How will the next decade of motoring shape up? Director talks to experts about cost, design, greener vehicles and the 10 trends to watch

1. A tighter rein on fuel costs

Car manufacturers like to think people buy their products based on design and engineering. In truth, fleet managers – and private buyers – are focused on cost. Toby Poston, communications manager at the British Vehicle Rental and Leasing Association (BVRLA), explains: "Since the recession the priority in fleet has been reducing cost. That means cutting fuel usage. This plays into the desire to reduce emissions as more efficient engines use less fuel and are cheaper to run."

Gary Whittam, European sales and marketing director at Azure Dynamics, the electric powertrain specialist behind Ford's new Transit Connect Electric, above, says fleet managers have the same motivations as manufacturers. "The ambition is always to get weight and cost out and get performance and profit up."

A key selling point for the Transit Connect Electric is lower running costs. "Not all customers are environmentally aware," says Whittam. "Plenty have seen fossil-fuel costs rise and when they look ahead they see them rising further. For a typical diesel van running costs are 70 per cent of the total, while for electric it is closer to 12 per cent."

2. The route to cleaner cars

Fleet managers are also under pressure to cut emissions. Poston says taxation – especially company car tax – is a factor. "Government policy means most taxes related to driving, from benefits-in-kind tax to vehicle excise duty, are CO2-related. Average emissions have fallen dramatically, driven by fleet buyers," he says.

Where fleet managers used to offer choice based on price, now most fleets band cars by emissions. "There is often nothing allowed over 160g/km or 120g/km," says Poston. "This is less of a challenge because prestige brands, such as Audi and BMW, have been reducing emissions." He cites the new BMW 520 as a desirable car with emissions under 120g/km. Manufacturers are, adds Poston, launching fleet-friendly models within these limits.

Kevin Griffin, director of fleet operations at Ford of Britain, says engines will continue to become cleaner. He points to the next generation of Ford engines called EcoBoost. "These combine variable valve timing with turbocharging so that from a single unit you can produce different combinations of power and emissions," he says. The same engine might produce 240bhp in a Mondeo but be used in a smaller car with the power reduced to 120bhp, offering better fuel economy and fewer emissions.

Damian Lawton, product marketing director at Jaguar UK, agrees. "The market and legislation will ensure more efficient engines," he says. "Better power-to-size ratios will be coupled with reduced emissions. Responsible manufacturers will be more efficient and reduce impact." He cites Jaguar's new XF 2.2 diesel as an example. "With a 2.2-litre, four-cylinder engine, it combines performance and refinement with fuel economy of 50mpg and emissions of 149g/km. And it can travel over 800 miles on a single tank."

3. Electric dream a step closer

A key change for fleets is the arrival of electric vehicles. Whittam says the industry needs a shake-up. "It is surrounded by myths, lies and legends," he claims.

Griffin says electric will meet specific needs only. "It doesn't deliver what the fleet manager requires or what the average consumer needs. Until electric powertrains can replace fossil fuels and give customers everything, it will remain a niche."

Sales figures support his view. Out of more than two million cars registered in 2010, fewer than 200 were electric, while 20,000 were hybrids. Doubts over range, charging times and the speed at which infrastructure will be put in place remain. Even Whittam admits it will take time to perfect. "One myth is that car batteries are the same as mobile-phone batteries and smaller, lighter ones will be here any day. They won't. It takes years to test batteries for an electric car."

Electro-sceptics question how clean the electricity is that's powering the cars. "Once you plug the car into a power station, what emissions is it really using? If it is powered by fossil fuels what good is it?" asks Griffin.

But G24 Innovations has a solution. The Cardiff-based manufacturer of solar panels wanted renewable energy to power its business. So it installed a wind turbine and is confident the electricity it uses to power the Peugeot iOn is green. G24 founder Bob Hertzberg explains: "This is the realisation of our 'green from green' dream. Renewable energy will be used to manufacture renewable energy products."

Griffin doubts the economic feasibility of a model based on subsidies. "If everyone switched to electric tomorrow, what would the taxation of electric vehicles be? The government won't allow the revenue from car tax to disappear."

Despite a government offer of £5,000 towards the cost of an electric car, take-up has been low. With £43m available, only 650 customers had signed up by last month. Which is why the BVRLA wants the scheme extended to commercial vehicles.

But what happens at the end of the vehicle's life? Poston explains: "While there is excitement about plug-in hybrids and range-extended electric vehicles, there are questions about residual values. There is no precedent and it's compounded because of the continuing advances in technology."

Al Clarke, a respected motor industry troubleshooter, says manufacturers become too focused on engineering. "Customers don't care as much as carmakers about technology," he points out. "It becomes an engineering fest, comparing different hybrids. It needs to be consumer-led. What customers want to know is how much will it cost, does it look like a dog's breakfast and what does it say about me?"

4. It's all about technology

No one can define how tomorrow's fleet might look. This is because competing technologies are developing and fleet managers will buy a range. Whittam explains that in the past, fleet managers tended to buy one technology – petrol or diesel – in a variety of sizes. "Early adopters are now asking which vehicles within their fleet can be converted to alternative fuels," he says. "Vehicles with a precise daily operating range could be replaced with electric vans. Managers are under pressure to find the best technology to answer environmental and cost challenges."

Whittam says the solution is partly electric. "About 30 per cent of the fleet will be electric, with 50 per cent being a hybrid with an efficient diesel or petrol engine. The rest will be filled by technologies we haven't thought of and things such as hydrogen fuel cells and biofuels."

Griffin points again to the improvements in petrol and diesel technology, with smaller engines able to produce more power with fewer emissions. "All engines will get smaller, lighter and be able to deliver more power. No one has the golden key that says this is the one technology that has all the answers."

5. Rise of the lifestyle brand

Fleet managers face tough choices, but so too do drivers. First, there are more models and variants available. Audi, for example, has a strategy to offer 42 different models by 2015. Jaguar's Lawton says the market is fragmenting. "Traditional market sectors are diversifying into sub-sectors to appeal to specific audiences," he says.

And within each model there are more options than ever. Clarke believes this is part of a wider trend. "Where cars used to be differentiated by technology, now it's about branding and design," he says. "A lot of cars share underpinnings. But who cares if this is technically the same car as that? You no longer differentiate on reliability or technology. It's about design and lifestyle brands."

This explains the involvement of fashion houses and celebrities in car marketing. Victoria Beckham has been involved in the Range Rover's new "yummy mummy carrier" the Evoque, while Fiat has enlisted fashion houses such as Gucci to produce limited editions of its 500. "Special editions have traditionally been run-outs at the end of a vehicle's life," says Clarke. "You'd add mats, flaps and a paint job, and give it a name. But no one is fooled today. Now it is associating the car brand with something else in the consumers' portfolio to encourage people to buy."

6. Road to a safer fleet

Several large carmakers including Volvo, Mercedes and Honda – as well as search firm Google – are testing automated cars. Google's test car did 140,000 driverless miles last year. The cars use radars, cameras and laser range finders to help see other cars and predict behaviour.

Clarke says technology is not the only barrier. "They have to overcome the cultural factor that people enjoy driving and don't fully trust the technology."

It's likely that all cars will soon be programmed to ignore the driver and auto-adjust speed, steering and brakes to avoid collisions. Likewise, cars will offer parking assistance, lane assist to prevent pulling out in front of others and camera- and radar-controlled crash prevention. Fleet managers have to decide which safety extras are worth it. Will they reduce damage and downtime, and potentially prevent loss of life?

Alongside cameras and radars is a raft of other technology that drivers take for granted such as ABS, ESP and traction control. "These technologies should reduce insurance costs and cut the cost of driving and make everyone safer," says Griffin.

7. That's entertainment

So what will we do if we're not driving? The trend for in-car entertainment suggests we'll be doing whatever we do at home or work. Cars already act as WiFi hotspots, allowing drivers access to the internet. Integration with mobile phones and MP3 players is being superseded by integration with laptops and the cloud.

Audi offers WiFi internet access on some premium models, while Ford is introducing Sync to the Focus. Griffin is keen to point to the benefits for fleet managers. "The Sync system will mean your Focus will act just as your PC would. It will be

voice-controlled and essentially you'll plug in your 3G card and run all your devices through the vehicle with full laptop and internet capability," he says.

But Clarke warns fleet buyers to look for a clear business case. "Technology has to be an enabler. In the private market you now expect the car to have Bluetooth and to be able to plug in your iPhone or iPod. In the commercial market there has to be a benefit. It can't just be a nice thing to have."

Clearly the interface between driver and car is changing. Cars now provide drivers with more information and advice. Heads-up driver displays show speed, the speed limit and sat-nav directions in the windscreen. Meanwhile, tablet and phone apps allow owners to interact with their car. Owners of a Nissan Leaf, for example, can charge the car or set the climate control remotely.

8. Turning point for telematics

The Nissan Leaf also monitors how environmentally friendly your driving is and it can communicate with the factory in Japan to report faults. Fleet managers are also using this sort of "hands-on remote" approach to control costs and emissions by monitoring how vehicles are driven.

Gordon Lyster, publisher of MotorTradeNews.com, says this area – known as telematics – is a big shift for fleet managers. "Manufacturers and fleet operators are increasingly sophisticated in using telecommunications. Leasing companies use telematics to track assets, and haulage firms use live tracking and traffic data to cut fuel bills."

Clarke adds: "Tracking vehicles and monitoring driving and journey times gives operators vital data. It allows them to think about security and protection. Security of commercial vehicles is a big issue. While there is a sense of Big Brother to overcome, being able to keep an eye on a vehicle – particularly one with a valuable load – is a powerful competitive advantage."

9. Collaboration and disruption

Cars and vans are more complex than ever. "Cars and commercial vehicles have changed from mechanical devices to electro-mechanical," Griffin says. Key differences are in the electrical rather than the mechanical. Hence one of Ford's most important global partners is Microsoft, which also developed Fiat's Blue&Me platform, allowing Fiat owners hands-free access to the phone, music player, and sat-nav. And it collects basic telematic data, which can be downloaded to a USB and read on a computer.

Ash Gupta, managing partner at The Gupta Partnership, is a keen observer of disruptive technologies. He says it is inevitable that a big tech firm will launch a car. "Google has one of the largest collections of electric vehicles in the world. And it is experimenting with new models. It won't be long before we see the Google car, or the Apple iCar," he predicts.

But Griffin isn't worried. "We collaborate with technology firms, the same way we do with other manufacturers," he says. High entry costs, small margins and economies of scale mean Griffin doubts the threat from western tech firms.

"If it was an industry that was very profitable and didn't need much capital, I could see more entrants. But it isn't an attractive industry." He feels the threat lies to the East. "The unknown entrants will be from Asian emerging markets," he says. "Their decisions will be based on wealth. Do they want to take the technology and build their own brands and plants or will they acquire and invest in existing brands?"

10. Patterns of ownership

As cars are changing, so how we use and view them is also different. "Even 10 years ago I wouldn't consider anything other than purchasing my car," says Clarke. "Now I see the appeal of a fixed monthly fee without any worry. Cars are becoming commodities and are judged on price."

Commoditisation means people seeking pay-as-you-go transport. It is already happening, with schemes such as Streetcar and Streetvan offering pay-by-the-hour rentals. Poston reckons that some patterns are hard to break. "Contract hire remains the most popular method, with about 1.5 million cars on those schemes," he says.

One shift has been the rise of salary sacrifice schemes, where employers allow staff to benefit from the purchasing power of companies to secure discounts on new cars. The contract is between employee and carmaker, with some schemes allowing employees to pay a fixed monthly fee for motoring, as if they had a company car.

Car of the future... today

BMW has announced its first foray into the electric car market. And its two offerings – a small city runaround called the i3 and a bigger, sportier plug-in hybrid, the i8 – encapsulate most current trends in the market.

Cheekily billed as the "first premium electric car", the i3 features a bank of lithium-ion batteries, the weight of which is offset by an abundance of carbon fibre. The four-seater family hatchback includes several family-friendly design features, including a spacious interior (dubbed the "Life Concept" by BMW) and an opening rear window that makes the boot more accessible. The interior is designed using renewable natural fibres to ram home the sustainability message.

The i8 is a powerful, sports-focused hybrid that hits 60mph in just 4.6 seconds, but which is claimed to return 94mpg, due to an ultra-efficient petrol engine.

Both cars include lots of clever passenger entertainment technology, including advanced smartphone connectivity that allows users to download music and apps.

The cars also include advanced safety technology that can detect pedestrians in the road and brake automatically, as well as an advanced cruise control system that takes over steering and acceleration. BMW has also created i Ventures, a company that will collaborate and invest in firms such as parking providers,

car-sharing schemes and other broader transport planners to encourage efficient and sustainable use of the car.

What the experts say

Stefan Sielaff, Head of design, Audi AG

Car design is facing new challenges. Alternative drive systems are gaining in importance. Electric powertrains offer new design opportunities because some components are not required. New concept cars demonstrate this. Designers are keen to reduce complexity. What information do drivers and passengers want to receive and when? Intelligence, sustainability and networking will define the concept of premium in the future.

Ash Gupta, Managing partner, The Gupta Partnership

Electric vehicles make sense for urban driving or predictable routes. With the infrastructure in place, change will accelerate. We will start to see new approaches to the way cities are supplied. Goods will be shipped to the outskirts of conurbations and the goods loaded onto electric vehicles to deliver quietly and cheaply at night. And it won't be long before an Apple or a Google launches a car that disrupts the market completely.

Gary Whittam, European sales and marketing director, Azure Dynamics

Electric vehicles will take off when the conditions are right. Diesel took off when manufacturers produced engines that weren't agricultural, when petrol companies moved pumps to where other pumps were and when government incentivised it. The same things are happening for electric vehicles. Manufacturers are producing desirable vehicles, the infrastructure is starting to be put in place and governments are offering subsidies.

Damian Lawton, Product marketing director, Jaguar UK

The car market is diversifying with greater choice of models and vehicles. This diversity will bring complexity for fleet managers, particularly in terms of body style and drivetrain choices. Manufacturers will develop vehicles for more selective consumers. Whether it's design, functionality, or economy, this will be combined with zero-emission drivetrains and state-of-the-art technology to deliver innovative products.