Element Fleet Management says many of its 5,500 clients are facing investor demands to cut carbon emissions and need help planning and executing their fleet transitions to electric

In a move that’s a sign of growing commercial demand for electric vehicles, Element Fleet Management of Toronto, which describes itself as the world’s largest pure play fleet management firm, recently unveiled a new end-to-end service offering designed to help its thousands of customers transition to battery electric over the next decade.

The offering, called Arc by Element, was almost a year in the making. According to Avninder Buttar, Element’s vice-president of strategy, it is the company’s response to the rapid maturation of the EV and EV charging markets, as well as investor pressure on clients to reduce emissions.

“One of the primary things that we’re seeing that’s driving the transition for our clients today is that there are ESG mandates that so many of these organizations have rolled out,” Buttar says. “GHG reduction targets require them to really have a clear plan for how they’re going to transition their fleet.”

The Arc by Element package starts with upfront fleet planning and carries through to vehicle acquisition and financing, charging, maintenance and end-of-life remarketing. Element also helps its clients to set up pilot programs and to develop roadmaps to full EV deployment.

Large and diverse roster

Element’s size makes this a significant step. It currently has one million vehicles under management, 5,500 clients across North America, Australia and New Zealand, and 2,500 employees. The company’s customers operate repair, delivery and sales vehicles, and its client roster includes large public sector fleets. In 2021, Element generated $512 million in adjusted operating income on total revenue of more than $1.6 billion.

Buttar, whose appointment was announced last May, co-leads Element’s EV program along with Jason Kazmar, director of electric vehicle and sustainability strategy. He says his team spent the past three quarters talking to customers and finding out the sorts of problems they’d need to solve in order to begin to shift away from internal combustion engines. The main issues they identified were total cost of ownership, availability of suitable vehicles, and charging infrastructure.

“The complexity and costs of that charging infrastructure is one of the biggest wildcards for most of our clients,” Buttar says. “They’re not sure how to best invest, especially in early days, without really knowing what the roadmap is.”

Besides these three decision-drivers, the Arc by Element team also wanted to understand some more subtle, but no less critical, considerations: which of its customers had the capacity to service EVs in their maintenance facilities; how they would deal with expense reimbursements; and concerns about range anxiety.

Another part of Element’s process in developing the market offering was to ask its customers to map their drivers’ routes to determine which categories of vehicles are most likely to end up in locations where recharging is difficult or impossible.

Three versions of pilots

For companies that want to start with a pilot program, Buttar says Element developed three versions of pilots aimed either at sales fleets that rely on home-based vehicles (typically sedans or CRVs); service fleets (primarily pick-ups or vans that have been upfitted with tools); or use cases that don’t fit neatly into either category.

“We’re actually helping them to solve for specific things within those pilots,” he explains, such as identifying incentives and providing turnkey solutions wherever possible.

While skyrocketing fuel prices due to the war in Ukraine may prompt more consumers to buy EVs, Buttar says Element’s customers tend to have longer time horizons, but will be factoring spikes at the pump into their sensitivity analyses for future fleet planning.

The company’s expectation is that the total cost of ownership for EVs will be about equal to conventional vehicles in the sales-fleet segment within two to three years, which means that customers in that vertical could fully transition their fleets by 2030.

For companies that turn to Element for delivery or service vehicles, or larger heavy-duty trucks, the new models are just beginning to come on the market, and so the turnover will take longer. Still, Buttar notes, Element is keeping its eye on what is likely the largest potential market, which is last-mile delivery, for both parcels and groceries — both expected to jump by more than a third by 2030. “That kind of increase is really enormous,” he says.

Transition role for hybrids

Interestingly, Buttar sees a continued role for plug-in hybrid electric vehicles (PHEV) in this coming period of turnover. “My perspective on hybrids is that they fit a really useful function for fleets, that is both as a transition vehicle as well as a replacement vehicle where EVs don’t exist,” he observes. He cites use cases such as utility- or telecom-operated repair trucks sent out to work at remote locations.

But, he adds, the transition from combustion engine to PHEVs will also require some operator education, as is the case with EVs. If drivers aren’t ensuring that a PHEV is battery is in recharge mode when they’re driving, the energy efficiency will actually be worse than a conventional truck because PHEVs, with their batteries, are just a lot heavier than conventional models.

“We share that with our clients to say, `Hey, don’t be shy about taking advantage of PHEVs, because if you can solve for this one thing, it can be a really good transition vehicle.'”