The current turbulence and uncertainty in the fleet market surrounding WLTP and the outlawing of fossil fuel and hybrid vehicles in just 12-15 years’ time makes this an ideal time for companies to review their fleet policies for the better. So says Fleet Logistics UK and Ireland.
The Birmingham-based fleet management specialist says companies now have an ideal opportunity to review their fleet policies and supply chains, and to engage and consult with driver populations to deliver robust strategies for the future.
In recent weeks, various issues have arisen to further muddy the already murky UK fleet landscape. The Government announced that from 2035 – possibly now 2032 – hybrids will be banned along with petrol and diesels cars, meaning only new electric and alternative fueled vehicles will be available for sale from that date.
The new vehicle emissions test, Worldwide Harmonised Light Vehicle Test Procedure (WLTP), is continuing to cause problems with many leasing companies only having around 70-80% of the required data from vehicle manufacturers, for a regime that takes effect from April. This is information vital to fleets as they review CO2 limits and budgets in the wake of emission hikes and mpg changes – elements that impact heavily on the Total Cost of Ownership (TCO).
At the same time, the latest Benefit in Kind (BIK) tax rules, which should come into force in April, heavily favor all-electric cars with zero rates of tax in year one for those with zero carbon emissions.
Meanwhile, the introduction of Clean Air Zones in several cities has seen the banning of certain types of vehicles from entering city centers, especially older diesels, which could result in cost increases for some fleets.center
So, companies face a tricky dilemma in developing a fleet strategy that cuts CO2 emissions, generates cost savings, optimizes efficiency and engages with drivers, but still provides sustainability for the future.
Sue Branston, Country Head for Fleet Logistics UK and Ireland, said that there were a number of strategies that companies could put in place.
“These should include reviewing your choice of vehicle manufacturer to optimize your purchasing power, whilst appreciating that negotiating for a larger number of vehicles with fewer badges may allow you to negotiate additional volume discounts. However, you may also need to review whether fewer manufacturers can meet your future needs in terms of powertrain capabilities, particularly with regard to electric vehicles and, for the time being, hybrids.
“Any decision should always be based on the TCO of the fleet, rather than front-end prices, as a sensible starting point,” she said.
Branston said that fleets may also want to take this opportunity to review their preferred acquisition methods and approaches to funding in the light of the many alternatives available. “Consideration should definitely be given to adopting a multi-bidding platform to introduce a competitive environment between different leasing companies. This is proven to consistently achieve the most efficient lease rentals on an on-going basis,” she said.
Branston went on: “As it is now certain that all our futures will be dominated by electric powertrains, stakeholders really need to ask themselves how and when their business will facilitate the change.
“With the launch of many new electric and hybrid vehicles in the UK market over the next two years, improved battery technology and range are a given, as vehicle manufacturers strive to meet the next round of emissions targets and beyond. A wider choice of affordable electric options with sufficient ranges and a reliable network of fast chargers will be essential for drivers if businesses are going to continue to function properly. Alongside this, parity of TCO costs with fossil fuel models is already there in many cases – and will improve if subsidized by the vehicle manufacturers and the Government,” she said.
With all these changes in the pipeline, should fleet operators consider adjusting the contract terms and lifecycles of their company vehicles now?
Branston said: “The lifecycle of the vehicle is a key element in any TCO calculation and is typically fixed by the fleet policy. Changing this can be a fast and painless way to cut fleet costs or provide flexibility while vehicle technology develops or the tax picture becomes clearer post April 2023.“
Reviewing fuel spend and mileages should be a key focus due to the potential savings involved. While the industry waits for WLTP information to emerge, it provides time to focus on each element of the supply chain and the costs.
This is also the right time to review smaller spend items such as license checking, driver training solutions, mileage capture and storage and movement providers.
“Now is the ideal opportunity for fleets to review policy so they are robust for the future – matching driver profiles to correct powertrains and not ruling out RDE2-compliant diesels for high mileage drivers and job need drivers where necessary. This way more drivers may be attracted out of their own vehicles and the cash option and back into company cars which are easier to manage from a duty of care, image and corporate social responsibility point of view,” she said.