15 predictions for 2020 for fleets
Natalie Middleton asks some of the UK’s major fleet suppliers for their outlook on the coming 12 months.
According to chairman Caroline Sandall, the challenging times for fleets seen in recent years will continue in 2020.
This includes in EV take-up as manufacturer supply constraints could be further hampered by border issues as a result of Brexit.
She adds: “There is no doubt that EV technology is viable across many fleet operations and, with fantastic products available and whole-life costs at a tipping point in relation to petrol and diesel models, a real shift in fleet attitudes and strategy is emerging.
“ACFO is aware of the implementation of hugely innovative and creation solutions as fleet decision-makers embrace central and local Government’s demands for corporates to pursue clean air strategies.
“Meanwhile, although electric vehicles can find a ‘home’ in many fleet operations there is no doubt that there continues to be a place for petrol and diesel models.
“The idea that one type of powertrain across a fleet is fast becoming history and that premise is equally applicable to any suggestion that a one-size fits all vehicle funding solution is right.
“In both cases we will see an increasing switch by fleet decision-makers to blended solutions in terms of both powertrains – zero-emission, plug-in hybrid, hybrid, petrol and diesel – and funding; company car, salary sacrifice, cash allowances and the like.
“What that all means in practice is greater flexibility for both corporates and drivers with individual choice to the fore.
“We will, hopefully, end 2020 in a more stable place. But in the short term we can justifiably say that next year will be a year of change and, depending how Brexit plays out, fleet decision-making will be further influenced by potentially volatile pricing as the value of sterling fluctuates.
“Finally, in recent years, ACFO has talked much about the coming force of Mobility-as-a-Service. It will arrive – but with so many other challenges to be tackled in the next 12 months it is perhaps sometime before fleet chiefs are ready to embrace fully integrated travel solutions.”
Paul Hollick, chairman, ICFM, says actions to tackle the ‘climate emergency’ will dominate the political landscape in 2020 and, in turn, that will further focus employers’ minds on ‘greening’ their fleet operations.
“The ill-informed will continue to demonise diesel, despite the fact that today’s generation of RDE 2/Euro 6 emissions generation of engines are, as the Society of Motor Manufacturers and Traders says, ‘the cleanest in history – and light years away from their older counterparts’.
“The attacks on diesel – such as Bristol City Council’s plan to ban all diesel vehicles from April 2020 along with increased parking charges by some local authorities for so-called ‘dirty diesels’ when compared those for other powertrains – will increase.
“It is therefore essential that the fleet and wider motor industry continues to lobby central and local government politicians and highlight the advantages of today’s diesel technology over that of yesteryear because diesel cars and commercial vehicles remain operationally vital for many businesses and drivers.
“2020 will be beset by towns and cities across the UK drawing up and eventually implementing Clean Air Zones. But the lack of uniformity in terms of vehicle entry criteria, hours of operation and charges delivers another compliance headache for fleet decision-makers already battling against a tidal wave of administration.
“Central Government must get a grip and use the next 12 months to deliver uniformity as local authorities present their plans to the Department for Environment, Food and Rural Affairs for approval.
“Finally, but remaining on the environment theme, my hope is that there will be more reasons – and benefits – for fleets to increasingly introduce electric vehicles to their operations.
“However, while I believe that we are at a plug-in vehicle tipping point, for demand to increase there needs to be major improvements to the robustness of the electric highway and more models available with lead times significantly reduced from where they are now.”
Managing director Ian Hill says the motor industry will continue to grapple with the forces of change being imposed by environmental pressures, in particular manufacturers’ drive to develop low- and zero- emission vehicles.
“The greatest demand for battery electric vehicles and ultra-low emission vehicles will come from company car users,” he explains, “as the new, lower company car Benefit-in-Kind tax charge regime kicks in after April, but availability will curtail registrations to a fair degree. And, as and when take-up of them does begin to gain serious traction, it can be assumed that a reduction in the level of Government Plug-in Grant will not be far behind!
“The latest internal combustion engine-powered vehicles are massively cleaner than those of earlier generations and they will continue to account for the majority of new car registrations, but the creeping imposition of Clean Air Zones and Ultra-Low Emission Zones – as well as outright diesel bans à la Bristol City Council’s recent decision – will gradually influence the migration towards cleaner models.
“However, electric mileage ranges and the availability and standardisation of electric charge points will need to improve dramatically before ‘Joe Public’ will have the confidence to completely abandon the fuel pumps.”
Goodwood Corporate Mobility
Tony Donnelly, chief executive, Goodwood Corporate Mobility, says Brexit-induced Government dithering over the past three years has contributed enormously to the high level of business uncertainty seen every day during our working life.
And based on its activity in 2019 in its industry the firm predicts a very different approach to the way businesses get their people and services to their markets over the next five years.
- Businesses committing to long-term leasing contracts becoming history, with hire/rent vehicles when required and the returning of them when not needed becoming the norm. However, this requires a competent and capable supply chain.
- The continued diminishing of company car demand as individual employees prefer their employers’ integrated benefits package to give them free choice over mobility
- The switch away from car ownership to usership being further incentivised by a desire across the population to escape seemingly ever-increasing traffic congestion and crowded roads
- An increasing awareness of the benefit of electric vehicles will rapidly increase demand, underpinned by ‘attractive’ company car benefit-in-kind tax rates, but issues around the charging infrastructure must be overcome. However, once vehicle supply matches demand – and plug-in models are priced sensibly – there will be only one method of business car powertrain provision inside three years.
However, diesel powertrains will, for the foreseeable future – at least five years – continue to dominate the goods vehicle market, due to their efficiency and economy.
2020 will see a huge surge in demand for electric company cars that will bring some shifts in the market, says Ian Johnston, CEO of Engenie, driven by the reduction in the Benefit-in-Kind tax to 0%.
“Over 50% of all UK new car registrations are company cars, so the surge in demand in this market will have a meaningful knock on effect on the overall numbers of EVs on the roads,” he explains. “The shift to corporate drivers choosing EVs will also kickstart a second-hand market for ex-lease EVs when they return to dealers after the 2-3 year term, providing retail consumers with the ability to choose from a national stock of affordable and available second hand EVs.
“The user experience of EV charging will also be brought into the spotlight in 2020. The Government has called for all new public EV chargers to provide debit/credit card payment by Spring 2020 in a push to make EV charging easier and eliminate ‘experience anxiety’. Tap-and-go payment will become the experience expected by mass-market drivers for whom public charging will be new. Networks unable to offer a seamless and reliable end-to-end customer experience will lose the faith of the mass market customer quickly and may not be able to recover their market reputation.”
Kevin Pugh, country manager at rapid charge device specialist Tritium, says 2020 will see rapid advances in EV charging infrastructure while fleets will lead the way on EV uptake.
Research indicates that 88% of the UK’s largest fleets expect to order an electric car within the next 12 months, and as more of the mid-priced electric vehicles with 200-mile plus range batteries become available, and as operators look at a vehicle refresh, Tritium believes the EV fleet will really take off in 2020.
Infrastructure developments will see more and more chargers placed beyond the forecourt, with many 50kW DC rapid chargers installed at places such as pubs, restaurants and within the community. For fleets, this will become particularly relevant to their operations as the availability of rapid charging on the road will ensure ‘range anxiety’ for fleet owners and drivers is less of an issue.
High-power charging will also hit the highways of Britain with the emergence of 100+kW DC charging while in 2020.
Andy Fern, fleet sales director, Kwik Fit, agrees that the journey towards fleet electrification will continue in 2020, but says pressures could a trigger a spike in employees opting out of company cars in favour of a model funded via Personal Contract Hire (PCH).
He explains: “As a result, 2020 could be the year when the traditional days of distinctly separate fleet and retail vehicle funding routes further blur with employees opting out of company cars, choosing to take a cash allowance from their employer and taking delivery of a PCH-funded car to match their lifestyle.
“Company car drivers will have a tough choice to make if they are due to have vehicle replaced in 2020.
“In two or three years’ time the electric vehicle market will be much more established with plentiful model choice and factories able to more easily match production with demand enabling the company car migration from petrol or diesel to electric to be easily achieved. Until then the transition has a number of bumps in the road that require careful consideration as to how they will be navigated.”
Fern also warns that ‘getting Brexit done’ brings uncertainties in terms of the potential volatility of sterling versus other currencies.
“Presently, sterling is reasonably strong and that signifies currency market optimism that ‘all will be OK’. But if that outlook changes and sterling goes into freefall against, for example, the dollar and the euro, wholesale and retail goods’ prices could increase alarmingly. Such risks will have to be factored into corporate decision-making.”
Meridian Vehicle Solutions
With the fleet sector facing uncertainty over everything from future EV taxation to Brexit and the general economy, Phil Jerome, managing director, agrees operators are likely to be looking into new ways of providing vehicle solutions.
He explains: “What we are seeing is fleet managers looking to maintain a high degree of flexibility against an economic backdrop that is hard to predict. That means medium term rental is continuing to be used for the reasons you would expect – for short term contracts and to cover probationary periods for new employees – but also to simply delay the decision to sign a longer term lease until the overall picture is clearer.
“This is something we expect to continue in 2020. It is a cost-effective and sensible move.”
Nick Hardy, sales and marketing director, Ogilvie Fleet, says 2020 must be the year that barriers to plug-in vehicle adoption are finally removed.
“Company car Benefit-in-Kind tax and the Worldwide harmonised Light vehicles Test Procedure (WLTP) will continue to impact on fleet operations and thus remain an area of careful attention for all fleet decision-makers and drivers.
“The impact of fiscal rules – notably company car drivers seeking to reduce their benefit-in-kind tax exposure – and WLTP on company car whole life cost decision-making will remain a key focus for contract hire and leasing companies as they work ever-more closely with customers to help them embrace new ways of working in 2020 and beyond.”
Peter Golding, managing director, FleetCheck, says it’s difficult to remember a time when there has been so much change afoot in fleet; from a macroeconomic picture in flux through to wider availability of EVs.
He continues: “For that reason, we expect much of 2020 to be about keeping fleets informed about emerging trends, helping them make sensible and effective decisions by providing not just the right technology but the right information, training and consultancy at the right time.”
He adds: “Businesses in 2020 are going to be facing some difficult decisions about their transportation needs and the fleet sector needs to be there to support them.”
The cost of motor insurance may go up in 2020 if we leave the EU without a deal post-Brexit, warns Terry Hiles, general manager of Derby-based Licence Check.
Hiles said in a no-deal post-Brexit scenario, the lack of reciprocal arrangements with the EU may mean a rise in the incidence of uninsured foreign drivers driving up insurance costs across the board, because the costs would not be able to be repatriated.
“This may be one of the consequences of us coming out of the EU without a deal, as there could well be a breakdown in communications and a failure in the exchange of information. If we get a deal, then obviously the threat is less, but it remains a real possibility.”
Hiles said that another possible threat to the motor industry could be in the rising costs of new vehicles and parts.
“With increased price pressure on manufacturers, they may have little alternative than to pass on higher costs in the form of higher prices,” added Hiles. “We really need certainty in the economy, which has been sadly lacking during the Brexit negotiation period,” he added.
Tim Meadows, VP and commercial director, epyx, sets out that the uncertain economic conditions will see fleets zoning in more to take control of costs.
“It seems likely that UK businesses are going to be operating against a backdrop of continuing uncertainty, so we expect to see an ongoing accent on cost control,” he sets out.
“Certainly, the major leasing fleets that use our platforms have very much been looking to create greater efficiencies in areas such as SMR and disposal, and we expect this to be a continuing trend.
“2020 will ultimately be about providing the best possible business transport outcomes while watching costs closely.”
Fleet Service Great Britain
Geoffrey Bray, executive chairman, Fleet Service Great Britain, says uncertainty will continue in 2020 as the issues surrounding the country, notably Brexit, will not be resolved overnight by the newly elected Government.
Bray claims this will lead to caution over EV adoption despite pundits across the UK fleet market championing 2020 as a potentially watershed for plug-in vehicles.
“Despite politicians talking about a ‘climate emergency’, the challenges facing the UK are so enormous that it would take a brave fleet decision-maker and board of directors to plunge headlong into embracing plug-in vehicles,” he says.
“The ‘big issue’ for me is residual value uncertainty. In recent years we have seen prices for used electric cars improve. But as new and facelifted models with enhanced batteries and therefore engine range are launched, residual values on ‘old’ models will plummet.
“As a businessman of almost 60 years standing – and still learning – the natural inclination amid times of uncertainty is caution.
“There remains other unanswered questions around electric vehicles – chargepoint infrastructure and multiple payment methods are two – so with residual values and therefore whole life cost uncertainty those chasing the electric dream in 2020 are likely to be disappointed.
“Conventional petrol and diesel vehicles versus electric vehicles to enjoy dominance in 2020? I know where my money is going.”
While EVs will dominate fleet choice lists and new model acquisition strategies in 2020, supply issues will likely mean that fleet decision-makers will have to extend replacement of existing petrol and diesel-engine company cars further beyond the typical three-year warranty period, according to Martin Evans, managing director, Jaama.
He continues: “Consequently, it is imperative that fleet operators and contract hire and leasing companies keep a watchful eye on vehicle maintenance expenditure to ensure bills do not escalate and run out of control.
“To do that a robust online fleet management software system is business-critical as technology will deliver efficiency improvements, financial and administrative savings and reduce risk exposure through driver and vehicle compliance management.
“Jaama’s Key2 Vehicle Management system, for example, tracks individual company car maintenance costs against budgets so fleet managers can see how they have totted up over the lifecycle of a vehicle and then extrapolate what future likely spending patterns will be.”
In the 20 years since Mediafleet started in the fleet supply chain, it’s never been as difficult to predict the year ahead as for 2020, according to managing director Barnaby Smith.
He explains: “A note of exhaustion with the political landscape is creeping into business rhetoric and, cross this with the technological changes pushing at the gates in the fleet world, and it’s easy to think that a lack of direction will undermine fleet buying volumes next year.
“At the same time, clarity resulting from the general election could unleash a new wave of investment which would support strong new vehicle activity, and most likely enthusiastic and energetic branding initiatives as well.
“However unpredictable 2020 may feel from our current standpoint, in one respect it will be no different than any other year, in as far as hard work and persistence will probably see us all through.”