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Africa|Automotive|Energy|Engines|Maintenance|Solutions
Africa|Automotive|Energy|Engines|Maintenance|Solutions
africa|automotive|energy|engines|maintenance|solutions

Fleet operators urged to time changeover to EVs ‘correctly’

28th May 2021

By: Irma Venter

Creamer Media Senior Deputy Editor

     

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There is a “very real danger” that fleet owners may be stuck with stranded assets if they do not time the changeover to battery electric or fuel cell vehicles correctly, says GridCars MD Winstone Jordaan.

GridCars is a South African electric vehicle (EV) charging solutions specialist.

Jordaan, who admits that he is more of an optimist than most people regarding the EV revolution, says it is possible that no more petrol or diesel vehicles will be sold in Europe by around 2026, driven by plunging 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 vehicle in demand in the local market.

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 price parity with ICEs globally in about 2023.

“When this point will be reached on commercial EVs is 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 vehicle, explains Jordaan.

He notes that the biggest cost drivers in any commercial fleet are the costs of the vehicle, fuel or energy and maintenance.

“All three of those are going up yearly with ICEs, 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, [they] will also inevitably start to climb, as they 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 the operational cost of an ICE vehicle, 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 cost plus capital cost – becomes cheaper than a diesel vehicle’s operational cost.

“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 second-hand 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 is somewhere between these crossover points.

“When we are between these two points, businesses 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 second-hand ICE vehicles.

“This is the difficult question fleet operators face in the near future – when to make that hard switch to EVs.”

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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