Rethinking electric vehicles as a corporate commuting benefit in the U.S.

Employee benefits and shiny cars don’t usually go hand-in-hand. No one ever bragged about driving a medical, dental, or vision plan off the lot.

Yet even the most basic corporate benefits are a product of their era. Consider the case of the venerable 401(k), the staple of most corporate retirement plans. In 1978, Congress amended the Internal Revenue Code to allow employees to receive their income tax-free when it was deposited into a deferred retirement account. Early adopters of this newfangled benefit could not foresee how one piece of legislation would transform individual retirement plans forever, but before long traditional pensions were phased out as the industry standard. Ultimately, the 401(k) represented more than a new investment vehicle for American workers. It became a means for employers to attract new talent, help employees improve their financial wellness, and prepare workers for a stable retirement.

American workers now expect to receive matching 401(k) contributions from their employer. It is no longer an exceptional benefit. To stand out in a competitive job market, an employer must also offer appealing short-term incentives that meet an employee’s most pressing needs away from the office ― preferably, for the betterment of both parties.

Enter the electric vehicle.

Fiscal perks

Electric vehicles predate not only pensions ― they even predate the IRS. The idea of making electric vehicles the focus of an employee benefit is relatively new, but it seizes on many of the elements that initially made the 401(k) appealing: a unique tool for attracting talented employees, federal tax incentives that aren’t available to buyers of gasoline-powered cars, and a significant cost savings to companies and commuters who currently purchase gas.

In other ways, the fiscal perks EVs offer go beyond those of traditional employee benefits. By definition, no retirement plan offers a short-term payout, while the average EV driver saves $2,000 to $3,000 annually on gasoline. Throw in tax incentives, plus the cost of oil changes and other engine repairs, and the average commuter can save $24,000 to $30,000 over the course of five years by switching to an EV. That money is immediately theirs to spend or save.

This realization is nothing new outside the U.S. In the first quarter of 2022, 15% of new cars purchased in the United Kingdom were classified as battery electric vehicles (BEVs). Eighty-four percent of these cars were purchased through the U.K.’s “salary sacrifice” program, in which employees can use tax-free wages to make EV lease payments.

In the U.S, the Inflation Reduction Act of 2022 was passed to similarly incentivize consumers to purchase EVs. It provided generous tax incentives for buying electric and hybrid vehicles (up to $7,500 for new cars and $4,000 for used cars). Yet, electric vehicle adoption here is trailing the U.K., with EVs making up less than 7% of all new vehicle sales last year.

What’s the missing piece? Corporate involvement. With so many businesses looking to reduce their emissions, it is time to look across the pond for guidance.

Global priority

Since the Paris Climate Agreement went into effect in November 2016, 193 states (plus the European Union) have signed on. The U.S. has been bound to its terms for all but three months since its adoption. The federal government has its own set of targets for reducing emissions by 2030.

American corporations employ remote workers around the globe, and climate change is an unusually unifying issue both at home and abroad. One Deloitte survey of international respondents identified reducing carbon emissions as a “near-universal” priority. Moreover, most people believe the burden for solving the climate crisis should not rest solely with global heads of state. The same survey revealed 65% of respondents expect CEOs to do more to make progress on societal issues, including reducing carbon emissions, tackling air pollution, and making business supply chains more sustainable.

In the U.S., with its geographically disparate population, a supply chain is only as sustainable as its source of energy. This is the basic principle animating the move away from fossil fuels, a point of agreement among major brands and most countries. Against this backdrop, private- and public-sector EV partnerships make sense.

This frequently takes the form of converting company-owned fleets from gasoline to electric. Amazon recently announced it would invest nearly $1 billion toward a fleet conversion. A small business with a large fleet ― a taxi dispatcher, a plumber, a private ambulance company ― might be intimidated by the bill, especially in states where the tax incentives are unfavorable. When remote work isn’t an option, could reducing a company’s dependence on fossil fuels include reducing the number of gasoline-powered cars its employees already drive?

Supply-chain scopes

The Environmental Protection Agency has already answered this question. It classifies emissions under one of three scopes. Scope 1 emissions include all the vehicles and assets a company owns. Scope 2 includes purchased electricity, steam, heating, and cooling. Scope 3 emissions come from “indirect” sources in the supply chain, such as the use of sold products (i.e., plug-in appliances) and, yes, the cars a company’s employees use to commute to work.

For many businesses, reducing Scope 3 emissions will require a new approach. By including some kind of EV incentive among their existing suite of employee benefits, corporate leaders can meet a number of goals: reducing their company’s greenhouse gas emissions, attracting and retaining talented employees and, at least in some places, taking advantage of tax breaks that were unavailable in the past ― and might not be available in the future. In Massachusetts, for example, the MOR-EV program provides rebates of $3,500 on EVs purchased or leased in-state for cars with a sales price of $55,000 or less. Maine offers EV tax incentives specifically for business fleets.

Moreover, corporations can use an EV benefit to directly impact their communities for the better. The potential impact of switching to EVs is difficult to understate: transportation accounts for 27% of all greenhouse gas emissions in the U.S. Internal combustion engines are directly tied to asthma and other health impacts that have a disproportionate effect on minority communities.

In the U.S., corporations have long been responsible for providing employees important social benefits such as health care and retirement savings. Now, we must reframe the switch to green technology as a similar social good.

Related: Traditional benefits are still top priority for employees

Businesses can begin by educating their employees about the environmental and economic benefits of EV adoption, and help them navigate the complex landscape of federal, state, and local tax incentives. In many parts of the country, the trend toward commuter reliance on EVs is already afoot. How integral private corporations can be to accelerating that trend rests with individual leaders ― many of whom have already made decarbonizing an organizational priority, or established themselves as environmental leaders. Promoting EV adoption is the next frontier of corporate responsibility.

David Lewis is the founder and CEO of MoveEV.