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Driven by environmental concerns, political mandates and the attraction of ending oil dependence, car manufacturers have committed to going electric. But while the transition is inevitable, it’s far from complete. Internal combustion engine (ICE) vehicles have enjoyed more than 120 years of dominance and today they offer an unmatched range of price points, body types and performance specs. Electric vehicles can’t yet match that breadth and struggle with cost, weight, range and payload.

In fact, demand for ICE vehicles in slower transitioning markets is so strong that some manufacturers have hit the brakes on EVs altogether. Last year Ford shelved its electric pickup, the F-150 Lightning, after losing billions on the project.

For fleet managers, that raises a practical question: are EVs mature enough to meet operational needs and reduce running costs, or is the reliable ICE engine still the smarter choice?

The bull case

One of the clearest advantages of electric vehicles for business fleets is lower maintenance and fuel costs. EVs have fewer moving parts, require no oil changes and experience less brake wear, thanks to regenerative braking. There is no exhaust system or moving rods; an EV is essentially a battery strapped to a skateboard. That translates to less downtime and lower running costs.

The numbers are compelling. According to salary packaging company Paywise, for a A$45,000 vehicle, five-year running costs are A$19,368 for an EV compared with A$31,940 for a petrol vehicle – a difference of over A$12,500. Total ownership costs are also about A$24,000 lower for the EV, driven by lower energy and servicing costs, and favourable tax treatments.

Real-world fleet data reinforces the case. In Auckland, Fulton Hogan brought two Volvo FM Electric 6x4 trucks into service in April 2025, supported by New Zealand’s Energy Efficiency and Conservation Agency (EECA) Low Emissions Heavy Vehicle Fund. Each truck can haul up to 16 tonnes of asphalt across short, repetitive metro routes: a sweet spot for electrification. Modelling shows the trucks will use 2.92 kWh/km and cover 60,000 km/year each – saving an estimated NZ$88,000 in fuel and 750 tonnes CO2 over five years compared with two equivalent diesel trucks.

However, sticker shock remains a barrier. For example, the Toyota HiAce, one of the most popular commercial vans, starts at NZ$56,000 for a diesel model. The cheapest electric equivalent, the LDV eDeliver 9, starts at NZ$100,000.

Residual value is another concern. A medium SUV like the Toyota Rav4 has a 95% residual value after three years, whereas an electric equivalent may only have 60%, says one fleet operator. The uncertainty around resale prices feeds directly into lease costs and risk models.

FBT exemptions in Australia and New Zealand help offset the higher upfront cost of EVs. But without these tax breaks, EVs tend to offer only marginal savings over ICE vehicles on a total cost-of-ownership basis and the maths doesn’t always stack up.

Other practical challenges remain, especially in Australia. Many business fleets travel long distances, operate in regional areas, tow trailers or carry heavy payloads. Current EVs often struggle with these uses because towing and load weight can significantly reduce range.

Another issue is the lack of choice. ICE vehicles are available in an extraordinary range of utes, vans and trucks tailored to specific commercial roles. EV equivalents are still limited, particularly at the heavier end of the market. For many fleet managers, there simply isn’t an electric vehicle that fits the job.

“We’re still in the single-digit penetration of electric vehicles for business fleets,” says one executive at a fleet management company, who declined to speak publicly about the low uptake of EVs among his clients’ fleets. “We can actually make EV total cost of ownership cheaper than ICE in many cases, but we still often fall into the trap of: is the EV fit for purpose for what our customer needs?”

Why hybrids are filling the gap

Instead of moving straight to full electrification, many businesses are turning to hybrid vehicles to reduce costs and hit sustainability goals, say fleet operators. Hybrids offer a broader range of commercial vehicle options, particularly in utes and vans and avoid many of the operational compromises associated with EVs.

They also solve many of the practical problems. Hybrids retain the ability to refuel quickly at service stations, and handle long distances and tow loads without requiring new charging infrastructure at depots or employees’ homes. From an operational perspective, very little needs to change.

Plug-in hybrids (PHEVs) require employees to charge them regularly. When they do, PHEVs deliver the greatest emissions reductions of any hybrid option. They also act as a transitional step, effectively training drivers and organisations for a future shift to full EVs, which many see as inevitable.

But if plug-in hybrids are driven in the same way as an ICE vehicle and never charged, they can use almost as much fuel as the equivalent petrol version. The car is effectively carrying around the dead weight of a very heavy battery for no added benefit.

“If people use hybrids like an ICE vehicle, there’s no emissions benefit or fuel benefit,” says a fleet manager. “But if there are policies and behaviours in place to ensure that you do charge up the battery of the hybrid, then you are going to see those benefits.”

Non-plug-in hybrids provide fuel savings automatically through regenerative braking and system optimisation. There is no behavioural change required from employees and no dependency on charging patterns to achieve efficiency gains.

Fleets have also been able to reduce costs in telematic data collection, which records information about distance, location and driving styles for each vehicle. Improvements in vehicle connectivity mean many cars (regardless of propulsion system) can now provide telematics data directly, removing the need to install physical tracking devices.

Where manufacturers allow access to this data, fleets can save $200–$1000 per vehicle. Frustratingly, some car manufacturers are reluctant to share this data, forcing fleets to install their own monitoring devices.

“Businesses want EVs to fit into their existing operating model, not force them to reinvent it. But it’s absolutely a solvable problem.”

The charging dilemma

Businesses considering the move from petrol or diesel fleets to plug-in or battery electric vehicles also need to review their approach to refuelling – or more accurately, recharging. With internal combustion vehicles, the model is simple: fill up at a service station. Unless you’re large enough to justify your own diesel depot, there’s little infrastructure to worry about.

EVs, by contrast, introduce new decisions, plus the opportunity to save substantial amounts on fuel bills. Electricity is typically cheaper than petrol on a per-kilometre basis and workplace charging can deliver further savings, especially when paired with solar.

Businesses can program EVs to charge during daylight hours using their own solar generation – for example, from massive solar arrays on warehouse roofs – or take advantage of policies like Australia’s Solar Sharer Offer (launching on 1 July 2026) or New Zealand’s existing solar export incentives.

The downside is that working out how to charge your vehicles is not straightforward. Vehicles can recharge at a public station, at a depot, at the office or even at an employee’s home. For companies with very large fleets or fleets that include trucks or other large EVs, this can mean installing expensive, high-capacity chargers and even upgrading the site’s electrical backbone – a major infrastructure cost that’s often underestimated. These decisions involve not just hardware but also billing systems, policy settings, and safety and liability.

That added complexity can be a turn-off for many fleet managers, according to Kristian Handberg, general manager at JET Charge, one of Australia’s leading charging infrastructure firms.

“Businesses want EVs to fit into their existing operating model, not force them to reinvent it,” Handberg says. “But it’s absolutely a solvable problem. If you need to have a home charger put in and operate it as part of the business, that’s all solved these days. The issue is just connecting the dots to help people navigate through it.”

Decisions include whether employees can charge at home (especially in apartments), how electricity costs are reimbursed and how access to workplace chargers is managed. There are also questions around safety, liability and FBT in Australia, or fringe benefit value (FBV) in New Zealand, when installing chargers at employees’ homes.

Charging providers have developed business models that try to eliminate the complexity in EV charging options. JET Charge sells a bundled service that includes home, depot and public charging – what Handberg describes as “a fuel card experience”. This makes it easier for finance teams to swap out petrol for electric charging, without rewriting their reimbursement processes.

The service can include home charger installation, managed directly by the charging provider. Rather than the employer taking on installation or maintenance themselves, the charging provider installs, operates and, if needed, removes the charger, and provides usage reporting under a fixed monthly service fee. This avoids asset tracking headaches and removes ambiguity around whether the charger is a fringe benefit or a property improvement.

“As a fleet manager, you [already] deal with fuel as an expense. We just want this thing to look and feel like that,” Handberg says. “You don’t need it to be complicated.”

When employees charge at home, fleets often use a flat reimbursement rate so staff aren’t out of pocket. While this can appear higher than petrol on paper, Handberg says total cost is often lower, particularly once tax incentives are factored in.

In Australia, the FBT exemption on eligible EVs plays a big role in shifting the economics in favour of electric vehicles. In New Zealand, although incentives like the Clean Car Discount have ended, low road user charges for light EVs still help the case.

The cost of charging infrastructure scales with the size of the fleet and vehicle, but so do the operating cost savings. JET Charge is working with bus depots and state governments on major upgrades to electrify bus fleets that it claims will deliver huge fuel cost savings.

However, for many small and medium fleets, high-speed chargers just aren’t necessary, says Handberg.

“The majority of businesses are not transport operators. It means that they can generally live with slow charging for the majority of the time [and use] public charging as their fallback,” Handberg says.

EVs may still feel like they’re stuck in the warm-up act, but the shift is now irreversible. In China, the world’s largest car market, more than 54% of new car sales are electric and EVs are already cheaper than petrol equivalents. That momentum will only accelerate as battery costs fall and supply chains scale. For Australia and New Zealand, the prospect of slashing oil dependency by electrifying commercial and personal transport is a powerful economic and strategic incentive.

For many fleets, hybrid may be the safer bet for today. But the equation is changing fast. In 12 months, that picture could look very different.

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Why EVs are surging in novated leasing

Sales of battery-powered electric vehicles (BEVs) in Australia broke through 100,000 for the first time last year, representing 8.3% of vehicle sales. The sales were turbocharged by the federal government’s Electric Car Discount, an FBT exemption that can save thousands of dollars on an eligible EV (under the fuel-efficient Luxury Car Tax threshold – A$91,387 for 2025–2026) purchased via novated lease.

While fleets may prefer hybrids, electric vehicles now make up around 35% of all novated leases at leasing specialist Paywise.

“Pre-policy, that figure was more like 2% of our book,” says Frank Agostino, CEO of Paywise.

This single policy change has turned EVs from a niche into a mainstream choice for salaried employees.

“Now you can get a BYD EV for as little as A$100 a week and that includes your finance, electricity, insurance, registration and servicing. People spend A$100 a week just on petrol for ICE cars,” Agostino says.

When EVs first entered the market, buyers hesitated due to concerns around battery longevity, resale values and range anxiety, Agostino adds. But these fears are now starting to ease. Modern Teslas can travel up to about 750km on a single charge. When they first came out, they were a bit over 400km in range. Charging infrastructure has also improved, with more than 1200 fast-charging locations nationally and at least 4200 high-power public charging plugs.

At the same time, government EV policies have helped create a used EV market. This has given drivers more confidence that batteries won’t degrade like a phone battery and that resale values will hold up over time. As public understanding grows and second-hand EVs become more common, uptake is expected to continue climbing.

“I genuinely think EV demand is still growing. Confidence issues are the main headwind,” Agostino says. “I think with education, it’ll continue to grow.”

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