Fleet fuel costs and electric van payback
The agency operates 240 vehicles. There are 150 diesel vans averaging 22,000 km a year, 60 petrol cars averaging 18,000 km, and 30 hybrids averaging 15,000 km. Fuel use is 6.5 L/100 km for diesel, 7.2 L/100 km for petrol and 4.8 L/100 km for hybrids. Diesel costs €1.75 per litre and petrol €1.82 per litre; hybrids use petrol. The fleet manager proposes replacing 40 diesel vans with electric vans. Each electric van would average 25,000 km a year and use 18 kWh/100 km at €0.22/kWh. The purchase premium is €9,000 per electric van over an equivalent diesel van. The manager argues that the switch will cut total fleet fuel spending by about 11% and that the price premium will pay back in under five years from fuel savings alone. You have been asked to check the arithmetic, including whether the different annual mileage of the electric vans affects the comparison.
1. Calculate current annual fleet fuel spending and the fleet-wide weighted average fuel cost per kilometre.
Read the worked answer
Diesel: 150 × 22,000 = 3,300,000 km; cost/km = 6.5/100 × €1.75 = €0.11375; fuel = €375,375. Petrol: 60 × 18,000 = 1,080,000 km; cost/km = 7.2/100 × €1.82 = €0.13104; fuel = €141,523.20. Hybrid: 30 × 15,000 = 450,000 km; cost/km = 4.8/100 × €1.82 = €0.08736; fuel = €39,312.
Total km = 4,830,000. Total fuel = €556,210.20. Weighted average = €556,210.20 ÷ 4,830,000 = €0.11516/km, about 11.5 cents. The weighted average is appropriate because the segments have very different annual distances; a simple average of the three cost/km figures would overstate the influence of the small hybrid group.
2. Test the claim that replacing 40 diesel vans with electric vans cuts total fleet fuel spending by about 11%.
Read the worked answer
Per replaced diesel van, current fuel = 22,000 × €0.11375 = €2,502.50. Per electric van, fuel = 25,000 × 18/100 × €0.22 = €990.00. Saving = €2,502.50 − €990.00 = €1,512.50 per van; 40 vans = €60,500. As a share of current fleet fuel: €60,500 ÷ €556,210.20 = 10.88%, so “about 11%” is a fair rounded claim.
The comparison is slightly conservative in one sense and aggressive in another: the electric vans do 3,000 km more per year, so they are doing extra work rather than simply replacing the diesel mileage. If the electric vans did only 22,000 km, their fuel would be €871.20 and the saving €1,631.30 per van, or €65,252 (11.7%). The percentage is therefore sensitive to the mileage assumption.
3. Evaluate the payback claim of under five years from fuel savings alone.
Read the worked answer
Simple payback = €9,000 ÷ €1,512.50 = 5.95 years, so the claim is false under the stated 25,000 km assumption.
If the comparison is put on equal mileage (22,000 km), electric fuel is €871.20 and the saving is €1,631.30 per van. Payback = €9,000 ÷ €1,631.30 = 5.52 years, still above five years.
The fuel-only calculation also overstates payback quality because it ignores maintenance, resale value, charging infrastructure and any change in insurance. Those items could shorten or lengthen the true payback, but the manager's specific five-year claim is not supported by the stated figures.