PLUG-IN CARS AS COMPANY CARS

Transcription

1 PLUG-IN CARS AS COMPANY CARS Company cars, cars provided by the employer for employees to use as their own private cars, are common in Sweden. About 25 % of all new car sales in Sweden are company cars. Hence, by making plug-in cars attractive as company cars, a significant part of the Swedish market will be available. This is enabled by using the right setup for financing the company car. Company car holders in Sweden are taxed for the benefit of having access to the car. To increase interest in choosing environmental friendly company cars the benefit of having a plug-in car as a company car is taxed based on a significantly reduced car value. Despite this plug-in cars are still rarely chosen as company cars. One explanation is that company cars often are selected from one of a few dominant makes of cars. These dominant makes of cars have until recently not offered plug-in car models. Another explanation is that early plug-in cars have been unsuitable as company cars due to reasons like their size and image. However, there is potential to change this trend. Better suited cars are on the way and some of them will be offered by the car makes that are among the most popular ones for company cars. Choosing a plug-in car as company car is an easy, relatively risk-free way to try a plug-in car. With enough information about the economic advantages and about the functionality of these cars, interest in plug-in cars can easily be increased.

2 THIS IS HOW IT WORKS Company cars in Sweden are often used as the family s primary car. The car is hence expected to be able to take the whole family and luggage on holiday trips etc. Many company car holders also use their car a lot for business travelling, and then driving long distances. For these reasons all-electric cars might not be the primary choice for a company car. However, if the employer offers for example a car swapping service among colleagues at work, for use when the all-electric car is insufficient, some of these difficulties might be overcome. A car swapping service can be designed as an application available for smartphones and web. In the service, the company car holder can search for colleagues prepared to swap company cars during a specific period ranging from a few hours to entire weeks. The service makes sure that the costs for the cars are registered at the correct user, even when the cars are swapped. The car swapping needs to be encouraged by the employer. Besides the advantage of making regular cars available for all-electric car holders the service also gives more employees the opportunity to test drive an all-electric car. This way the employees experience of all-electric cars increases in general. Modern information technology will enable keeping track of where the plug-in car is charged and having all costs for charging of the car collected at one bill specific for the car. This will for example make it possible to charge the car when visiting a customer without debiting the customer s electricity bill. Services that are keeping track of when the employee is using the car for official matters and when the car is used for private matters facilitate distributing electricity costs between the company and the employee. The setup for company cars in Sweden ranges from financing models where the employer pays for all costs of the car and the employee is just taxed for the benefit, to financing models where the employee pays for all costs for the car with a gross salary deduction. A growing number of companies offer company cars of the latter model, which is cost-neutral to the company. For the employee the cost for such a company car is somewhat lower than what it would have been if the same car was bought privately. For plug-in cars the financing model that is cost-neutral for the company is the worst-case scenario for the employee. The higher purchase price of the plug-in car has to be covered by the employee through a higher gross salary deduction, which in turn needs to be offset by the lower taxation for the car and the lower mileage cost in order for the plug-in car to be competitive relative to an internal combustion engine (ICE) car. Our calculations show that even in this worst case scenario the plug-in car can cost the employee less per month than a comparable ICE car, if the company car is kept for a period of 5 years. 5 year long contracts are used at some companies today but shorter contracts are more common. With increased driving the plug-in car becomes more cost competitive, and for a sufficiently high annual mileage the cost for a plug-in car can be lower than the costs of a comparable ICE car even if the contract is shorter than 5 years. In cases where the employer takes some, or all, of the costs for the company car, a plug-in car can be an expensive alternative for the company. Normally, only the employee benefits from the lower tax and the lower mileage costs of the plug-in car, while the employer is affected by the higher purchase price. To make the plugin car an attractive alternative to both parties also in this case, the idea is that the employer, through an additional gross salary deduction gets a share of the benefits which compensates for the higher price of the plug-in car. Even though the full benefits of the plug-in car in this case do not reach the employee, the plug-in car can still be a competitive alternative to an ICE car. In setups where fuel is a part of the employee s benefit, the plug-in car can be a competitive alternative for both parties even without the additional gross salary deduction. Illustrations: Johanna Svantesson

3 BUSINESS MODEL IN DETAIL In this section the business model for using plug-in cars as company cars is described based on the business model canvas 1 developed by Osterwalder et al. The business model is aimed at car leasing companies offering management of company cars to environmentally responsible customer companies. CUSTOMER SEGMENTS CUSTOMER RELATIONSHIPS KEY RESOURCES KEY ACTIVITIES There are two main customer segments in this business model; employers offering company cars and employees offered a company car. A third customer segment is supporting the business model by creating a demand for used cars. Employers may be interested in offering plug-in cars as company cars because it gives them a possibility to build their brand from an environmentally friendly and social aspect. With the right setup the company can also reduce their costs for offering their employees company cars. The customer relations are the same as in today s company car management business, but the employees need to be made aware of the possibilities and benefits of selecting a plug-in car. This could be accomplished by information in newsletters and on webpages both at the employer s site and the leasing company s site. The primary key resources in this business model are the plug-in cars and the financing model used. Other key resources may be support service systems like the car swapping system and the system for collecting information about charging and driving of the cars used for distribution of electricity costs. DISTRIBUTION CHANNELS The key activities in this business model will primarily be the same as in today s company car management business. There may however be an additional value in collecting battery-, use-, and charging statistics for key partners to use in the learning process for this relatively novel technology application. The value of that information is currently unknown and treated as a bonus. VALUE PROPOSITION Employees may be interested in a plug-in car because of the lower total costs for the car due to the reduced tax value and the lower running costs. For many employees the plug-in car is also possible to charge at home, eliminating the need to go to a gas station for refueling the car. The image acquired by driving an environmentally friendly car may also be attractive to some employees. A third customer segment is used-car buyers interested in buying the cars after the company car contract is closed. This customer segment may be interested in a used plug-in car for the competitive purchase price, for the possibility to charge at home, and for the image acquired by driving an environmentally friendly car. KEY PARTNERS This business model might benefit from cooperation with car manufacturers who want to use this channel as a means for faster commercialization of their plug-in cars. Another possible key partner is energy companies ensuring availability to charging stations. COST STRUCTURE Typically, the costs will be the same as for traditional company cars. The main cost will come from purchase of plug-in cars. Other costs depend on what is included in the management agreement, could be for example costs for insurance, maintenance and fuel or electricity. The cars and any other possible part of the value proposition are distributed through the same channels as the leasing company use today. REVENUE STREAM The main revenues come from leasing fees and from selling the used cars after the end of the leasing periods. Selling battery data might generate an additional income, but this is not included in the calculations. The value proposition for the employer is management of the plug-in cars offered as company cars for the company s employees. The offer include the same service as offered for ICE cars but may also include additional services like access to a car-swapping service and access to a service that collects all costs for charging the plug-in car and distribute them between the employer and the employee based on if the employee has been using the car for official or private matters. The value proposition for the employee is a cost competitive company car that is also environmentally friendly. For the used-car buyer the value proposition is a wellmanaged environmentally friendly car at a competitive price. 1 Available at (read )

4 BUSINESS MODEL SENSITIVITIES BUSINESS MODEL DEVELOPMENT The main strength of this business model is solidly shown in the fact that such a substantial share of all new car sales in Sweden are company cars. Compared to other company cars, both plug-in hybrid cars and range extender electric cars show to be 100 % replacements of ICE cars, and still they are less costly. This should put them on many employees consideration list if they only were aware of their existence. Information is hence a critical success factor. However, the most important viability factor for this business model is the Swedish tax regulations for company cars. The reduction of taxation for plug-in cars is only temporary, and for this business model to be viable it has to be extended. A long-term expressed strategy for tax regulations concerning company cars is essential for achieving an increase of plug-in cars as company cars. The second most important viability factor is the value of the plug-in car on the used-car market. A higher used-car value would further improve the business case of plug-in company cars and/or enable a shorter (more competitive) leasing period. This business model is developed within the BeliEVe project (Business model innovation for Electric Vehicles). More information about the project can be found at www. viktoria.se/projects/believe. We decided to focus on this business model when examining statistics on new car sales in Sweden. Since such a large share of the new car sales are company cars it is necessary to address this segment when trying to achieve a large scale commercialization of plug-in cars. Company cars also have the advantage of only being kept as company cars for a few years before entering the used-car market. An increased share of plug-in cars used as company cars would therefore lead to an increased presence of plug-in cars on the used-car market, hence making plug-in cars more available for common people interested in buying a car. In the process of investigating how plug-in cars could be made attractive as company cars we have interviewed both companies offering company cars to their employees, employees who are company car holders and leasing companies managing company cars. Based on these interviews we soon discovered that even though Swedish tax regulations are designed to encourage people to choose a plug-in car as a company car the impact of this is almost nonexistent. Our results are pointing out information directed to both companies and employees as an essential means to increase the share of plug-in cars among company cars.

5 SPONSORED BY: VIKTORIA SWEDISH ICT AB LINDHOLMSPIREN 3A, SE GÖTEBORG, SWEDEN