As we head into 2024, I’m feeling very optimistic about the UK fleet outlook. Vehicle supply is expected to ease and the numbers look promising, with the British Vehicle Rental and Leasing Association (BVLRA) reporting that 40% of fleets expect to increase their fleet size in the next 12 months.
At Gofor, we’re anticipating an increased focus on fleet decarbonisation, with electric vehicle salary sacrifice continuing to ramp up. I see this as a big positive - reducing fleet carbon impact is the right thing to do for both commercial and environmental reasons. And here’s why I think 2024 will be the year of the electric vehicle.
The political backdrop
A number of influencing factors have come together in recent months to help support the UK’s move to electrification this year:
- The ZEV mandate - whilst the UK government has extended the consumer deadline for the purchase of new petrol and diesel cars from 2030 to 2035, encouragingly the zero emission vehicle (ZEV) mandate was also ratified by parliament. That mandate means that 80% of new cars and 70% of new vans sold in the UK will need to be zero emission by 2030, increasing to 100% by 2035. It starts in 2024 with 22% of all cars sold by car makers to be fully electric, while 10% of all vans from commercial vehicle makers must be electric. This gives much needed clarity to manufacturers and means we should continue to see a good supply of electric vehicles (EVs).
- The EU tariff extension - the planned EU tariff of 10% on electric vehicles was extended at the end of last year until 2027. This would have added almost £4,000 to the average cost of an EV made in Europe according to the Society of Motor Manufacturers and Traders. Pricing stability can only be helpful for EV business lease costs.
- Charging infrastructure is improving – this will help business driver confidence and further boost electric vehicle adoption. As of November 2023, Zapmap reported a 46% uplift in the total number of charging devices since November 2022 with 53,029 charging devices across 30,853 locations.
Rising business demand for electric vehicles
The 2024 Outlook Report from the British Vehicle Rental and Leasing Association (BVLRA) predicts that 40% of new orders this year will be battery electric cars, plug-in hybrids or hybrids. From conversations we have with customers, we know there is an increased focus on the environmental, social and governance (ESG) agenda - and electric vehicles are a core part of that strategy.
It is also becoming more realistic for businesses to install workplace EV charge points, thanks to the provision of government grants which cover up to 75% of the total costs of purchase and installation. The government is also making electric vehicles commercially attractive through low taxation via funding methods such as salary sacrifice.
Growth in electric vehicle salary sacrifice
We launched Gofor salary sacrifice last year and have already delivered the scheme for several clients – including learnd and Penderyn Distillery. I’m expecting to see higher demand this year because of the tax advantages for both employers and employees.
We’re also hearing that high levels of UK employment mean recruitment and retention will be key human resource challenges for 2024. That could also be a big driver for salary sacrifice which is seen as a great employee benefit.
What is electric vehicle salary sacrifice?
Salary sacrifice is a funding method that allows non-company car drivers to ‘sacrifice’ a portion of their gross salary for a fully maintained electric vehicle. It is highly tax efficient for both the employee and employer. It reduces the income tax and national insurance (NI) contributions paid by the employee and also lowers employer NI contributions. The scheme typically enables the employee to access an electric vehicle at a better rate than through a personal lease contract and there are no personal credit checks or upfront rental requirements.
Why bringing employees on the EV journey is critical
Our experience has shown us that employee engagement and education are absolutely critical for a smooth transition to EVs. So, my three top tips for implementation are:
- Make it easy - it is key to make the switch to electric vehicles really simple for employees. We’ve found running explainer webinars and setting up EV demonstration days hugely helpful to get drivers comfortable and engaged.
- Get the technology right – Gofor provides a portal to make it easy for drivers to compare cars online, cost versus a private lease and also view simple tax deduction analysis. Whatever you use, ensure it’s easy for your employees to use and straightforward to administrate.
- Get employees comfortable with charging – charging an electric vehicle is a new experience for most people, so it’s important to take the fear away. Education is important – simple steps such as recommending online ‘how to’ charging videos and suggested charging map apps really do make a difference.
So, here’s to a successful and greener 2024. At Gofor we’re looking forward to doing more of what we love - helping businesses optimise their fleets.