Research for the Fleets ahead! report has shown that there are broadly five key stages to fleet decarbonisation. This article shares some insights for each of these stages so that companies looking to start on this journey will be well prepared
Written by By Matthew Alabaster, Panos Stergiopoulos and Adrian Del Maestro of PwC Strategy& and Ben Allan of Field Dynamics
As more and more corporates make net zero pledges, many are having to figure out what the pathway to decarbonisation will look like. One of the immediate areas of focus will be fleets. As highlighted in our report, Fleets ahead!, written in collaboration with National Grid and Field Dynamics, fleets are large. There are over six million vehicles in the UK in this segment, made up of corporate cars, taxis, buses, heavy goods and logistics vehicles. Decarbonising these fleets can make a material improvement to air quality and reduce emissions. It can also be a source of major competitive advantage, in terms of ESG credentials. However, getting decarbonisation wrong will be costly and undermine business operations. So how can companies ensure they adopt the right approach to this complex transition?
We interviewed some 40 entities associated with fleet decarbonisation to understand what that transition road map looks like. And our interviews confirmed that some companies have already identified critical milestones on this journey. Our research confirmed there are broadly five key stages to fleet decarbonisation. And in this article we shall share some insights for each of these stages so that companies looking to start on this journey will be well prepared.
1. The importance of collaboration internally and externally
The complexity of the transition cannot be underestimated for fleet managers. They will be moving to a new world where they will need to consider a host of issues not typically associated with internal combustion engines: what type of electric vehicles (EVs) to procure and how to fund them? Which charging models to adopt and charging infrastructure to deploy? How to manage associated power consumption challenges? And not least, ensuring a culture where EVs are readily adopted by employees, just to mention a few examples.
Given this complexity the need to collaborate will be very important and takes different forms.
Decarbonisation is not just a fleet manager responsibility. Other functions will have vested interests and a need to contribute including. This includes finance (funding EV procurement); real estate (exploring the location of charging assets); HR (developing incentives for EV adoption across employees); operations and many others.
Fleet managers will need to collaborate with companies that provide support in fleet electrification for example. Charge point operator EO Charging is working with Amazon to electrify their fleet. Or managers may need to partner with parties which own strategic real estate, such as the Pod Point alliance with Tesco using the supermarket chain’s retail sites for destination charging.
Then again, it may simply be a question of collaborating with other companies who have already started this journey to understand what they have done and gone through.
Of the fleet managers we interviewed, all are still in the early stages of decarbonisation but will have learned valuable lessons.
2. Access to data to analyse and understand user needs
Quite often companies make the error of discussing which EVs to purchase or what type of charging infrastructure to deploy, before understanding what their actual needs are. And to this point data is critical. One of the first steps for fleet managers will be understanding current driving patterns. Consider the following questions: What are the current routes employees typically use? How often do they make these journeys and how long do they last? Given current fleet cycle times, when is the optimal moment to substitute vehicles?
If the fleet is to be replaced by EVs how will they be charged? Where? And what will the dwelling times for charging be?
3. Assess the charging infrastructure requirements and implications
Once managers have a good handle on driving and potential charging patterns, they will be better placed to consider the charging infrastructure required to support fleets.
Charging infrastructure and charging models will also dictate the volume of EVs required. So for example, a depot-based charging model may guarantee flexibility and scale to charge multiple EVs. However, a home-based charging model for drivers who cannot charge at home (they live in flats) and lack access to on-street chargers may limit the volume of EVs to be procured.
Power consumption patterns will also have ramifications. Overnight trickle chargers (7kW) will consume less power than faster chargers (50kW+). The latter may require grid reinforcement which could result in multi-million pond investments if installing an array of fast chargers.
Some fleet managers have explored industrial estates with existing power capacity for conversion to a charging hub to minimise these costs.
Many corporates also fail to realise how fleet decarbonisation can reshape the existing business and the operating model. Consider servicing. Operators of large fleets may have an in-house function to service their ICE vehicles. As these fleets electrify, companies will need to review whether they wish to develop their own in-house capabilities, or whether it now makes more sense to outsource servicing to the OEMs or other third parties. While electric vehicles have significantly fewer moving parts than an ICE counterpart, the technology is new and complex. If they wish to keep servicing in-house, service teams will need to be re-skilled and service sites will need to be repurposed to accommodate health and safety measures.
4. Multiple strategies to consider when deploying solutions
Given EVs are an emerging market, it is important fleets are wary of over-dependency on single suppliers. Moreover, fleets will need to explore a combination of strategies: some fleets may decide to stagger the purchase of EVs. Using smaller orders, fleet managers are able to test and trial deployment. Other fleets may decide to place large orders to secure OEM supply. A forward view of the lease cycles of the current fleet should be considered to understand deployment squeezes.
As for the procurement of electric vans (eVans), which is a growing trend, this raises other challenges. eVans have received less attention from OEMs so far resulting in limited choice. There is currently a restricted choice of electric vans in the UK. At the time of writing our report, there were 20 eVans on sale in the UK. This is compared to some 90 electric vehicles on sale.
Furthermore, the performance of these vans is also limited (many have low range).
It is important corporates work through emerging alliances (such as EV100) and with the OEMs to better inform them of industry requirements and co-develop new vehicles.
Tactically, fleet managers may also need to weigh up the trade-off between payload and range. If range is more important for the fleet then payloads will need to be reduced.
Aside from procurement and charging infrastructure, another major challenge in this phase of the journey is the winning of hearts and minds to encourage EV adoption. When fleets receive their EVs how do they ensure employees adopt and promote the new technology?
Fleet managers have emphasised the need to identify champions in the business. Centrica described three categories of employees: the EV equivalent of ‘petrol heads’ who are enthusiastic for EVs; those who are sitting on the fence and are not too bothered about which way the fleet goes; and the third category, those drivers wedded to their diesel vehicles and hostile to EVs. Companies need to engage the first group to drive change across the organisation.
Anglian Water went one step further and arranged induction days for new drivers. On receipt of their EV, employees were trained on all the basics to ensure the smooth adoption of the technology. Anglian Water specifically identified drivers who lived far away to pick up their EVs so returning home with their new vehicle would allay concerns about range anxiety.
Many firms have also created EV fora to encourage employees to share experiences and learnings about best practice when driving EVs.
5. Adapt and re-iterate
As fleet managers go through this journey they will need to apply continuously the learnings and scale up decarbonisation initiatives. Businesses will need to stay close to other fleets, government and OEMs to constantly learn and evolve.
And one final thought on heavy transport. While the decarbonisation pathway for light vehicles is electrification, the outcome for heavier trucks and 4x4s is less clear. Some electrification of heavier trucks is possible if routes are predictable and short, with readily available charging infrastructure. Municipal refuse trucks are a good example.
However, the fleet managers we interviewed felt the electrification of heavier vehicles with long and unpredictable routes was harder. And while there were some interim transition fuels, such as bioemethane, fleet managers recommended focusing on the electrification of lighter vehicles first, allowing time for viable technologies to emerge later for heavy transport.
Fleet managers face significant complexity as they look to decarbonise their vehicle parc. Many operators are weighing up the right time to begin this process. Move sooner and the organisation may have to deal with challenges including a more restricted choice of vehicles and the need for a more bespoke charging solution. Move too late and the organisation will risk brand damage relative to their competitors. In our view, the date to bear in mind is 2024: the year during which, according to our estimates, electric vehicles will cost the same as their ICE equivalents. At this point, choosing an electric vehicle will become the default option for consumers. Any companies which are not operating low carbon fleets by that time risk being seen as dragging their feet. This gives a window of opportunity of two to three years for fleet operators to transition substantially their operations to low carbon.
Download the ‘Fleets ahead!’ report here.
Keyword: A road map to fleet decarbonisation