Electric Vehicle leasing and incentivising the Road to Zero
The Electrical Vehicle (EV) and broader e-mobility sector has long been a target area for M&A, desired by both strategic acquirers, who strive to ensure they remain relevant during the most significant technological shift in a generation, and by institutional investors who wish to enter one of the UK’s fastest growing market sectors.
Whilst all major automotive OEMS have invested significantly in the electrification of their product portfolios, a level of consumer reluctance to switch to pure EV vehicles remains, with concerns over performance, residual values, and range anxiety.
Fiscal carrot or regulatory stick
In its Ten Point Plan for a Green Industrial Revolution, the UK government brought forward the proposed ban of new petrol and diesel cars from 2040 to 2030 with a view to generate an additional five MtCO2 savings by 2032.
Although it is inarguable that a blanket ban will achieve the desired effect, the Government has a desire to achieve a consumer-driven change through the reform of the tax system to increase the uptake of low carbon vehicles; with one of the most rewarding opportunities being the incentivisation of EV leasing through company car schemes.
EV company car schemes
EV schemes are conducted via salary sacrifice, whereby employees reduce their salary in exchange for a leased vehicle. This is nothing new in terms of employee benefits, but what is different is the scale of the savings.
With benefit in kind rates starting at just 1% in 2021/22 (before rising to 2% for 2022/23 through to 2024/2025) the individual savings are substantial, ranging from 30-60% of the cost of a lease dependent upon an employee’s marginal tax rate.
An example is given below:
- Employee on a 40% tax rate with 2% NI
- Tesla Model 3, valued at £60,000
- Gross monthly salary sacrifice of £835
- Tax savings of 40% (£334) and 2% (£17)
- BIK of 1% = £60,000 * 1% = £600
- Tax on BIK of £600 @ 42% = £252 p.a. or £21 per month
- Total employee savings:
- Tax savings: -£334
- NI savings: - £17
- BIK charge: +£21
- Total savings (monthly): £330
- Total savings (annual): £3,960
There are a number of other benefits for employers providing EV company car schemes to their employees including a demonstration of the business’ ESG commitment to its stakeholders, enhancement of employee engagement, reduced fuel costs for both the employee and business, access to convenient workplace re-charging points and Vehicle Excise Duty savings.
Wider market impact
Aside from the societal, and environmental advantages of such incentives, the benefits to the wider economy of accelerating EV uptake will be significant. Nowhere will this be felt more than the EV charging sector.
continue to attract significant investment
Clearwater International is increasingly active across the full EV landscape, as seen in the recently advised sale of EV charging specialist Rolec to infrastructure and engineering services provider, Sdiptech. The sheer scale of the market opportunity to update the UK’s EV infrastructure will continue to attract significant investment, both domestic and international, for years to come.
