Are EVs cost-effective? How to calculate your fleet’s total cost of ownership and monthly costs

June 17, 2022 Finance

From environmental benefits to cheaper energy and repair costs over an electric vehicle’s life cycle, the case for fleet electrification is compelling. However, the initial price tag of an electric truck or bus may be discouraging. 

So, how do you make sure adding EVs is cost-effective for your fleet? It starts with calculating the total cost of ownership. 

total cost of ownership (TCO) analysis is a financial estimate that helps owners determine the costs of a product or system while providing a way to understand the economic value of an investment. 

This analysis could help your fleet discover some significant savings on the road to fleet electrification. 

Why is calculating total cost of ownership important?

Calculating the total cost of ownership for an electric truck or bus is crucial for your fleet electrification planning. Here’s why:     

  • It allows you to make an informed financial decision for your fleet.
  • It uncovers less obvious savings on fleet operating costs, alongside clear advantages like complying with incoming government regulations and avoiding rising diesel costs and fuel surcharges. For example, the Freight Carriers Association of Canada (FCA) estimates that the 2022 average freight fuel surcharge is 70 percent above the long-term average.  
  • It gives you the chance to plan for manageable monthly costs rather than a hefty upfront expense.

Although market changes, operational use, and your fleet’s travel and mileage affect the total cost, it’s widely accepted that a TCO analysis can reveal cost-effective solutions for fleets. 

Making fleet electrification cost-effective

Here’s a look at the current price ranges for different classes of EV (in Canadian dollars):

  • Class 3–5: $125,000 to $315,000
  • Class 6 and 7: $315,000 to $435,000
  • Class 8: $425,000 and up     

These prices, compared to internal combustion engine (ICE) vehicle prices, might seem too high. However, a detailed TCO analysis identifies factors that offset this upfront capital expenditure, such as government incentives and subsidies and lower fleet operating costs.     

We provide our clients with an easy-to-use digital tool to accurately calculate the total cost of ownership of an EV alongside expert advice and guidance.

Here are some other factors to consider:

  • If you work with a leasing partner such as 7Gen, the upfront capital costs can be amortized over the working life of the vehicle. “That way, the higher cost is brought down while you feel the benefits of lower operational costs sooner,” says Mark Bayley, Director of Project Finance at 7Gen.
  • Fleets can apply for government support for buying electric vehicles. The Government of Canada offers a 100 percent federal tax write-off for MHDVs purchased before January 1, 2024, and is planning other incentives. British Columbia’s Specialty Use Vehicle Incentive (SUVI) program and Quebec’s Écocamionnage and Transportez vert programs also offer significant rebates and subsidies (up to $175,000/vehicle depending on battery size) for EV purchases. 
  • Increasing numbers of medium- to heavy-duty EVs entering the market will likely drive down prices of new vehicles in the future.
  • Research shows that it takes just three to five years to pay back the costs of an EV truck—a small portion of its overall lifespan.

Calculating the total cost of charging infrastructure that suits your fleet’s needs

A thorough TCO analysis should also include the expenses associated with installing EV charging infrastructure. The total cost of such infrastructure can range from thousands to tens of thousands of dollars, depending on the following:

  • The location of your depot site
  • The current electrical capacity and connection to the local grid
  • The size of the fleet and its energy needs

Readying your site for EV charging infrastructure will likely involve working with your local utility early in the process. “Utilities are generally happy to work with large fleets and different kinds of electricity consumers to futureproof sites, increase charging capacity, and work together on this” 7Gen’s Mark explains.

Government funding is also available to help with the installation of EV charging infrastructure. Fleets can take advantage of the Zero Emission Vehicle Infrastructure Program (ZEVIP) from Natural Resources Canada, which provides funding for EV charger installation. Meanwhile, the Accelerated Investment Incentive allows for full expensing of eligible property, including EV charging stations.  

Under Quebec’s Transportez vert program, fleets in the province can also have 50 percent of acquisition and installation costs covered for DC fast charging stations

Electricity-powered vehicles deliver operational savings almost immediately

Although equipment costs may require a large investment, fleets that purchase EVs will notice savings in the costs of driving their vehicles almost immediately. 

How? With diesel prices surging to sky-high levels across Canada, EV charging offers a sustainable fuel alternative at an overall cheaper price point. 

To keep costs low, it helps to know when—and how—to charge an EV to avoid high fees at peak usage hours. 

“One of the ways around that is using smart and dynamic charging,” Mark explains. “So, if you finish your day at 5 p.m. and plug in the vehicle, it’s not immediately drawing power at the peak electricity price timing. It’s going to charge overnight, so you’re charging the vehicle at a rate that doesn’t hit those high-demand hours.”

And, with the Clean Fuel Standard due to come into effect in December, fossil fuel costs will rise even higher. The good news is that the standard will also allow fleets whose vehicles run on electricity to register for carbon credits, which can then be sold as a revenue opportunity. 

Cost-effective maintenance and repairs lower fleet operating costs

Maintenance and repair costs for EVs represent another significant savings to account for in a total cost of ownership analysis. 

But where do these potential savings come from? 

  • Electric vehicles use fewer fluids and have fewer moving parts that require maintenance than their fossil fuel–powered counterparts. 
  • Electric vehicles have a much simpler structure of three main parts where maintenance is required: an engine, an inverter, and an onboard charger. 
  • Regenerative braking in electric vehicles can lead to savings on brake maintenance. 

Although lower maintenance costs are a major plus, fleet managers should also factor in EV training for drivers, depot staff, and in-house mechanics when conducting a TCO analysis.  

Luckily, Quebec-based fleets can avail of funding for staff training through the province’s Transportez vert program.

Start calculating total cost of ownership early and get a great partner on board

To recap, a comprehensive total cost of ownership analysis for adding EVs to your fleet can reveal substantial savings—so long as it considers the following:

  • The overall cost of an electric truck or bus that works for your fleet and how that cost can be spread out over the lifespan of the vehicle
  • The overall cost of installing charging infrastructure for EVs in your fleet
  • The readiness of your depot for installing EV charging stations and the time required to work with your local utility to prepare your site
  • The estimated savings of switching to electric vehicles, including lower energy, maintenance, and fleet operation costs 
  • The government incentives for EVs, charging equipment, and training your fleet     

Of course, starting work on a TCO analysis as soon as you’re ready to make the switch is essential. Here’s why it’s a good idea to give yourself a generous timeframe:  

  • Your company will have adequate time to research electric trucks that work for your business, understand the charging infrastructure you need, and involve key stakeholders (drivers, depot staff, local utilities, etc.)
  • Your fleet can take advantage of government incentives, which will not be available forever
  • You can find a dependable partner to guide you in checking your site’s capacity, selecting vehicles and charging infrastructure suited to your needs, and navigating applications for government incentives and subsidies

“A comprehensive TCO analysis might require a little more time and care than just buying a new ICE vehicle, but it’s not a particularly time-consuming task if you’re working with a good partner,” says Mark. 

“When you work with a company like 7Gen, we speak with your fleet managers, we look at your operational profile, and we suggest the vehicle options from across OEMs that fit your needs. You don’t have to be pigeonholed into buying from a certain brand.”

Interested in calculating the total cost of ownership for an EV for your fleet, and figuring out which vehicle and charger options you can order? Contact the 7Gen team today