Incentives power electric vehicle leasing

Government incentives are fuelling a boom in novated leasing for electric vehicles but broader fleet uptake is being held back due to lagging investment in charging infrastructure.

Greater investment in charging infrastructure is needed to encourage EV uptake across corporate fleets. Picture: David Clark

Government incentives are fuelling a boom in novated leasing for electric vehicles, according to ASX-listed provider FleetPartners, but broader EV uptake across corporate fleets remains held back by lagging investment in charging infrastructure and the stalled entry of a viable electric ute in the Australian market.

New business writings (NBW) in the company’s novated leasing business increased by 81 per cent in the six months to March, on the back of a surge in EVs purchased through salary packaging.

EVs represented more than half (51 per cent) of the company’s NBW in novated leasing in the first half, with that number reaching 61 per cent for the month of March.

FleetPartners chief executive Damien Berrell said the rise had been fuelled by the federal government’s electric car discount, which provides fringe benefit exemptions for eligible EV purch­ases. “On the novated side of things it’s obviously the tax break … which makes novating an EV so compelling,” he said.

“That policy came in July last year, and since then we’ve seen huge demand in novated, which you can see through our numbers – the word of mouth has certainly spread across the general employee base.

“Sixty one per cent of the novated leases we did in March were EVs, so the growth we’re getting is this huge tailwind from the demand for EVs at the moment.”

Despite the higher take-up of EVs from employees, Mr Berrell said the transition of corporate fleets remained low, with several barriers to broader adoption.

“Probably the biggest barrier at the moment is fit for purpose – and what we mean by that is utes,” he said. “Half of our portfolio, so half of the customers’ fleets are typically utes, and at the moment there is no viable plug-in or battery ute in the market.

“In terms of employee acceptance, or range anxiety, that’s starting to wane – as novated becomes more popular people are becoming more familiar with them.

“But then there’s charging strategy. About 40 per cent of our customer employees live in apartments, in Sydney and Melbourne, and the vast majority of those apartments probably don’t have an EV charger.

“So it just makes it a little bit more tricky getting employees who are driving EVs to go and charge their vehicles.”

Ahead of Tuesday’s federal budget, Mr Berrell said federal funding to help retrofit older apartment buildings with charging infrastructure would help to fast-track the transition of corporate fleets in Australia.

In its first-half results announcement on Monday, FleetPartners reported that its assets under management or financed (AUMOF) had grown by 10 per cent to $2.1bn, with NBW across its fleet management and novated leasing businesses up 39 per cent to $448m. The result was supported by a continuing improvement in the supply of new vehicles, which the company said was nearing pre-Covid levels.

Net profit after tax, excluding amortisation, came in at $41.8m, down 4 per cent from the previous corresponding period, due to a 6 per cent increase in operating expenses, including higher wages and technology costs.

While arrears were only slightly higher in the first half, Mr Berrell said the challenges facing the Australian economy were playing out across the broader automotive sector.

“When we look at used car prices, they do seem to be staying more elevated and for longer than what we thought,” he said. “Passenger (vehicle prices) have actually turned and are starting to go back up – it’s almost back to the peak of 2022. And so what’s driving that is the substitution effect. When the economy starts to slow down, people start to swing out of new cars and they swing into used cars.”

FleetPartners shares closed 5.7 per cent lower at $3.45.

Originally published as Incentives power electric vehicle leasing