’ carbon footprint, enhancing their reputation and putting them in prime position to generate incremental revenues from environmentally conscious customers.

2. The advantages of lower tax

Reducing costs is perhaps the main way a business can maintain its competitive edge, and early adoption of EVs offers a timely opportunity to exploit the available tax breaks. First is the policy of making 100% of a zero-emission vehicle’s cost deductible from taxable profits. This, combined with the reduced Class 1A National Insurance contributions and benefit-in-kind (BIK) rates on company cars, means businesses and employees stand to save thousands of pounds in tax per vehicle.

Wouldn’t it be great to improve the retention of your valued people by increasing their take-home pay without increasing payroll costs? Switching to EVs can achieve this.

Jon Hanson
Director, Future Mobility Group, NatWest

For example, suppose a business operates a fleet of 20 diesel cars, each covering 16,000 miles a year. A diesel vehicle will typically cost £38,060, produce 113g per kilometre of harmful emissions and incur a 31% BIK rate, with an equivalent EV costing £51,435 and emitting 0g/km. If the employee’s taxable rate is 40%, the EV option is likely to save the employer £32,000 a year in Class 1A National Insurance for the 20 staff.

If you include the price of diesel compared with electricity, the savings could reach almost £55,000, based on HMRC mileage rates.

3. There is help to invest

Electric vehicle technology is relatively young, and therefore not cheap, but incentives help to address this. Government-backed grants reduce the cost of eligible vehicles by up to £3,000 for cars and up to £20,000 for vans and heavy commercial vehicles. And workplace charging grants provide up to £14,000 towards the cost of installing EV charge points. Currently, these are generous and help drive competitiveness. But, of course, the government may reduce or remove these grants as they become more popular.

These, alongside the low costs of maintenance and reduced carbon offsetting that some businesses pay, mean that EVs have outstandingly low total costs of ownership.

4. EVs can help to retain talent

Wouldn’t it be great to improve the retention of your valued people by increasing their take-home pay without increasing payroll costs? Switching to EVs can achieve this.

By way of a second example, consider the following: an employee as a 40% taxpayer is given a diesel car with list price of £38,060, and incurs a BIK rate of 31% (tax year 2020/21). The price for the equivalent EV option would be £51,435, but the employee would incur a BIK rate of 0% (increasing to 1% and 2% in the following two years). This would mean the employee could save nearly £5,000 a year in taxes.

If they needed a further nudge, businesses are allowed to provide free charging for employees at work without the employee incurring any additional BIK liability. Essentially, this is a free car and free fuel for the employee – a great way to retain talent..

5. Timing is key

Recognising the advantage that EVs can bring to your business is one thing, but it requires immediate action. So, what next? Over the coming weeks we will publish five in-depth articles to help you review your company vehicles and understand in detail their costs, advantages and environmental impact. Only with this knowledge can a business assess the true advantages and wider benefits of switching to electric.

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This material is published by NatWest Group plc (“NatWest Group”), for information purposes only and should not be regarded as providing any specific advice. Recipients should make their own independent evaluation of this information and no action should be taken, solely relying on it. This material should not be reproduced or disclosed without our consent. It is not intended for distribution in any jurisdiction in which this would be prohibited. Whilst this information is believed to be reliable, it has not been independently verified by NatWest Group and NatWest Group makes no representation or warranty (express or implied) of any kind, as regards the accuracy or completeness of this information, nor does it accept any responsibility or liability for any loss or damage arising in any way from any use made of or reliance placed on, this information. Unless otherwise stated, any views, forecasts, or estimates are solely those of NatWest Group, as of this date and are subject to change without notice. Copyright © NatWest Group. All rights reserved.

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