5 May 22

“Sustainability and TCO now go hand in hand”

Better value for less money? That is what sustainability can deliver for your fleet – if done right. In one of the three breakout sessions on the closing day of the Global Fleet Conference, various speakers explored the links between greening your fleet and lowering its total cost of ownership (TCO). 

“In Europe at least, we had forgotten what inflation is, but now it’s back”, said Thierry Faure (Head of global corporate sales & client relations, ALD). With the price of fuel, cars and fleet services going up, TCO is more important than ever, he said. 

TCO is like an iceberg: all too often, we think only of the visible part – in this case, the monthly rent of a vehicle (say, €350 to €450); and the taxes (which can vary from 5% to 40% of TCO). Fuel is often not considered, but this easily runs in the hundreds of euros per month as well.

Reason to switch

Yet with energy prices likely to remain very high, it – quite literally – pays to take a closer look. “The TCO of BEVs has increased too, but much less than for ICEs. It’s becoming an additional reason to switch to electric.” Three examples illuminated the point: comparing TCOs between Q4 2021 and now for a French diesel, a Belgian PHEV and a French BEV. The diesel’s TCO had increased by 26%, the PHEV’s by 20% and the BEV’s had actually decreased by 5%.

“In absolute terms, the PHEV has the highest TCO. That’s because it rides on the combustion engine for about 70% of its mileage. But the BEV is now an economic as well as an ecological benefit. Sustainability and TCO go hand in hand.”

Laura Jowziak (Senior VP, sales and client relations, Wheels; pictured) provided some insight into America’s move towards EVs. In general, the picture seems similar: a forecast of steady growth, driven by incentives, an expanded model lineup, and decreased acquisition cost. But whereas in Europe, commercial fleets are pioneers in electrification, that is less the case in the U.S.: “Incentives, whether at federal, state or city level, are primarily aimed at consumers. When the public embraces EVs, companies will be able to introduce them on a large scale. We’re lobbying Congress to offer targeted support for fleet electrification.”

EV-ready drivers

Meanwhile, American fleets are electrifying, but Wheels helps them to do so smartly: by identifying EV-ready drivers, in infrastructure-rich areas. In a country as vast as the U.S., that’s not everywhere – although some customers do make an effort. “We have one customer who has EVs in every of the country’s 50 states… except Wyoming.” That’s just too big and empty a place for corporate EVs – at least for now. 

Closing the joint presentation, Koichi Inoue (executive officer, Mitsubishi Auto Lease Corporation), gave a view on electrification in Japan – a topic not often broached in these forums, despite the country’s massive vehicle fleet and native automotive industry. Despite those factors, “the EV model lineup in Japan is still quite limited,” said Mr Inoue. 

So, MAL has worked out a step-by-step approach, that focuses on feasibility and balancing the portfolio, moving from ICE-only via a mixed system to an EV model. “Some clients want to go faster, and for them we can offer consulting on how to do this.” 

Glocal approach

For Philip Morris International, the goal is to ‘deliver a smoke-free future’ – by 2025, the tobacco giant wants at least half of its sales to come from its new, smoke-free products. PMI’s global fleets have a similar, and frankly less paradoxical-sounding goal: by 2025, they want to be totally carbon-neutral, explained Ramón Cano (Head of Fleet CoE) and Huub Smeets (Global Procurement Lead Fleet & Travel). 

“Sustainability and caring for our employees is very important for us, because every day, 20,000 of our colleagues are on the road,” said Mr Smeets. About 40% of PMI’s fleet is in Europe, but its single-biggest fleet country is Indonesia, with 4,000 vehicles. Latin America is another hotspot. 

Through concerted efforts, PMI managed to streamline what was a very fractured global fleet, but not in a one-size-fits-all approach – the name of the game is “glocal”: global where possible, regional or local where necessary. “Streamlining leasing is easy in Europe, but more difficult in APAC. In many countries, the main players will be absent. So we work a lot with Oryx, who are very strong in the region. And where they too are absent, we find local heroes.”

In Malaysia, PMI hooked up with ALD, which opened up shop there recently. It’s been an instructive experience for both. “My advice to others in similar situations: you have to grow together with your suppliers.”

Greenhouse gas accounting

In the next session, Matthijs Honing (Director for Consultancy and Executive Strategic Partnerships, OviDrive) explained the complexity of calculating fleet sustainability – which, if done right, can save you money. 

“Just going with one lease partner may make it difficult for you to reach your sustainability targets,” he pointed out. Charting the way forward takes some expert greenhouse gas accounting, of the kind OviDrive offers. 

A few interesting figures: 

BEV emissions aren’t zero, when you take into account how both the vehicle and the electricity are produced (as we ultimately should). The result varies per region. In Europe, a BEV emits 75% less CO2 emissions than an ICE car. In the U.S., it’s 63% less. In China, 29% less. And in India, just 4% less. 

This is one crucial factor – and there are many others – that help determine where, when and how you should move from ICEs to EVs. Mr Honing presented various scenarios OviDrive developed for one of their clients, with different mixes of ICEs, BEVs, PHEVs and HEVs. 

Bottom line: “Without the correct selection of leasing companies, a 50% reduction of CO2 emissions requires a 10% increase of car rent cost. However, with the correct selection of leasing companies, that increase is reduced to just 0.2%.”

But eventually, the total cost of sustainability also includes earn-backs from new business growth, as customers increasingly select suppliers with sound environmental credentials. “You should always remember that your customer is assessing you,” Mr Honing concluded. 

Collaborative approach

Closing the session, Patrik Havranek (Head of group fleet management, ISS) explained how the global facility services provider aims to electrify its fleet, via closer collaboration with its existing supplier, LeasePlan. 

“The old-school approach to procurement is to fight with your supplier to achieve certain results. In the end, you may win, but those results are actually fairly limited in scope. Our new approach is to be collaborative. To take in the full picture. And that will get us better results.”

The first job for a global change is to get a picture of the situation as it is. Not an easy task, but an essential one. “Now we know where we start from. Our global average emission is 135 grams per km. That is relatively high, indeed. But at least it’s honest.”

Taking LeasePlan’s own annual EV readiness index as a starting point, ISS has devised a country-specific electrification plan, which includes both BEVs and PHEVs. “I know the reservations against PHEVs, but if used correctly, they do contribute to our sustainability targets.”

Because, Mr Havranek stressed, “It’s important to keep in mind that electrification per se is not the target; sustainability is.”

And sustainability itself is also part of a bigger picture: “We want to intensify our relationship with LeasePlan further. Sustainability was an important first step, but there will be others as well.”

Image: Benjamin Brolet

Authored by: Frank Jacobs