With fuel costs up 35% since US-Iran conflict, fleet electrification shifts from green agenda to core business resilience strategy

When it costs close to £100 to fill a tank of petrol, people notice.

It’s the sort of topic that comes up around the dinner table. Families are wondering how much higher prices could go and what impact they will have on monthly budgets. But if individuals experience uncertainty when filling up a family car, the uncertainty facing businesses is magnified many times over when they operate dozens, hundreds or even thousands of vehicles.

For fleet operators, fuel is not a household expense. It’s one of the largest and most volatile costs on the balance sheet.

Figures from the RHA this summer should serve as a warning to the industry. Fuel prices have increased by 35% since the outbreak of the US-Iran conflict, and fewer than four in 10 operators say they are confident they can continue operating under current fuel pressures before the situation becomes unsustainable. More than eight in 10 report shrinking margins, while over half are experiencing cashflow pressures.

These are not the signs of a temporary pricing challenge. They are signs of a sector becoming increasingly exposed to forces outside its control. The problem is not simply higher costs. It is unpredictability.

For a logistics business, success depends on being able to price work confidently, protect margins and plan for growth. That becomes difficult when one of your largest operating costs can change significantly based on events happening thousands of miles away.

Every diesel price spike serves as a reminder that many operators remain exposed to risks they cannot control. That is why I believe the industry needs to rethink the conversation around fleet electrification.

The debate has moved beyond sustainability.

For years, the discussion around electrification has largely focused on environmental targets or vehicle purchase prices. Important as those issues are, they miss the bigger picture.

The question facing businesses today is not simply whether an electric vehicle costs more than a diesel equivalent. It is whether reducing dependence on volatile fuel markets can create a stronger, more resilient and ultimately more competitive business. Viewed through that lens, electrification becomes less about sustainability and more about commercial strategy.

The fleets that thrive over the next decade will be those that create greater certainty around operating costs, build resilience into their operations and position themselves for long-term growth.

That does not mean diesel disappears overnight. Nor does it mean every fleet should transition immediately.

But it does mean fleet replacement decisions should be viewed through a much broader commercial lens than they have been historically.

Why total cost of ownership matters more than upfront cost.

One of the biggest misconceptions surrounding electrification is that the business case rests solely on the upfront price of vehicles and infrastructure. In reality, the most important measure is total cost of ownership.

When operators look at the full lifecycle economics, including fuel, maintenance, servicing, infrastructure and operational efficiencies, a very different picture often emerges.

Government support is accelerating that shift with the second wave of funding from the Department for Transport’s Depot Charging Scheme set to remove one of the biggest barriers to adoption: upfront capital costs. In practice, that support can materially change the economics of electrification. Once grant funding is applied, some fleets can be as much as 18-25% cheaper than diesel over the vehicles’ lifetime.

At a time when margins remain under pressure across the logistics sector, those are not marginal savings. They can influence competitiveness, profitability and investment capacity for years to come.

Control is emerging as a competitive advantage.

What is becoming increasingly clear is that the most successful operators are no longer thinking purely about vehicles. They are thinking about energy.

Historically, fleet performance was heavily influenced by how effectively businesses managed fuel. Increasingly, the same will be true of electricity. The opportunity extends beyond replacing diesel with another energy source. Intelligent charging, demand management and greater visibility of energy consumption all create opportunities to reduce costs and improve operational efficiency.

More broadly, they provide something many operators have had very little of over the past few years: control.

In an uncertain economic environment, control has real value. Businesses that can reduce exposure to volatile markets, increase predictability and improve cost certainty are likely to be in a stronger position when competing for contracts, protecting margins and planning future investment.

Fleet replacement is now a boardroom decision

What strikes me is that many conversations around fleet replacement still focus heavily on vehicle procurement. But increasingly, these decisions are about much more than vehicles. They are about cost certainty, resilience, funding opportunities, and evolving customer expectations.

They’re also about determining how a business intends to grow over the next decade and that’s why I believe the bigger risk may no longer be electrifying too early. It may be waiting too long. Every diesel price shock reinforces the same lesson: dependence on fossil fuels comes with a cost, but it also comes with risk.

The operators that emerge strongest from the current period of uncertainty will not necessarily be those with the lowest fuel bill this quarter. They will be the ones that have taken a longer-term view of their business, their energy strategy and their competitiveness.

The conversation has moved beyond whether fleet electrification is possible. The more important question is whether businesses can afford not to give serious consideration to it.

Mike Nakrani, CEO, VEV