Spring Budget a “missed opportunity” to support electric fleets

The fleet sector has criticised the Spring Budget for not addressing challenges with electric vehicle charging, despite extending the 5p-per-litre fuel duty reduction for an extra year.

Boosted by renewed tax incentives, 66.7% of new electric cars were registered to fleets and businesses last year, according to the Society of Motor Manufacturers and Traders (SMMT). Exempt from vehicle excise duty (road tax) until 2025, they also avoid inflation-linked rate rises in April, which could push up yearly renewals by around £20.

However, operators have faced rising costs and bottlenecks for public charging, and organisations including the Association of Fleet Professionals had called for measures such as on-street residential charging and reforms to VAT and reimbursement to support businesses.

There was some good news in the Budget, which delayed the 20% rise in the energy price guarantee (EPG) for three months. This limits average annual household energy bills to £2500, if the Ofgem price cap is higher. Although that threshold will increase to £3000 from July, Cornwall Insights is forecasting that Ofgem’s price cap will fall to £2013 by that point, and that’s what households will pay.

In the meantime, drivers on a flat-rate tariff will pay an average pf 31p per kilowatt-hour (kWh) for home electricity. The advisory electric rate (AER) used to reimburse those expenses is now adjusted quarterly and increased from 8p to 9p per mile in March, which covers the cost of charging popular models, such as the Kia Niro EV and Volkswagen ID 3, at home.

However, the AER usually doesn’t cover the cost of public charging. As businesses, charge-point operators are receiving government support to cover soaring energy costs, but tariffs have increased dramatically over the past year and these have been inflated by a 20% VAT rate, instead of 5% at home, which penalises drivers without off-street parking.

According to Mina, which automates charging reimbursement for fleets, the average cost of public charging was 70p/kWh last autumn. That’s equivalent to 18p per mile for the Niro and 17p for the ID 3 – and equivalent to a 43mpg diesel car or 38mpg petrol car, based on current pump prices.

Network capacity is also under pressure, with 284,000 new electric cars and vans registered during 2022 and delays at popular charge points.

“The lack of any significant new measures to further incentivise electric vehicle adoption and infrastructure roll-out signals a missed opportunity,” said David Bushnell, director of consultancy and strategy at Fleet Operations. 

“EV adoption remains in its infancy, and with high energy costs continuing to impact drivers reliant on public charging networks, more must be done to achieve a timely transition to net zero transport. Cutting the public-charging VAT rate, to match the rate for domestic electricity, would have been a good place to start.”