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Bridging Sectors: Future Fleets with James Buxton

04-05-2021Opinion

We recently sat down with James Buxton – Head of Fleet at Audi UK – to discuss energy and mobility. In this conversation, we cover what’s driving the adoption of electric vehicles as company cars, the challenges with electric rental, the partnership between fleet managers and energy providers, and more. The following is an excerpt, condensed and edited for clarity.

Sam Rangasamy

Sales and Marketing Executive

For OEMs like Audi, half the challenge is getting the product to market but the other half is the service that follows. Many have commented that for Electric Vehicle (EV) fleets services are much more relevant compared to Internal Combustion Engines (ICEs), would you say that this is accurate?

That’s correct because your requirements as a fleet manager to run 10 Battery Electric Vehicles (BEVs) within a 500 unit fleet is very different to running 450 BEVs within a 500 unit fleet. So as there’s still a learning curve from petrol to EV, we’ve mainly seen a strong uptake of BEVs within a ICE and plug-in hybrid (PHEV) dominant fleet.

The need for better infrastructure is still extremely relevant and slowly being solved, but is currently a barrier for adoption. Interestingly, what is driving the BEV uptake is better fleet segmentation and cost-saving that comes with it.

The average fleet is split into management and essential vehicles. Management vehicles tend to not travel vast distances as they’re mainly used to get to and from work and meetings. This unit is the main advocate for the uptake in BEVs and they tend to charge their vehicles at home. Majority of the unit is the essential vehicles — they tend to do 5,000+ miles a year, for them the current EV infrastructure and services can’t meet their needs.

What’s been the biggest driver for clients choosing EVs over hybrids and ICEs?

Taxation has been one of the greatest motivators. For example, among the C-segment (CEO, COO, etc) the traditional choice of a diesel, saloon company car can come to £500 p/m in tax while a PHEV equivalent can come to £250 p/m, but a BEV could be as low as £20 p/m. So BEVs is the better option in terms of finance and additionally, is better suited to their lifestyle. We speculate that the trend would be even stronger post-pandemic as remote working has created an even better use case for BEVs.

The management team is a smaller percentage of a larger corporate group. What’s been the common challenges in the adoption of a full BEVs operational fleet?

There are a number of challenges. In this current market, the impact of policies like the Benefit in Kind tax can be a huge driver for EV adoption, but the appeal is proportional to an employee’s income tax bracket. This may be relevant for some ‘essential users’, where if you transition to an EV the reduction in Benefit in Kind tax is marginal (multiplied by 20% income tax) when compared to management user drivers (multiplied by 40% income tax). So I think there could be more policies to promote the adoption of EVs for that core, essential user fleet.

Does depot infrastructure have an influence on the uptake of EV fleets?

Depots aren’t as popular or successful for a personal car use case, but tend to work better for operational vehicles, though there’s still hurdles with that model. The best case study would be the airport car rental sector. There’s a lot of movement and shuffling of those depot cars and the challenge there is the infrastructure. You’ll need at least 7KwH chargers, ideally 50+KwH if possible, this can vary from vehicle to vehicle, so already there’s an issue around what's needed for sufficient load management. But the bigger issue is also around data and connectivity to each vehicle. As a fleet manager, you need to be able to predict how much charge is needed for each returning vehicle and what vehicle is available that can best accommodate a customer’s need. Currently there isn’t a system that can manage this situation well.

So it’s not an easy feat developing an infrastructure for a depot style EV fleet.

So does that lack of data mainly impact the fleet manager or the charging service?

I’d say fleet managers are most impacted. It's a common issue within the logistic sector, where fleet managers are allocating the vehicles per job — those vehicles are losing money if they aren't moving or being used. Likewise, a similar point can be made for rental or depot fleets too.

Do the challenges and relationship to energy providers change dramatically with domestically stationed fleet vehicles?

Absolutely. Ease of access becomes imperative for domestically stationed vehicles. For example, when delivering an ICE car at a client’s house, they would already be familiar with how fuelling works. But with an EV, it’s very rare that the client doesn’t need any extra services. Audi has had to enter third-party arrangements to provide a holistic service for our clients. Our service now extends to finding what charging options are available for the customer. Most OEMs have also taken this approach. It’s been a learning curve that involves multiple parameters, such as making sure changing options are present and functioning on arrival, the need for additional customer data such as location beyond just delivery and to continually ensure we can provide that service to the customer. None of these were present with domestic ICEs vehicles.

Has that need for adaptation been a similar change for all fleet providers?

Those who have been operating for longer have made better headway than others, but it is a challenge for all parties: OEMs, leasing companies and the end user and likewise, bad user experience is reflected across all parties. The vehicle provider might take the brunt of it but it does cast to all members.

There’s also the challenge around segmenting energy usage for business and personal which was unforeseen.

The solution can depend on the client’s policy. Most institutions are flexible if EVs are a small percentage of their fleet but at scale, cost can become an issue. It also creates a hurdle for adoption as customers might not want to be billed for the energy use if it can’t be segmented.

Is this challenge a responsibility of the fleet manager, charge installation partner or the energy provider?

It’s a challenge for everyone frankly. It’s a challenge for fleet managers as it's a barrier to adoption, for the end user as it makes the process more complex and for the energy company as they currently don’t have the means to segment bills between what’s used for business and personal. Audi has just entered into a trial partnership with Mina, who’s service manages the chargepoint and invoices your employer monthly automatically. We’re excited by that partnership as early customer feedback has been positive.

So, there are solutions starting to emerge. But from an OEM perspective, it's our job to identify stronger commercial solutions. Ideally, we would like to support the full scope of the customer experience, from a wall charging setup to on-the-go charging as it’ll drastically lower the barrier of entry.

Do you envision that these gaps in function and solutions will be filled by startups and other companies or the traditional operators like OEMs and energy providers?

The current outlook is that other companies will be bridging the gaps. OEMs are working on solutions but the market leans towards more digital-native and agile companies to partner with in order to unlock the greater benefits and increase the level of adoption. And this applies to all members in this ecosystem.

From an OEM perspective, what are the opportunities and challenges you believe energy providers should focus on?

One challenge that I speculate will continue is the customers access to in-journey charging. At the moment that market is quite fragmented. There are numerous, different charging infrastructures across the country. With ICE vehicles, fleet users have fuel cards which work with 99.9% of providers and it’s easy for a client to set parameters if needed. But from a charging perspective, there are numerous tariff rates that can vary widely. Plus, as we are still in the innovation phase of EVs, there isn't a protocol that’s satisfied by 99% of the charging points in the UK. That creates a lot of friction for fleet managers as they can have a variety of cars with varied invoices making the overall operational cost hard to manage and predict.

Outside of the challenges, what are other opportunities between fleets and energy providers that you feel haven’t been fully realised?

As mentioned, there is an area for improvement around the billing and energy accountability. But aside from that, there’s a requirement for the fleet and energy sector to collaborate and better manage energy peaks. In a depot situation, for example, we could have hundreds of vehicles just sitting there on a Sunday that could contribute back to the grid. With sufficient collaboration it would solve both the grid management issue for energy providers and lower the cost of operation for fleet managers therefore building a stronger case for the adoption of EVs.

Could a similar use case be applied for a domestic fleet?

I can see it being an option for the future but currently it’s not available. I would expect that it would also come with a policy rewrite but there’s little to no energy accountability which makes it hard to manage such a solution. Though ideally, fleet EVs would be used as a home battery, similar to a Tesla Powerwall. If paired with domestic solar panels, a client’s energy bill would drastically reduce, building yet another case for EV adoption.

What technologies have you seen that are leading these opportunities? Would bi-directional charging be one?

Currently, there’s very little on the market. But there are interesting developments happening, both from OEMs and energy companies as it’s a potential solution to minimise stress on the grid. Plus there’s a revenue case for both parties. For OEMs, it adds value to an EV as it becomes more than a means of transport—it could be a power generator for your house, saving your money on bills or an emergency or external power in times of need. While for energy providers, they can diversify energy production, making the grid as a whole much more resilient and could be a transfer to a more sustainable model.

Both can gain a new means of benefits in bridging the gap between each other and I can imagine that the data to be gained adds value to the proposition too.

That concludes our conversation with James Buxton. You can follow him on Linkedin. To learn more about our energy and mobility approach, check out our energy and mobility pages.

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