As the world continues to grapple with the implications of climate change, businesses are under increasing pressure to reduce their carbon footprint, both from consumers as from policy makers. One area where companies can make a significant impact is by the electrification of their vehicle fleet.
Governments around the world are introducing policies to encourage automakers to electrify their vehicle models. Recently, a European ban on new vehicle models with an internal combustion engine as of 2035 was voted, but it still contested. In any case, Member States, such as Belgium, are putting in place fiscal incentives for organisations to speed up the electrification of their corporate car fleets.
With transportation accounting for a large portion of global greenhouse gas emissions, transitioning your company cars to electric vehicles (EVs) can go a long way in reducing your organization’s carbon emissions. However, convincing employees to switch to EVs is a non-trivial task. In this blog post, we explore how carrot and stick techniques can be used in the electrification of company car fleets.
The carrot technique is an incentive-based approach that rewards employees for making the desired behavior change. In the context of electrification of your company car fleet, the carrot technique involves offering employees incentives for switching to an EV. Some examples of incentives include:
- Financial incentives: This can include higher budgets for EVs, a home-charging station paid by the employer, or even bonuses for employees who take up an EV evangelist role. Of course, a lower benefit in kind provides a clear incentive for picking an EV, and a fiscality-based TCO budget further reduces the attractiveness of ICE-options.
- Non-financial incentives: These can include preferred parking spots, with access to charging stations, or even recognition programs for employees who make the switch to an EV.
The carrot technique can be an effective way to incentivise employees to switch to an EV. By offering tangible rewards, employees are more likely to be motivated to make the switch.
The stick technique, on the other hand, is a consequence-based approach that penalises employees for not making the desired behavior change. In the context of electrifying your company car fleet, the stick technique involves imposing penalties on employees who continue to drive non-electric vehicles. Some examples of penalties include:
- Financial penalties: This can include charging employees for parking in non-designated spots or overcharging the ICE vehicles in terms of budget cost in the car policy
- Non-financial penalties: These can include reducing the ICE options in the car policy, revoking parking privileges or even disciplinary action for employees who refuse to make the switch.
While the stick technique can be effective in getting employees to make the switch to an EV, it can also lead to resentment and decreased morale among employees. Therefore, it is important to use this technique sparingly and ensure that there is a clear and fair policy in place. The ultimate stick technique is prohibiting the use of ICE vehicles all together.
A hybrid technique combines elements of both carrot and stick techniques. In the context of electrifying your company car fleet, the hybrid technique involves offering incentives for employees who make the switch to an EV, while also imposing penalties for those who refuse to make the switch. This approach can be effective in getting employees to make the switch, while also ensuring that there are consequences for those who refuse to do so.
The Belgian Transition date: possible policies
In Belgium, new vehicles with an internal combustion engine (ICE) will not be fiscally deductible anymore. The fiscal transition period implies that for new vehicle orders between July 1st, 2023, and December 31st, 2025, the fiscality declines over the life-time of the vehicle.
As a consequence, the employer will incur additional fiscal costs for ICE vehicles under lease contract, over the years. The government as such hopes to create incentives towards electrification.
As a response, some employers move to an EV-only policy, making EVs mandatory and thus prohibiting (stick policy) employees to order ICE vehicles. The benefits are that the policy is clear and that there is a more limited fiscal cost increase exposure. Often, however, employers feel resistance from their workforce, because some of their personal or work context does not allow for an EV (yet).
On the other hand, a Total Cost of Ownership (TCO) budget, that takes into account the (average lifecycle) costs, including all fiscal aspects, might allow the employers to avoid this resistance. Indeed, employees can still order ICE vehicles, but at their own expense: the fiscal implications of their powertrain choice is taken into account in the budget cost of the vehicle.
As such, the available car offering within their car policy budget level will be smaller or more generalist-branded cars, and EV cars will thus appear more attractive, given their lower fiscal costs (carrot policy).
How Headlight can help you
At Headlight, we believe advanced budget methodologies are essential within fleet operations best practices. Our budget configurator allows organisations to create your digital policy and seamlessly create transparency: which cars are in which budget? You can simulate the car offering under different budget conditions and update budget levels accordingly, so that attractive (electric) vehicles in each car policy budget level enable the electrification of the corporate fleet.
There are four important steps to maintain an up-to-date and dynamic policy:
- Configure. Set up your digital car policy configuration, including budget levels, budget methodology, your unbundled services, service packages and more
- Analyse, adapt. Review what vehicles are within which budgets, and the impact of altering prices or parameters on the car offering.
- Go live. Publish your new car policy and enable employees to order in compliance with your new policy.
- Repeat. Prices and situations change, and so should your car policy! Keep your policy up-to-date by frequently adjusting your policy if the situation requires it.
Electrification of your company car fleet is an important step in reducing your organization’s carbon footprint. However, convincing employees to make the switch to an EV can be challenging. By using carrot and stick techniques, you can incentivize employees to make the switch while also imposing consequences for those who refuse to do so.
When implementing these techniques, it is important to ensure that there is a clear and fair policy in place, and to communicate the benefits of electrification to employees. By doing so, you can ensure a successful transition to an electric fleet.