The impact of recent legislation and technology on companies operating vehicle fleets

The wing mirror of a fleet car

Fleet vehicle operators will increasingly look to embrace tech and seek outside help to manage the cost implications of changing legislation, say experts. Here they explain the changing world of business driving

Business leaders whose companies operate fleets of vehicles face three major concerns over the next year: controlling costs, reducing carbon emissions and ensuring driver safety. That’s the verdict of industry experts reacting to recent changes to the law and technology as well as the appetite of businesses to control potentially growth-inhibiting costs.

Many large companies, for example, found themselves reporting their transport emissions for the first time in December 2015 to ensure compliance with the government’s new Energy Savings Opportunity Scheme (ESOS). This is a mandatory energy assessment for businesses in Britain that employ more than 250 staff or have an annual turnover in excess of €50m (£39m).

It was established to ensure that companies meet the requirements of the EU Energy Efficiency Directive 2012 by actively identifying – and acting on – cost-effective energy-saving measures. It’s widely anticipated that this new scheme will result in large businesses being more aware of their carbon emissions, and consequently any fuel-guzzling vehicles, than has previously been the case.

Gerry Keaney is chief executive of the British Vehicle Rental and Leasing Association (BVRLA), which represents the interests of the UK’s £25bn fleet sector. He believes that large companies will seek to cut costs and carbon emissions in 2016 by engaging fleet management companies to work on their behalf as ‘corporate mobility managers’. “The increasing prevalence of technology, connected vehicles and data is creating opportunities for vehicle rental and leasing companies to provide a range of new mobility services for companies with fleets,” he tells Director.

“We are just at the beginning of this journey. These companies are already delivering a range of innovations including flexible vehicle rental, corporate car sharing and fleet management apps and telematics. As technology and customer acceptance continues to develop, these services will evolve to include alternative modes of transport. Fleet management companies will move from managing fleets to being able to manage nearly every aspect of corporate mobility.”

Outsourcing trend

David Rowlands, general manager of Hertz UK, echoes Keaney’s comments, adding that the company is now regularly asked to help large businesses adopt ‘transportation programmes’. “These are intended to allow companies to improve efficiencies, avoiding both the risk of breaching employer duty-of-care obligations and the issue of controlling grey mileage claims [from staff who drive their own vehicles for work purposes; see box, right],” he explains. “We achieve this by offering short and medium-term rental packages in addition to providing car clubs and pool fleets, which represent efficient and sustainable alternatives when a longer-term solution is required.”

Rowlands highlights the recently launched Hertz 24/7 programme as an example of the way his business is enabling large companies to implement best practice across their fleet. “We supply and maintain modern, low-emissions and technology-enabled vehicles, while deploying a robust registration and booking process and fully comprehensive fleet management,” he explains. “The system helps companies have real-time online visibility of their fleet’s status and performance and allows employees to book the vehicles themselves online or by using the app, which dramatically simplifies and improves the procedure, saving costs.

“Pool fleets’ users access the vehicles by entering a code in the on-car PinPads or by swiping a keyfob or card over the reader, and a keyless entry system allows employees to access the entire fleet, eliminating the lost key issues. Car clubs and pool fleets have been proven to drive significant improvements in utilisation, as vehicle usage reports help companies keep track of costs and adjust the size of their fleet in line with their real needs. The benefits embodied in these schemes are increasingly attracting companies seeking to move away from company cars and leasing into mobility solutions that represent a more cost-effective and environmentally friendly alternative.”
Headlights on a road to represent fleet vehicles

Impact of law changes on fleet operations

Meanwhile, the increased use of ultra-low emission vehicles (ULEVs) has been identified as a major way for Britain to meet its stringent emissions targets. Accordingly, the government has implemented a number of initiatives to incentivise uptake, including the benefit-in-kind (BIK) tax regime. But in 2015, the government announced the original incarnation of its plug-in grant – worth up to £5,000 off a vehicle’s list price – would be reduced.

As of last month, vehicles with a zero-emission range of more than 70 miles are benefiting from a grant of £4,500, while those with a shorter range — such as plug-in hybrid electric vehicles (PHEVs) with a petrol or diesel engine — have received £2,500. But industry professionals do not believe these changes will impact on the increasing number of ULEVs being incorporated into fleets in the short term.

Chris Chandler, principal consultant at Lex Autolease, explains: “The plug-in grant was intended to be a mechanism to encourage take-up of these vehicles, and it has always been the case that it would reduce over time. It is right that the level of grant is reduced as plug-ins start to stand on their own financial merit. While some plug-in vehicles will be affected more than others – namely PHEVs – the gradual phasing out of the grants as the technology becomes more mainstream
is the preferred option rather than a sudden death removal.”

Another significant development for large companies operating fleets arose in November when the chancellor announced his spending review and autumn statement. He stated that the government intended to defer the removal of the three per cent diesel supplement on BIK tax bands. Due to be removed later this year, this will now not be lifted until 2021 – a move expected to earn the Treasury an extra £1.4bn from British companies and company car drivers during the current parliament.

Speaking at the time, George Osborne said the deferral was because the introduction of more rigorous EU emissions tests was “slower than had been expected”. But the decision has been perceived by some analysts as penalising company car drivers for decisions made before the statement. The move is also likely to prompt some companies to reassess which vehicles they encourage employees to drive.

Keaney says: “Since George Osborne became chancellor in 2010, company car drivers have been hit by a series of tax increases that are both unfair and unsignposted. It is no coincidence we have seen 30,000 fewer employees taking a company car during this period. We’ve worked out that the effect of the two per cent increase in company car tax from 2017-18 and the delay in removing the three per cent diesel supplement will cost the average company car driver an additional £626.94 in 2017-18, and an extra £882.26 in 2018-19 compared to what they paid in 2013-14.”

Safety considerations

Of course, ensuring employee safety behind the wheel remains of primary concern to companies mindful of obligations under the Corporate Manslaughter and Corporate Homicide Act 2007. In recent years, increasing availability of advanced driver assistance systems (ADAS) is thought to have helped reduce road traffic accidents. These systems may, among other safety features, automate lighting and braking, provide adaptive cruise control or keep the driver in the correct lane.

Chandler says: “There is a definite progression in how such technology is viewed – from being initially launched on high-end vehicles as a desirable add-on to becoming more mainstream and then made compulsory, either by businesses for their fleets or by legislation, as their positive safety effects become known. As an example, some fleets are making technology such as automatic braking systems standard on their vehicles where possible, whereas this had been a ‘nice to have’. We envisage that appetite for ADAS will follow the same path, though we’ve not seen this in practice yet.”

Indeed, the BVRLA’s Keaney hopes that the government will “take a lead” on ADAS in the months to come. “In particular, we want to see the government mandate the use of autonomous emergency braking (AEB) on public sector fleets, and promote wider uptake through the use of tax and other incentives,” he explains. “A progressive tax regime has helped the fleet sector achieve huge cuts in CO2 emissions. With the right support it could deliver similar reductions in the number of people killed or injured in road accidents.”

Whether it’s emissions or driver safety, business owners will need to be fleet-footed in the year ahead to ensure they comply with the law while ensuring rising costs don’t have an impact on wider business strategy.

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About author

Ben Rooth

Ben Rooth

Ben Rooth is an award-winning freelance business journalist who has interviewed everyone from Prime Ministers to the chief executives of FTSE 100 listed companies. Over the past 20 years, he’s filed stories from destinations as diverse as Kabul, in Afghanistan, and Palm Springs, in America.

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