Large corporations are jumping on the “green” bandwagon left and right, which in turn is pushing firms that lease and manage car fleets to convert to electric vehicles (EVs) faster than they had ever thought possible.
In late 2020, fleet management company ALD set a goal to have 30 percent of its new cars electrified by 2025 – a goal that seemed like a stretch because as recently as 2019 only one in 200 of ALD’s new vehicles was an EV or a hybrid.
But corporate clients chasing environmental, social and governance (ESG) goals pushed the leasing giant, a unit of Societe Generale, past that target in 2021.
ALD has set a new goal that around 50 percent of its new vehicles will be either EVs or hybrid models by 2025 as corporations’ hunger for zero-emission options to meet ESG targets keeps growing, Deputy Chief Executive Officer John Saffrett told Reuters.
Corporate clients are “all sitting there trying to figure out how they’re going to meet their sustainability objectives,” Saffrett said. “An obvious part of their footprint today that they’re trying to address is their vehicle fleet.”
Firms like ALD – which replaces its entire fleet every 42 months – play an important role in the auto industry, buying millions of vehicles globally that also help shape the future of the used car market when they come off lease.
ALD also leases cars to both firms and consumers on behalf of some major carmakers including Tesla Inc and Ford Motor. According to industry data, leasing has grown as retail sales have fallen – the share of cars bought at retail in Europe fell to 45 percent in 2021 versus 55 percent in 2020.
France-based ALD is taking over Dutch rival LeasePlan, giving it a combined global fleet of around 3.5 million vehicles, as it focuses on scaling up its EV business.
Large ALD customers like AstraZeneca Plc have set electrification targets – the drugmaker wants its global fleet of 17,500 vehicles to be fully electric by 2025 – and are pushing carmakers to make those cars greener.
That intensifies the pressure on the auto industry to squeeze carbon and other harmful materials out of their supply chains. But electrifying large fleets is easier said than done.
A lack of available public charging infrastructure means that for companies with sales representatives who drive long distances, only plug-in hybrids will work for now. “The challenge you have with electrification as a corporate is you can’t just switch drivers on day one,” ALD’s Saffrett said. “You’d love to, but it simply doesn’t work.”
In Africa, some parts of Asia and Europe, companies like AstraZeneca also face a lack of available EV or hybrid models. In other areas, where a more rugged pickup truck is needed to reach the doctors served by such companies, suitable EVs are in short supply.
AstraZeneca, for instance, has no choice but to buy fossil-fuel models in those regions, said Juliette White, the drugmaker’s head of global sustainability. Around 58 percent of AstraZeneca’s global fleet are EVs, hybrids or plug-in hybrids.
The most immediate focus is on so-called Scope 1 and Scope 2 emissions – those a company generates itself directly and indirectly. AstraZeneca’s fleet, for instance, accounts for just under 17% of its emissions. At German agriculture and pharmaceuticals company Bayer, its fleet accounts for under 5% of emissions. Bayer is aiming for 30 percent of its global fleet of 26,000 light-duty trucks, SUVs and sedans to be electric within the next four years.
Passenger cars and commercial vehicles are by far the largest asset class in Europe’s leasing market. According to industry lobby group Leaseurope, in 2020 new vehicle leases totaled 244 billion euros ($249.5 billion), or 69 percent of all equipment leases.