TCO-based decision: Inclusion of Electric Vehicles in Fleets
A private Danish construction company intends to replace some portion of its current fleet with electric vehicles. The replacement with electric vehicles must not affect the company’s business competitiveness and performance. The aim therefore is to analyse the inclusion of electric vehicles and determine the composition of a mixed fleet of vehicles in a fleet used by technicians.
The company provides electrician services to various locations and each driver brings the vehicle home every day, which means that each day the route starts and ends at the driver’s home location.
Differently than the first case study, the issue here is the impact that the length of the driven routes, and the use of the Air Conditioner unit, have on the battery usage.
The current Setup
Currently the company operates small and large internal combustion engine vehicles (ICEVs) in its fleet. Only the small ICEVs are being considered for replacement with electric vehicles as the tasks and routes operated by the large ICEVs are not yet relevant for replacement with electric vehicles.
Features of the vehicles considered by the company are:
To analyse the possible fleet mixes for each of the sample days, we determine the average daily operational cost which reduces with increasing number of EVs in the fleet, see plot in figure 1.
The Total Cost of Ownership (TCO) of the fleet is calculated using existing retail prices presented in table 2 above (excluding value added tax, green incentives etc.). The result is seen in figure 1. The black line in figure 1 indicates the TCO with no EVs in the fleet and it is notable that without any value added taxes and subsidies the inclusion of any EVs is not preferred.
Figure 1 In the upper part: variation of average daily operational cost. In the lower part: variation of TCO with EVs at various price differences between EV and the small ICEV. The small ICEVs price is fixed at 21k USD and the diesel price is 1.34 USD/liter and the electricity price is 0.1973 UDS/kWh.
Source: Malladi et al. (2019) DTU Management
The price difference of an EV and a corresponding ICEV is varied in the graph. The study shows that the EVs start becoming favourable first when the price difference drops to less than 5000 USD. When the price difference is 3000 USD or less it will be profitable for M.T. Højgaard to replace all 44 small ICEVs with EVs. Significantly higher savings is to be gained if the price difference drops further to 1000 USD.
The operational costs heavily depend on the prices of diesel and electricity. When varying the EV composition based on a variation in diesel and electricity prices, it is noted that when diesel prices are high and electricity prices low, it will be more advantageous to include EVs in the fleet. Despite this fact, it would not be profitable to include any EVs in the fleet for any reasonable combination of energy prices if the price difference is as large as 11,000 USD.
This emphasizes the importance of taxes, subsidies and incentives to encourage and stimulate the commercial EV ownership.
We have presented here a versatile general framework in the context of urban service logistics to optimize and evaluate the Total Cost of Ownership of a mixed fleet that may include electric vehicles. The results show the importance of 1) considering uncertainty at the strategic level, and 2) including cabin climate control and auxiliary power in the energy consumption model. The framework is versatile and can handle a variety of cases. If you want to know more, please contact:
Management Science, DTU Management Engineering
Direct +45 45251512
Malladi et al. (2019). DTU Management. Stochastic Fleet Mix Optimization: Evaluating Electromobility in Urban Logistics