23 nov 22

European governments send mixed messages on ICE and EV

European governments are sending mixed messages to fleets and private drivers as they help businesses and individuals navigate the cost-of-living crisis.

While state grants are in place in the majority of European markets to support the uptake of electric vehicles, national Governments are also subsidising the cost of petrol and diesel to shelter vehicle operators from the full inflationary impact of soaring pump prices.

The war in Ukraine has caused a dramatic spike in both gas and oil prices, driving up the cost of electricity (gas-fired power stations generate more than 20% of the European Union’s electricity) and diesel.

This has narrowed the gap in energy costs between electricity and fossil fuels for vehicles.

France subsidises fossil fuels

In France, for example, the Government has spent €7.5 billion of public money subsidising pump prices by as much as 30 cents per litre, reducing the cost of refuelling to July 2021 prices, long before the outbreak of war in Ukraine.

This makes France the “finance champion of fossil fuels,” [le champion du financement des carburants fossils”] said Lucien Mathieu, acting director, France, Transport & Environment.

At the same time, electricity costs have soared to record levels, increasing the cost of recharging an electric vehicle. However, for drivers who can take advantage of cheap domestic energy tariffs, battery power is still cheaper than diesel, said Mathieu, citing figures that the cost of a 100km journey in a petrol Peugeot 208 would be €9.70, compared to just €4.40 for the electric version of the car.

Moreover, plans for next year will widen the energy gap between EV and ICE, with T&E France saying the increase in costs for fossil fuels will be five times greater than the rise for electricity.

However, if drivers need to plug-in at rapid public chargers along motorways, the cost per mile is equivalent to filling up with fossil fuels.

UK cuts duty on petrol and diesel

It’s a similar situation across the Channel in the UK, where the Government has reduced duty on fossil fuels by 5 pence per litre, and is introducing annual road tax to electric vehicles for the first time. Moreover, the cost of using a rapid public charger has risen by 42% since May and 72% in a year. In September, this meant that a driver exclusively using a rapid or ultra-rapid charger on the public network would pay around 18p per mile for electricity, compared to 19p per mile for petrol and 21p per mile for diesel, according to the RAC motoring organisation, which expressed concern that the relatively high cost of rapid charging on the public network risks putting off drivers from opting for electric cars.

Simon Williams, RAC EV spokesperson, said: “It remains the case that charging away from home costs less than refuelling a petrol or diesel car, but these figures show that the gap is narrowing as a result of the enormous increases in the cost of electricity.”

Germany has three-month fuel discount

In Germany, the Government introduced a three-month fossil fuel discount in June, reducing peak pump prices by as much as 30 cents per litre, although prices have started to rise again since the subsidy ended.

TCO recalculations

These fast-changing variations in electricity and fuel prices cause challenges for fleet total cost of ownership models. The impact is not even, however, between EV and ICE car, with calculations by LeasePlan showing that energy accounts for 11% of the TCO of an EV, but 22% of an ICE car.

 “For example, when the price of both electricity and fuel increases by 50%, this results in a TCO increase of 6% for the Volkswagen ID.3, but a TCO increase of 11% for the Volkswagen Golf,” said LeasePlan.

Discover the incentives for electric vehicles in Europe.

Authored by: Jonathan Manning