EV subscriptions can help control rising fleet costs

With the 2024 Budget set to raise business costs in many areas, Mercia Fleet Management believes that ‘flexing’ to electric vehicles via subscription could help introduce an element of control at this inflationary time.

With most businesses facing a rise in employers’ National Insurance Contributions and the Minimum Living Wage from next April, plus the impact of rises in Vehicle Excise Duty (VED) which will increase the tax burden for most vehicles, the need to keep a firm control over operating costs is paramount.

For fleet operators, VED is set to rise in several areas including hybrid vehicles and more expensive EVs. For example, new electric vehicles with a list price of over £40,000 will from April 1, 2025 have to pay the expensive car supplement of £390 a year from the second tax payment onwards– which is thought likely by some experts to raise leasing costs by £50 a month for cars registered after April.

One way of mitigating the effect of the increases and exerting greater control over costs could be to flexibly introduce EVs on subscription rather than long term leases – especially for businesses with seasonal or contractual requirements.

To underline the point, Mercia, the fleet management division of EV salary sacrifice specialist Fleet Evolution, carried out research amongst clients in the professional services and construction sectors.

They identified that, in many cases, company cars were often deployed for contracts of only three months to meet short-term or seasonal needs and were often not required longer term.

Andrew Leech, head of Mercia Fleet Management and founder of Fleet Evolution, said that fleets should consider using EVs on subscription to meet short-term needs as, although more expensive than long-term leasing, they were more cost effective than resorting to daily rental.

“This has meant that the MG4, our most popular EV, can cost as little as £25 per day, while the Tesla Y on subscription could cost just £40 a day including insurance.

“We firmly believe that subscriptions should be considered as an important part of a fleet strategy, especially to provide greater flexibility, at a time when the Budget has raised the cost thresholds for most businesses in the UK

“The ability to ‘flex’ a fleet based on demand is vital in the current market for the very many businesses who face rising costs following the Budget. And these will become even more expensive due to initiatives such as the increases in VED on new product,” he said.

Mercia has recently launched an EV subscription service, Subscribe Electric, to give corporate customers a taste of going electric at affordable prices while meeting short-term business needs.

With current short-term hire costs for EVs at prohibitive levels – a typical Tesla Model 3 from a conventional daily hire company can cost in the region of £2,000 per month – Mercia believes EV subscriptions could help in controlling operating costs.

Andrew Leech added: “Short term EVs can be highly attractive from a cost point of view at a time of rising costs for most businesses following the Budget. They can also play a role in helping businesses meet their corporate sustainability targets at the same time.

“We are increasingly talking to businesses that want to find ways of mitigating their costs, especially after what most believe was a bad Budget for business.”