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August 1, 2009updated 12 Apr 2017 4:34pm

Electric Dreams

Leasing Life research has revealed that demand for public sector leasing of electric LCVs is on the rise Much has been said in the media about the car and commercial vehicle sectors desire to invest in electric vehicles

By Fred Crawley

Leasing Life research has revealed
that demand for public sector leasing of electric LCVs is on the
rise. Fred Crawley reports.

Much has been said in the media about the
car and commercial vehicle sectors’ desire to invest in electric
vehicles. Not all of this, it appears, was simply empty words.

In June, Coventry-based electric
commercial vehicle manufacturer Modec secured a record £3 million
truck order for a French customer. Modec is well known for its
green credentials – it leases lithium-ion rechargeable batteries on
its electric CVs using finance from ING Lease UK (see Leasing
Life, April 2009
).

Does this mean there are really
opportunities for lessors in the electric vehicle revolution?

Last month, Leasing Life
carried out lengthy interviews with 11 major leasing companies as
well as some government agencies, asking whether they believe
leasing can benefit from the much-proclaimed switch to electric
vehicles.

Interesting reading

The results are interesting reading,
particularly for those lessors that specialise in light commercial
vehicles.

It emerged from the research that
while car lessors see the disadvantages of leasing electric
vehicles outweighing the advantages, the opposite is often the case
when dealing with LCVs.

While the leasing of electric LCVs is
not necessarily popular among all types of lessees, there is strong
demand for it at present from the public sector.

Many of Lloyds TSB Autolease’s 25
electric vehicles currently on lease are LCVs with public sector
customers, while both Arval and ING Car Lease UK reported that
there is a growing market for the leasing of LCVs into the public
sector in the UK.

Given the fact that public authorities
have their own government emissions targets, this does not come at
any great surprise. However, it is noteworthy that the focus right
now is on LCVs – there have been hardly any lease contracts for
electric cars.

The natural limitations of electric
vehicles mean demand for these assets will be restricted.

Fleet expert Colin Tourick said that
the fleets most likely to lease electric vehicles (EVs) will be
“those whose fleets don’t stray far from home base or a recharging
point, such as local councils and delivery companies”.

This strikes true. Carillion Fleet
Management, a smaller fleet operator well known for its enthusiasm
for green policy, currently leases five electric vehicles – three
to a landscaping company working with Poole Borough Council, and
two to a London-based delivery company called Office2Office –
matching the customer profile that Tourick specifies.

Notably, the contracts mentioned above
are all for LCVs: two 3.5 tonne tippers, two 5.4 tonne Beavertails
and a 5.4t LWB high-roof van.

Meanwhile, the public sector demand
for leased electric LCVs might be spreading to other sectors,
too.

Fleet provider Venson Automotive
Solutions reported that it has recently signed a sizeable lease
contract for the supply of several electric LCVs. Another provider,
Grosvenor Contracts, also reported a number of electric vans on
order for clients.

“These will be used in a city where
power link-up points are conveniently located and where the
vehicles are not travelling too far,” said Nichola Johnson,
Grosvenor’s customer services director.

The downsides

There are downsides to leasing
electric vehicles, however.

There is a widespread concern that
electric commercials will never make it past the stage of “token”
uptake as an eco-friendly PR move, unless they can be shown to be
genuinely competitive with carbon-fuelled vehicles on a level
economic playing field.

However, despite higher upfront costs,
lower residual values and therefore higher monthly rental costs,
Venson Automotive Solutions claimed that over four years or 60,000
miles, these higher costs would be offset by huge savings in
service, maintenance and repair costs and fuel bills.

Venson gave the example of a small
diesel van, costing around £16,435 (€19,021) to operate over four
years/60,000 miles, a figure it calculated to be £2,915 – or 17
percent – more than the equivalent cost for a small electric van.
Obviously on longer lease terms, these figures become more
favourable yet for EVs.

Another problem facing electric
vehicle lessors is asset resale, said a spokesperson from ING Car
Lease: “The concern for a leasing company when deciding how and
what to put on its books is whether technology will have made the
vehicle in question obsolete when it needs to be sold after three
years.

“Obviously this causes a certain
amount of caution when pricing these vehicles, and until a clear
single winner in the race to replace carbon fuelled vehicles
emerges, we cannot see this changing.”

Also, while it is good for one’s image
to be seen to be leasing or owning an electric vehicle, doing so is
not always practical, a point made clear by Arval’s UK market
insight director Mike Waters.

“While there is some interest in
electric vehicles, in most cases they are not yet practical for
business drivers,” Waters said.

“Until the charging infrastructure
improves – as well as the vehicle range – the majority of fleets
are unwilling to make the commitment when more mainstream vehicles
are more suitable and often cheaper.”

Nonetheless, with increasing numbers
of public authorities signing up to the green revolution, it won’t
be long before the private sector realises that the advantages of
electric vehicle leasing just might outweigh the oft-quoted
disadvantages.

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