Should your business move to cleaner vehicles?

Resoundingly ‘yes’, but some in your business may appreciate a fuller breakdown of the benefits. Here they are.

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This drive to reduce emissions is rapidly changing the shape of the vehicle market.

“The world can’t address climate change without businesses doing their part,” says Simon Cuenca at Lombard Vehicle Solutions. “For lots of reasons, such as cost and revenue, leaders need to think about their sustainability journey now. And a crucial part of that is addressing the fleet. Petrol and diesel vehicles will soon no longer be available from new, but well before then there will be a tipping point where ULEVs [ultra-low emissions vehicles] become simply a better option.”

So what do business leaders really need to know about the rapid move away from internal combustion engine (ICE) cars and vans? Here’s how to nudge your colleagues in the right direction. 

Remind them that policy and regulation is changing

The UK government has reaffirmed its commitment to the adoption of zero emission vehicles. As of 2030, new ICE cars and vans will no longer be available for sale. Hybrids face the same fate in 2035, meaning this may only be two vehicle change cycles away. Ahead of this the UK government is consulting on its Zero Emission Vehicle mandate ahead of launch in 2024, placing increasing expectations on vehicle manufacturers to up the mix of zero emission vehicles they sell.

To support the shift, businesses and individuals have been incentivised to adopt electric vehicles (EVs). These have included grants introduced to help the affordability of both vehicles and charge points, as well as lower tax bands for zero-emission vehicles associated with vehicle excise duty (VED) and company car tax (CCT). 

Show them a map of the UK’s cleaner air zones

It is not just new vehicles which are impacted, clean air zones (CAZs) are increasing in number and reach; what started as the Low Emission Zone in London in 2008, has spread to similar schemes in more than 10 towns and cities, with more on the horizon. Some charge older, dirtier vehicles to enter restricted areas, whereas others rely on better road layouts or cycle lanes to clean up the air.

Participating cities include Bristol, Bath, Birmingham and Portsmouth, while Oxford City Council is piloting the first Zero-Emission Zone (ZEZ) – charging all petrol and diesel vehicles, with only fully zero-emission vehicles left untouched. These restrictions help improve air quality for residents, but can introduce restrictions and additional costs.

Notable cities and towns with CAZs in place include:

  • London
  • Oxford
  • Bath
  • Bristol
  • Sheffield

Tell them about tax incentives and lower operating costs

There is support to invest in cleaner vehicle technologies, with reduced CCT rates for zero-emission vehicles now confirmed through to 2028. These remain at 2% to end of tax year 2024/25 and then increase at 1% a year to reach 5% in 2027/28. These measures reduce the Benefit-in-Kind (BIK) costs for drivers, enhancing their net pay when compared with an equivalent ICE vehicle. This has a knock-on effect with reduced [Class 1A] National Insurance Contributions for businesses providing these vehicles as a benefit, when compared to an equivalent ICE vehicle.

An exemption from BIK applies for charging an electric or plug-in hybrid vehicle at or near an employee’s workplace. An employer can also pay for a charging point at an employee’s home without BIK.

In terms of permitted expenses, the Advisory Fuel Rate (AFR) for an electric car is 9p per mile. Usual AFRs apply for hybrid cars. Zero-emission vehicles are also exempt from vehicle excise duty until 1 April 2025, creating additional potential savings.

100% first year capital allowances are often also available for the purchase of new electric or zero-emission cars and vans, as well as for EV charge point equipment.

Aside from tax, running costs are typically lower for zero-emission vehicles.

Electric powertrains have fewer moving parts than their fossil-fueled counterparts, which means less wear and tear and, as a result, lower maintenance and repair bills over time 

And finally… you can use your sustainability creds for competitive advantage

As many larger businesses and corporations reduce their emissions, they seek to procure and partner with like-minded suppliers that can demonstrate their own carbon reduction plans. This is a crucial way that a business can demonstrate how it is reducing its Scope 3 emissions in its supply chain.

Adopting cleaner business vehicles can be a demonstrable way of supporting emissions reductions, benefiting your own business emissions, but also enhancing sustainability credentials to your customers.

Reducing business-related emissions, including from vehicles, can create a competitive advantage. “Even sceptical colleagues should be won over by this argument,” concludes Simon.

This material is published by NatWest Group plc (“NatWest Group”), for information purposes only and should not be regarded as providing any specific advice. Recipients should make their own independent evaluation of this information and no action should be taken, solely relying on it. This material should not be reproduced or disclosed without our consent. It is not intended for distribution in any jurisdiction in which this would be prohibited. Whilst this information is believed to be reliable, it has not been independently verified by NatWest Group and NatWest Group makes no representation or warranty (express or implied) of any kind, as regards the accuracy or completeness of this information, nor does it accept any responsibility or liability for any loss or damage arising in any way from any use made of or reliance placed on, this information. Unless otherwise stated, any views, forecasts, or estimates are solely those of NatWest Group, as of this date and are subject to change without notice. Copyright © NatWest Group. All rights reserved.

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