A PHEV driver could save over $1,000 on fuel expense annually. However, these savings are squandered when fleet drivers are overly reliant on the car’s gasoline engine. - Photo: Toyota

A PHEV driver could save over $1,000 on fuel expense annually. However, these savings are squandered when fleet drivers are overly reliant on the car’s gasoline engine. 

Photo: Toyota

Leading the charge in sustainable transportation practices, a number of prominent Fortune 500 companies, including Google, Frito-Lay, Staples, Hertz, Enterprise, and Avis, have been incorporating plug-in hybrid vehicles (PHEVs) into their fleets for more than a decade. The popularity of these vehicles continues to grow. Last year, PHEV sales in America jumped by 20% and there are now more than 860,000 PHEVs on the road.  

PHEVs have become increasingly popular in municipal and federal government circles, as well. In January, New York Mayor Eric Adams announced the addition of 25 PHEV street sweepers to the city’s fleet, which already exceeded 4,000 PHEV and fully electric vehicles. Boston, Los Angeles and Seattle are among the other major American cities that have beefed up their PHEV fleets in recent years. Together, federal agencies quintupled their purchases of EVs and PHEVs in the 12 months ending September 2022.  

The trend among the public and private fleet owners is not without reason. PHEVs have an internal combustion engine and a small electric motor that offers 25 to 50 miles of electric-only range. Because of this, PHEVs provide the ability to reduce an organization’s environmental impact while reducing drivers’ range anxiety.  

Most EVs have a lower total cost of ownership than gas-powered vehicles over their lifetimes, especially when factoring in the generous incentives being offered under the Inflation Reduction Act, which offers up to $7,500 back in tax credits. Newer PHEVs, like the 2023 Kia Niro and the Ford Escape, have a total range of more than 500 miles and can be used as a purely electric vehicle for most daily driving needs. 

Non-Electric PHEV Fuel Economy  

There’s just one catch. 

According to Consumer Reports, most PHEVs have lower fuel economy compared to conventional internal combustion engine (ICE) vehicles when they are not running on electricity. BMW’s 330e xDrive sedan only gets 25 miles per gallon when driving purely on gas, for example, while the ICE 330i xDrive gets 28 mpg.  

Some PHEVs have very low fuel economy when using the gas engine; the Porsche Cayenne Turbo S E-Hybrid gets fewer than 20 miles per gallon.  

For these reasons, using the charging feature of employees’ fleet-issued PHEVs is essential to reducing both environmental impact and organizational expenses. 

Calculating PHEV Cost Savings 

How much money can an organization lose by not plugging in its PHEVs overnight?  

Let’s assume a commuting employee is given a 2023 Toyota Rav4 Plug-In Hybrid with 42 miles of range per charge, and 38 mpg when running just on gas. If they log 70 miles a day on average, the employee is driving 17,500 miles in a 50-week year.  

If they never plug in, their company will spend $1,616 to fuel up the car each year at $3.51 a gallon (the average U.S. price for gasoline in 2023). If the employee plugs the car in every night when they get home, even if they only use a trickle charger, they will have a fully charged battery in the morning. In this scenario, the first 42 miles of their trip each day will be paid for using their home electricity.

The current average residential rate is $.17 per kilowatt-hour, although it’s often less in the evening for employees with off-peak rate plans. 

The battery capacity for the Rav4 is 18.1 kWh, costing $3.08 (18.1 kWh times $.17) to charge to full. So, 60% of the employee’s driving (42/70) utilizes the electric battery (10,500 miles). The rest of the commute is powered by gas (7,500 miles), so the company spends a total of $1,415.83 per year ($769.25 on electricity plus $646.58 on gas), saving over $200 annually.  

It is important to note that regional differences in the cost of gasoline and electricity will cause the actual savings to vary greatly. For example, in Baltimore, the average gas price is currently $3.77 and the off-peak residential electricity rate is $.09/kWh. So the same Rav4 fleet driver in this market saves their company $634.46 a year.  

The savings can further compound if a hybrid fleet driver is putting on lower mileage, because a larger percentage of the commute relies only on electricity. For example, if the Baltimore driver only covers 50 miles a day, their company would save $1,130.51 annually. 

If these savings are not realized, organizations that invest in PHEVs are not merely leaving money on the table. They’re forfeiting the return on a comparatively large initial investment. A Chrysler Pacifica touring with an internal combustion engine, for example, costs $37,620. Its plug-in hybrid version costs $51,095.  

The difference in cost is only made up over the lifetime of the vehicle, through the cost of gasoline and lower average cost of maintenance. These savings are squandered when fleet drivers are overly reliant on the car’s gasoline engine. 

Environmental Costs of Not Plugging In 

Fuel cost savings are only one reason to encourage employees to plug-in their fleet PHEVs. The average car in the USA emits 4.6 metric tons of carbon dioxide (CO2) driving 11,500 every year. Fleet drivers putting on 70 miles a day can emit almost twice as much, especially if they are driving in a large SUV, minivan, or truck.  

PHEVs produce no tailpipe emissions when they are in all-electric mode, although they still have a carbon footprint created at the electricity generation source. How much CO2 will be emitted per kWh depends on how the electricity used to power them is generated. Coal-fired plants produce 2.26 pounds per kWh. Natural gas produces .97 pounds per kWh, while solar and wind produce 0 pounds per kWh.  

The average last year for all U.S. homes was 0.857 lbs CO2 per kWh. It is worth noting that the energy grid is getting “greener” every year, so this average can be expected to fall. In areas generating electricity from solar, wind, geothermal, and other zero-emission sources, plugging PHEVs in at night could quickly cut a fleet’s carbon footprint in half. 

A study by the California Bureau of Automotive Repair found that real-world electric miles driven by plug-in hybrids can be as little as 35% percent of EPA projections. The plug-in rate may be even lower in the case of PHEV fleet vehicles which, until recently, did not have an efficient, accurate method for at-home charging reimbursement.

Incentivizing Drivers to Charge PHEVs 

Here are a few ways to encourage employees to charge their commuter PHEVs: 

  • Provide chargers at work: Installing Level 2 or fast chargers on-site allow employees to charge up when they come into the office. Plugging in is easy, especially for drivers who do not have Level 2 charging at home. As your company pays for the electricity, there is no need to reimburse fleet drivers who use the on-site chargers. While installing chargers is pricey, there are many tax credits, grants, and rebates currently available for on-site builds, as well as creative financing options.  
  • Help employees charge on the go: Even though public charging is two to three times more expensive than charging at home, filling up the battery on the go still costs less than gas and is better for the environment. Make sure fleet drivers covering long routes or traveling out of town regularly know where to stop and charge with an app like plugshare. PHEV fleet drivers should also have access to a company card, or a charging app tied to a company card, to make topping up the battery easy. 
  • Reimburse for at-home charging: Few employees will willingly add $50 to $100 each month to their home utility expenses without compensation. They don’t have to. Given the small battery capacity of PHEVs compared to EVs, there’s no need to install level 2 chargers at an employee’s home. A trickle charger will be enough to replenish a PHEV battery overnight. However, reimbursing employees for the cost of that electricity is essential to ensure compliance with labor laws that obligate employers to reimburse for vehicle-use costs. It also costs employers less in the long run than the alternatives (e.g. installing chargers at work and paying for charging on the go or covering the extra gas spend). 
  • Update your PHEV use policy: Sometimes employees choose a PHEV because it’s the only option for the style of car they want to drive (e.g., the Chrysler Pacifica is the only plug-in van a company offers its fleet drivers). These drivers have little interest in technology and may be even less inclined to build charging into their routine. Setting clear charging expectations in your company policy can help ensure the results you want. As your company is the one reimbursing for gas and electricity, you can easily detect employees who are not following the corporate guidelines and charging protocols.   
  • Educate your fleet drivers: Only 9% percent of Americans consider themselves “familiar” with the fundamentals of owning or operating an electric vehicle. If you do not already have a PHEV education program in place, offering a basic guide to PHEVs is an important first step to ensure fleet drivers understand the unique aspects of their vehicle. A short orientation program can highlight the benefits of plugging in for the environment, review charging policies, and introduce the logistics of a reimbursement program.  

PHEVs are popular among fleet owners easing into the transition to electric vehicles. Consumers are jumping on the trend, too. Around 860,000 PHEVs were in use in the United States last year. For anyone considering buying or leasing EVs or PHEVs for their next personal car, the workplace can offer a great introduction to the benefits ― and the caveats ― of these vehicles.  

 About the Author: David Lewis is the founder and CEO of MoveEV, a solution designed to make it easy for companies to scale electric vehicle (EV) adoption and reimburse for charging at home. Lewis is an experienced B2B software executive with experience creating value through new product offerings, M&A, and transforming tech-enabled services to SaaS. 

Originally posted on Automotive Fleet