The issues over electric van residual values and the finance models that manufacturers are intending to use to bring these models to market remain top of many fleet managers’ concerns.

These concerns were address at a recent Fleet Van conference where fleet managers were given advice on electric vans and what the future holds.

“It is possible that the RVs on an electric van could be zero after five years,” warned Martin Flach, Iveco van product director.

“A five-year-old EV that has not had its battery replaced may not sell on the used market – we may have to look at extended cycles of eight or nine years where an operator replaces the battery after five years and sells it on after another three.”

Iveco fits its electric vans with sodium nickel chloride batteries rather than lithium ion batteries, which some manufacturers are saying have a longer lifecycle than the Iveco batteries.

However, battery lifecycle remains a major concern and adds to confusion over residual values. “RVs are a huge problem generally with alternative-fuel and electric vehicles,” said Adrian Vinsome, head of programmes and Cenex. “They are recognised in the market as a big problem.”

According to John Watts, CAP commercial vehicle senior editor, the picture for RVs could be even worse. If there is a 30% drop in battery costs over the next three years, which is possible if technology advances as quickly as it has over the past three years, then an EV could be obsolete in three years.

In addition, Watts points out that an electric van is predicted to fall in value at a rate that is three times quicker than a diesel-equivalent.

The answer may be to run EV vans for a longer life – say seven years – at which point the financial case becomes somewhat more attractive.

But it is not just EV residual values, says Janet Entwistle, former managing director of BT Fleet. “You need £20,000 more to run an EV than a similar diesel and if you are outside the congestion zone, it will cost you £30,000 more,” she said referring to a Transit-sized van (see figure 1). “It’s a problem: EVs are not yet a viable proposition.”

However, things are changing. Renault is about to launch its all-electric Renault Kangoo at £16,990. But the battery has to be leased separately from Renault at £59 a month. “In theory this could become a viable option,” says Entwistle. “There is going to be a viable small electric van option next year.” (See figure 2).

But this idea of leasing the battery separately from the vehicle raises other issues. CAP for example will refuse to set a residual value on an EV unless the vehicle is sold as an entire package.

But there are other issues with this mixed funding option, not least that legislation prevents multiple finance agreements on one vehicle. This funding model raises other questions such as who owns what, what happens if a fleet defaults on a payment and what insurers do when a vehicle is crashed or stolen - how do they value the battery and the rest of the vehicle?

These questions can be answered through a single funding agreement with the manufacturer, so both the lease of the vehicle and the lease of the battery is funded through the manufacturer’s capital operation. This of course would not suit all fleets.