More and more organisations are electrifying their fleet in the pursuit of greater sustainability. However, the changing mobility landscape – in terms of the growing number of suppliers and also the ever-wider vehicle choice – presents new challenges and pitfalls. What are the implications for your sourcing strategy? How can you minimise the risks during the supplier selection process? And which best practices can you learn from? To find out, I spoke to Jeroen Molthoff, fleet management expert at Molthoff Fleetmanagement.
How is the electrification of fleets changing the procurement approach?
Fleet procurement was relatively straightforward in the past because the various makes and models of internal combustion engine (ICE) vehicles were largely similar in terms of their technical specifications. Nowadays, however, you need to closely examine and compare all the specs to make sure you select vehicles that are fit for purpose. This starts with understanding and specifying the precise minimum requirements for your fleet, such as the range and charging speed. In the case of light commercial vehicles (LCVs), it’s important to consider additional issues, such as the maximum load and whether a towbar or trailer can be fitted – because the battery's position means this is not possible on all electric vehicles. As a result, the emphasis during procurement is shifting towards functionality rather than price.
But the price is still important, isn’t it?
Yes, but rather than just focusing on the price, organisations should calculate the integral costs of their electric fleet. Components such as the investment value, depreciation, tyres, fuel, maintenance, repairs and insurance all have a very different impact on EVs' total cost of ownership (TCO) compared with ICEs. It’s also important to weigh up the risks. For example, some of the youngest EV brands are being rushed onto the market with a primary focus on generating sales first, before expanding the service organisation or creating spare-parts inventory. To avoid a threat to your business continuity following a breakdown or accidental damage, you must ask the right questions in advance and secure guarantees.
What about organisations that source their fleets through a tender process?
Tenders have traditionally been a good way for public-sector organisations and large corporates to negotiate sizable volume discounts on new vehicles, either by buying directly from OEMs or by signing selective-vehicle contracts with lease companies. However, the supply bottlenecks affecting EVs mean that much lower discounts are on offer. With this in mind, and because EV technology is being continually improved, it can make more sense to opt for the flexibility of a framework agreement for lease rather than tying yourself to a particular make or model that may soon become outdated. Additionally, in the case of government organisations, working with a lease company can enable them to benefit from commercial subsidies from which they would otherwise be excluded. However, there can be huge variation in the EV rates quoted by different lease companies, so it is advisable to spend time looking for the right partner.
Which best practices can help organisations to get started?
It’s admirable that organisations want to electrify their fleets in support of their sustainability goals, but these should not be pursued dogmatically. First and foremost, your fleet needs to functionally support your business activities. This might mean accepting that it’s not possible to electrify 100% of your fleet within the desired timeframe, especially in the case of LCVs. One solution to this is to segment your fleet based on the specific requirements and then to look at which segments can be electrified now, and which you should reassess again at regular intervals – because the technology is evolving all the time.
How can organisations keep track of all the market developments so that they can make the right choices?
The EV market is so dynamic that it can be difficult to keep up with what is on offer, both from lease companies and from OEMs. Fleet procurement requires a lot more preparation than before. And if you decide to continue working with tenders, you need to ask new and different questions in order to obtain the right information as the basis for analysing the costs and also weighing up the risks. Most organisations don’t have the internal resources for this complex and time-consuming process, in which case an external specialist can provide the necessary expert knowledge and help you make the right decisions based on your situation.
Start now transitioning to a sustainable solution?
Contact Jeroen for advice and support with sourcing electric vehicles (including insight into your current requirements and future opportunities), or Saskia for guidance during the transition from a traditional company car policy to offering alternative and sustainable forms of corporate mobility.
This interview is the first in a series aimed at helping organisations to realign their sourcing strategies with the new mobility landscape. The next article will cover the procurement of alternative or ‘smart’ corporate mobility.