There is a “very real danger” that fleet owners may be stuck with stranded assets if they do not time the change-over to battery electric or fuel-cell vehicles correctly, says GridCars MD Winstone Jordaan.
GridCars is a South African EV charging solution specialist.
Jordaan, who admits that he is more of an optimist than most regarding the electric vehicle (EV) revolution, says it possible that no more petrol or diesel vehicles may be sold in Europe by around 2026, driven by consumer demand.
A number of countries have proposed bans on internal combustion engines (ICEs) from 2030 onwards.
Such a scenario will inevitably have some level of impact on the South African automotive industry, and the type of vehicles that will be in demand in the local market.
For now, EVs still carry a more expensive price tag than ICE vehicles, especially in South Africa where there are no government supported incentive schemes to acquire these zero-emission vehicles, unlike in the US and the UK, for example.
Jordaan believes, however, that passenger EVs should reach general, global price parity with ICEs at around 2023.
“When this point will be reached on commercial EVs are still debatable, but it may be as soon as 2025. It’s a bit of a guessing game at the moment.”
However, before price parity, which refers only to the capital cost of the vehicle, EVs will reach an operational breakthrough point, where it is cheaper to operate an EV than an ICE, explains Jordaan.
He notes that the biggest cost drivers in any commercial fleet are the costs of the vehicle, fuel/energy costs and maintenance.
“All three of those are going up with ICEs yearly, compared with EVs where all three are currently going down.
“So, before price parity, we’ll reach the operational breakthrough point, where it is cheaper to operate an EV.
“It is clear that the operational costs for diesel vehicles will only increase, while the operational costs for EVs will continue to drop, until, at some point, where it will also inevitably start to climb, as these vehicles reach their optimal volume prices.”
The point, however, emphasises Jordaan, is that the operational cost of an EV will at some point in the near future become less than an ICE, and it will remain there going into the future.
“When that crossover happens, it will be the obvious time to change to electric when buying a new vehicle.
“It also means that if any fleet owner decides to a buy a new ICE vehicle after that point, they will be placing themselves at a disadvantage.
“The changeover point may be different for different types of vehicles, and it will be influenced by range, but there will be a changeover point in terms of operational costs,” says Jordaan.
The next crossover point is when the total cost of an EV – operational costs plus capital cost – becomes cheaper than a diesel vehicle’s operational costs.
“The problem that exists then is that the value of diesel vehicles may drop to zero – and even more so if diesel vehicles are banned in a number of countries,” says Jordaan.
“This means you have lost the secondhand value of that vehicle. If your strategy was to sell that vehicle, you won’t be able to do so, as it would be cheaper to buy and operate an EV.”
Jordaan believes that the ideal point for fleet owners to start looking at acquiring EVs exists somewhere between these crossover points.
“When we are between these two points, business will have to make their strategic decisions very fast, because failure to do so will mean that there will be a very limited market for their secondhand ICE vehicles.
“This is the difficult question fleet operators face in the near future – when to make that hard switch to EVs.”