Is your organization among the many that are planning to introduce electric cars? Are you leading the way, or not even considering this move? Regardless, there are considerations to keep top of mind, particularly if your company car policy applies to multiple countries or regions.
When reviewing your company car policy, typical considerations include local business requirements, employee perception, market practices, budget and tax effectiveness. All of these are just as relevant when considering integrating electric cars into a fleet of company cars. But there is an additional consideration that is becoming increasingly important: Timing.
Mind your milestones
Milestones have always been a consideration for fleet and car policy managers. Company cars must be replaced at certain dates and regular changes to legislative effective dates must be remembered.
Also, let’s not neglect legislation that impacts the tax effectiveness of a company car benefit overall. Organizations around the world have seen – and will continue to see – regulatory changes that significantly affect the employer and/or employee tax. Frequently, that tax is linked to the benefit type (car or cash) or the pollution emitted by the vehicle.
However, statutory changes are becoming more drastic, particularly in Europe, and are going as far as prohibiting certain categories of vehicles to circulate in select areas. For instance, beginning in 2026, Belgian employers must offer electric company cars if they want to maintain their tax advantage.
Such changes are pushing organizations to review the type of benefit (car or cash) and the types of cars they provide to eligible employees. Additionally, changing employee preferences and mobility patterns that are an outcome of increased remote work are causing employers to consider alternate mobility solutions.
Having an outdated company car policy that does not track these milestones puts organizations at risk of higher costs and reduced attractiveness to potential employees. It also increases the risk of organizations investing in vehicles that may be prohibited once legislation goes into effect.
Given these considerations, it’s true that the decision to move to electric cars is heavily influenced by tax legislation, but there are other influences too. For example, organizations may be considering their own willingness and initiative to reduce their CO2 footprint and increase sustainability as part of a larger environmental, social and governance (ESG) strategy. There also may be a desire to compete with peers and ensure a modern, thoughtful employee value proposition.
Prevalence of electric cars in policies
Based on the results of WTW’s 2022 Company Car Benefits Survey, Figure 1 provides an overview of the countries in which organizations with car policies are choosing to make electric vehicles available to executive-level employees.
While prevalence varies around the world, our survey results revealed that, generally, electric vehicles are becoming more common. Belgium, the Netherlands, Ireland and Norway are among the European countries with the highest proportion of electric cars in relation to vehicles with combustion engines, and the trend is increasing on a year-over-year basis.
Company car makes and models
Once the decision is made to provide electric cars, organizations must consider the makes and models to provide or from which employees may choose. The selection of models proposed by car manufacturers is fast changing, as are the price ranges.
Even if the majority of frequently allocated makes and models still have combustion engines, electric models are beginning to appear. Figure 3 shows the most frequent makes and models that senior managers across a selection of functions and markets in Europe drive.
Even if it is less frequent, electric cars also are making an appearance in company fleets in other regions. For example, the Tesla Model S is the second-most common make and model among executives (global grade 17) in Hong Kong, after the Audi A4. In Brazil, the Renault ZOE is the third-most common make and model among engineer executives (global grade 15).
Inventory availability
Time is of the essence for another reason, too: The current availability of cars. Historically, cars were available from manufacturers and leasing companies within a few months of order – or even directly if in stock. Today, ensuring employees’ accessibility to a company car when the replacement period is up or on a new recruit’s first day of work is far from being as simple as it once was.
Car delivery delays are increasing daily, and this is linked to production sites that came to a screeching halt when COVID-related lockdowns were instituted, raw materials became unavailable and supply chain issues increased.
In some countries, leasing companies are unable to even offer a target date when vehicles will be delivered. Short-term solutions (e.g., providing temporary vehicles to new recruits, short-term leases) are inaccessible, making it important to make timely decisions about the types of vehicles a company car policy should cover. Along with legislative effective dates, employers must consider the time it takes to obtain vehicles once orders are placed – not to mention solving for how those vehicles will be charged once they are delivered.
Charging policies
Choosing electric or hybrid vehicles also requires organizations to develop policies for charging those cars. Today, the infrastructure for charging looks very different from country to country. It also varies depending on the area/city within each country. The ability to charge a vehicle is, in most cases, more limited than the ability to fill a fuel tank. It also takes more time to charge an electric car than it does to refuel.
Whereas company cars typically are provided with a fuel card, it isn’t as simple with electric vehicles. It is essential to understand the solutions available in your geographies and decide how to support employees with chargers at work, on the road or at home. Ideally, the topic of charging vehicles was considered when analyzing whether electric cars are suitable for the organization’s needs and employees’ preferences – not to mention current and future mobility patterns. Also, remember that installing chargers once decisions are made can take time.
Crossing the finish line
Effective and timely decision making will impact the competitiveness of your company car policy. This makes it important for all stakeholders – be they local, regional or global – to understand the challenges and time constraints faced not only when developing a new policy, but also when implementing it locally.
Enhancing your company car benefit is not simply about understanding the organization’s needs and budgets, but also understanding the wide variety of external factors that will vary by location.
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