The company car and van market is among the best barometers of UK plc’s health – and the indicators show the feelgood factor is back. Experts lay out the smart developments that could save money, improve performance and put the foot on the economic accelerator
Company cars and vans are the backbone of British business in myriad different ways. Quite apart from getting people and products to the right place at the right time, car policies, in particular, can also ensure that the best employees are recruited, retained and motivated. But the sector itself is also extremely valuable to UK plc. According to a recent report published by Oxford Economics, the vehicle rental and leasing industry contributes £24.9bn to the British economy each year.
This figure – equivalent to the combined local economies of Edinburgh and Leicester – takes into account the operations of the industry itself, the British-made vehicles and engines it purchases, the activity of UK dealerships and its impact on the used-car market. In the process, the sector also generates around £5.2bn of tax revenue annually.
Figures from the Society of Motor Manufacturers and Traders (SMMT) show that the number of new cars registered in 2014 was at a 10-year high – and corporate customers are buying the majority of these. Last year, sales of new cars and vans to fleets and business users totalled 1,296,936 while sales to private motorists were 1,179,499.
Within the industry, the consensus is that company car and commercial vehicle fleet markets have bounced back from a tough recession. Neil Cunningham, general manager of Hertz UK and Europe, places the current situation in context: “The fleet industry – and the rental market in particular – follows macroeconomic trends. GDP was strong nationally in 2014 and consequently we’ve witnessed good growth in the fleet sector generally.
“Interestingly, at Hertz we’ve witnessed more growth in our light commercial vehicles (LCV) division than we’ve seen in cars. My view is that this is due to many companies still being reluctant to commit to the long-term ownership of assets. Accordingly, they turn to companies like us to ensure they can get the job done when they find there’s an increased need.
“Also, the recession saw a lower turnover of fleet vehicles – but this is starting to return. In other words, if companies owned their vehicles they tended to hang onto them. As a result, there’s now a shortage of LCVs, in particular, and that’s having a positive impact on the value of vans in the second-hand market. By contrast, the value of cars is generally proving more stable.”
It’s clear, then, that the economic climate is seeing UK businesses take advantage of the ‘sharing economy’ – leasing or sharing assets as required, rather than purchasing them. But experts caution that upcoming events and changes in legislation will present obstacles for companies that operate vehicles which could cost them dearly if they’re not properly prepared.
There’s broad agreement in the industry that there could be challenges ahead in 2015. The British Vehicle Rental and Leasing Association’s (BVRLA) chief executive Gerry Keaney says uncertainty surrounding the election is currently among them.
“The upcoming general election is widely expected to be even closer than 2010, with most political analysts saying it is too close to call,” explains Keaney. “This raises the prospect of another coalition being formed, which is likely to result in an extra period of political and economic uncertainty. Businesses will also be waiting anxiously to see how our next government decides to implement the required austerity packages of tax measures and spending cuts.
“On a more positive note, the launch of Highways England and a new roads watchdog and passenger champion suggests that road users will have a much greater voice within government going forward.” Keaney is referring to legislation enacted in February that turned the Highways Agency into the government-owned Highways England, tasked with delivering the £15bn road investment strategy that will result in more than 100 road schemes over the next five years.
Both Keaney and Cunningham maintain that the reduction of the administrative burden on companies operating fleets over the past year has also been a “change for the good”. Chief among these measures was the abolition of the paper tax disc, which is forecast to save British businesses millions of pounds.
Currently, one of the main sources of concern for industry professionals is whether there will be a smooth transition when the driving licence paper counterpart is finally abolished on 8 June. This legislative change was originally due to be enacted last December, but was delayed following pressure from the fleet sector. From June, the DVLA will no longer issue the paper counterpart and existing ones will lose their legal status.
However, there will be no change to the photocard part of the driving licence and companies renting and leasing vehicles will still need to check this document. From 8 June, anyone wishing to hire a vehicle will have three choices:
1. They will be able to use the new online Share My Driving Licence service. Hirers will log on using their national insurance number, driver number and postcode. They can then print their record and take it to the rental desk.
2. They can use the DVLA’s premium line telephone service.
3. From summer, organisations can use the DVLA’s Access to Driver Data (ADD) service, which is being developed for “trusted partners”. This will give real-time driver licence data through
a business-to-business interface.
The charging model for this last service is currently under consideration. Keaney adds: “The delay to these changes has given some lead-time to allow vehicle rental businesses to prepare properly
for the change.
“It’s going to require a huge communications exercise with clients, liaison with insurance companies, changes to terms and conditions of rental, and staff training – in addition to new software and communications systems development. But it has given businesses operating in the fleet sector sufficient breathing space to work through their requirements and liaise with customers on a solution that works best for them.”
According to a recent survey undertaken by Britain’s largest fleet management company, Lex Autolease, which is part of Lloyds Banking Group, 62 per cent of company car drivers say the offer of a comparable vehicle is an important consideration for any future job moves.
Lex’s Report on Company Motoring – compiled from independent surveys of more than 1,400 firms – found two-thirds of businesses believe the company car is an important employee benefit, while one in five plan to upgrade their car policies in the next two years to help retain the best employees.
Tim Porter, managing director of Lex Autolease, says: “When asked to rank the most important factors in choosing a company car, drivers put reliability at the top of their wish list, followed by fuel efficiency and safety. In contrast, the brand of car was ranked as the least important consideration. Our research proves the attractiveness of a company car to potential employees and suggests that businesses may need to review their benefits package to ensure they can
secure prized talent in an increasingly competitive employment market.”
Driven by regulation, manufacturer innovation, fiscal policy and concern for the environment, the green agenda is also now prominent in the minds of most businesses operating vehicle fleets. Seventy-nine per cent of businesses ranked the environmental impact of their fleet as an important consideration and 70 per cent say the issue has become more prominent in the last two years.
Porter adds that this is reflected in Lex Autolease’s own fleet of 280,000 vehicles. Collectively, the amount of carbon dioxide these cars and vans emit has fallen by 11 per cent over the last four years. He explained: “An increasing number of businesses have realised that implementing a green fleet policy can produce cost savings and environmental benefits. Manufacturer innovations, particularly the development of cleaner and more fuel-efficient petrol models, ensure that firms have a good choice of environmentally friendly vehicles to support their day-to-day requirements.”
Keaney also expects fleets to gradually move from diesel towards cleaner petrol vehicles. “The green agenda is continuing to influence vehicle choice, where low-CO2 models deliver benefits in kind for both employee and employer,” he adds. “The government has recently provided more of a long-term view on taxation, which has helped forward planning, and manufacturers are responding with increasingly efficient vehicles. In 2015, fleets will be reassessing their cars and vans, questioning fuel, power and particulate emissions as well as CO2.”
One of Britain’s largest rental businesses, Enterprise Rent-a-Car, witnessed annual growth in the fleet sector throughout the recession as a direct result of targeting SMEs. Adrian Bewley, its director of business rental, observes that another major trend within the fleet sector is for companies to work in partnership with their rental or leasing provider.
He explains: “Fleets are moving beyond the traditional supplier-client relationship as they realise that rental can resolve several employee travel needs. They want companies like Enterprise to analyse their travel data – and sometimes capture it – in order to understand where efficiencies may be achieved. Large businesses want a consultative business partner rather than a supplier, and this is changing the tendering process, although some would argue it needs to change more. It means working with businesses strategically to develop a transport policy that will allow them to plan how, why and when employees make trips for business – or if they even have to travel in the first place.”
Bewley adds that fleet customers are increasingly demanding greater flexibility as part of the tendering process – and they’re asking for vehicles to be fitted with telematics. This provides a company with a wide variety of real-time data that enables management to monitor, among other things, how well a vehicle is being driven and whether there are any unexplained periods of inactivity during the working day.
Bewley continues: “Trends in car sharing from the consumer space are changing how everyone perceives rental – and this is starting to influence how businesses source their vehicles. Businesses might need a car for an hour, a day or several months at a time. Similarly, customers need asset management for different increments of time and need 24/7 access. That means it’s not just about daily rental, but car sharing and longer rental programmes as well.
“In addition, a business may want to consider electric cars or may need specialist vans – and that means providers have to offer a more flexible range of services. Underpinning it all is the move towards a more rigorous, data-driven approach to business travel. Companies need to know how employees are travelling at present in order to work out how they could travel more efficiently in the future. That requires solid data to understand each company’s particular travel needs and vehicle usage – and
that’s what we’re increasingly being asked to provide.”
Prestige car manufacturer Jaguar has embarked on an ambitious new global fleet and business sales strategy to meet the requirements of company car drivers. Fundamental to this strategy is the launch of the new Jaguar XE, which offers a lower ownership cost than any of its premium rivals as well as class-leading residual values.
The manufacturer has utilised its expertise in aluminium structure engineering to ensure “exceptional” fuel consumption and emissions figures in order to make the XE the most efficient Jaguar ever produced. Indeed, some diesel XE models can achieve 75 miles per gallon and 99g/km of CO2 emissions. At the other end of the range, the supercharged 3.0-litre V6 petrol engine – fitted in the XE S – is capable of 0-60mph in just 4.9 seconds.
Jaguar Land Rover’s managing director Jeremy Hicks told Director: “The Jaguar XE is the perfect car for fleet customers because we’ve worked hard to ensure it ticks all the right boxes. Yes, it’s beautiful, sporty and luxurious, as you’d expect from a Jaguar, but it has the lowest running costs in the premium segment thanks to class-leading residual values and our new efficient Ingenium engines.
“We’re looking forward to delivering XE to customers later this year and feedback so far has been very, very positive. We’ve delivered everything we said we would, from the running costs to the looks to the driving experience. There hasn’t been a car like this in the fleet market for a long time.”
When it comes to cutting-edge technology, the XE – which is priced from £26,995 – also has some of the most advanced driver assistance systems currently available. All Surface Progress Control (ASPC) – developed through decades of Jaguar Land Rover experience in off-road traction systems – can electronically gain traction in seconds, and is ideal for use on low-grip surfaces, such
as snow-covered roads.
A forward-facing stereo camera is mounted behind the front windscreen to give the XE driver a 3D view of the road ahead. This data is used for functions including the autonomous emergency braking and a lane departure warning system.
Trend to watch: ULEVs
Despite years of scepticism, sales of plug-in vehicles are finally on the charge
Registrations for ultra-low-emission vehicles (ULEVs) quadrupled last year as more businesses got to grips with their benefits. According to the SMMT, sales of plug-in cars and vans increased four-fold from 3,586 in 2013 to 14,498 in 2014, with both companies and private motorists keen to cut costs and carbon emissions.
The acceleration in popularity is also matched by the growing number of ULEV models on the market. Some 25 car and seven van models are now eligible for the government’s plug-in grant scheme, and major manufacturers are expected to bring a further 40 to market over the next three years.
Mike Hawes, SMMT chief executive, says: “2014 was particularly strong for alternatively fuelled vehicles as increased choice, coupled with a desire for reduced costs and greater efficiency, resulted in a quadrupling of plug-in car registrations. With a variety of new models expected in 2015, this market will continue to grow significantly.”
To take account of rapidly developing technology – and the growing range of ULEVs on the market – the government is updating the criteria for the plug-in grant for cars and vans. From April 2015, eligible ULEVs must meet criteria in one of the following categories depending on emission levels and zero-emission-capable mileage:
Category 1 CO2 emissions of less than 50g/km and a zero emission range of at least 70 miles
Category 2 CO2 emissions of less than 50g/km and a zero emission range between 10 and 69 miles
Category 3 CO2 emissions of 50-75g/km and a zero emission range of at least 20 miles
Vehicles in all categories will still be eligible for the full grant of up to £5,000 until 50,000 grants have been issued. More than 25,000 plug-in car and van grant claims have been awarded since the scheme began in 2010.
The BVRLA’s Gerry Keaney concludes: “The arrival of attractive new pure electric and plug-in hybrid models from BMW, Audi, Volkswagen and a number of other leading manufacturers has provided a major stimulus
to the ultra-low-emission vehicle market over the past year. Despite the recent fall in oil prices, we feel that this figure is likely to accelerate again as more new plug-in electric models are launched and businesses and consumers learn about their practicality and cost-effectiveness for many applications.”
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