Volvo Group has confirmed it will be electrifying its company car fleet, following the adoption of a whole life cost (WLC)-based method of building choice lists from Arval UK.

Volvo’s previous company car policy was long-established with choice lists based on lease rentals, offering petrol and diesel models from Volvo and Renault. However, Danny Nussbaum, HR director explained that pressure had been building to make fundamental changes.

He said: “It became increasingly clear that we should move away from fossil fuel powered company cars towards electric vehicles (EVs) and plug-in hybrid electric vehicles (PHEVs), in support of sustainable travel and fleet electrification.

“There has also been growing interest from our drivers in EVs and PHEVs, both from an environmental point of view and to minimise their benefit in kind taxation. In a wider context, Volvo at a corporate level has its own ambitions in terms of emission reduction targets that exceed those of the Paris Agreement.

“All of this meant that it was clear that our company car policy needed a structural rethink to support electrification, especially from the point of view of choice lists and fuel reimbursement, so we asked Arval UK to oversee what turned out to be a very detailed review.”

Arval UK has a sole supplier arrangement with Volvo Group for its fleet and they recommended a number of changes. One such change was to rethink the whole approach to choice lists using a WLC based methodology, rather than lease costs, in order to include EVs and PHEVs.

Shaun Sadlier, head of consultancy at Arval, said: “When you have both electric and ICE cars on a choice list, lease rental costs can distort the position of electrified vehicles in the car grades.

“Adopting a whole life cost-based methodology, which includes elements such as business fuel and class 1A NIC, ensures that electric models are positioned correctly and comparable to, if not less costly, than petrol and diesel versions, when you include all costs to the business for the life of the car.”

A few months after the new company car scheme was introduced, Volvo’s new car orders are now dominated by electrified choices, splitting two-thirds towards PHEVs and a third towards EVs.

Nussbaum added: “The impact from a benefit in kind point of view has been dramatic. Some employees have managed to slash their monthly company car tax bill from £500 to £20-30 simply by making greener choices, which clearly makes a significant difference to their pay packets. The trade-up option is also proving popular, and there is a nice bonus in the shape of a new Arval programme called ‘1 Electrified Vehicle = 1Tree’, where a tree is planted for each electrified vehicle we order.”