Described as a major scientific and societal challenge, the Covid-19 pandemic has hit fleets hard. Natalie Middleton explores the short- and longer-term impacts and new ways of working.

The AFP says many organisations will recognise that home working delivers results in terms of employee productivity

As the consequences of the “greatest global science policy failure in a generation” continue to play out, we’re still far from seeing a way out of lockdown and just how badly the fleet and automotive industry has been hit.

Already, it’s clear that the car and van sector has suffered seismic impacts, as the “worst crisis ever to impact the automotive industry” according to ACEA has taken its toll. Manufacturing plants have been idled, dealer networks closed and supply chains collapsed. And fleet and private demand has plummeted; according to ACEA, overall EU new car registrations slumped 55.1% in March while SMMT data shows UK fleet registrations were down 47.4% last month to 117,557 units.

But already, a picture is emerging of an industry banding together and shifting its strategies, adjusting to working from home and circumventing limitations on travel and cancellations of industry events.

Leasing industry support

Despite having to initiate its own social distancing and working from home measures for staff, the leasing sector has been working to support customers facing numerous issues with running fleets.

This includes fleets looking to cancel vehicle orders; in the early days of the lockdown, Activa Contracts had already an increase in clients requesting to cancel vehicle orders and was working to minimise cancellation charges.

It’s also working to mitigate the impact on its own capital; while prior to April, the focus had been on processing registrations of diesel and petrol cars asap to avoid any hikes in VAT and BiK, the pandemic and the knock-on effect on the order bank then saw Activa Contracts work to limit the number of early registrations to prevent capital being tied up in assets that are not on contract.

There’s also been help with extending contracts where necessary and payment holidays for the fleet sector; Richard Jones, managing director of motor finance and leasing at Lloyds Banking Group, says it’s already granted these to more than 3,000 fleet customers.

“Those with up to 20 vehicles on fleet can apply to defer their payments online, and those with fleets of more than 20 vehicles should contact their account manager directly to discuss the support that’s on offer,” he explains.

Jon Lawes, managing director, Hitachi Capital Vehicle Solutions (HCVS), also says the firm has been contacting all of its customers that have vehicles due for renewal in the next six months and offering them the ability to extend their contract. “This has been done on a case-by-case basis to ensure we consider the most appropriate option for each and every driver, be that driving instructors or corporate fleet drivers,” he continues.

New guidance from the Financial Conduct Authority (FCA) also means car finance customers using personal contract purchase, hire purchase and contract hire agreements should be offered a three-month freeze on payments and interest.

The industry has also worked hard to ensure continuity of service for essential fleets, including continued collections and deliveries despite a wider temporary halt on these services for non-essential fleets.

A major halt in manufacturing

From mid-March, major carmakers in Europe were already starting to announce closures; seen by the ACEA as an “abrupt halt” and not just in reaction to lockdown measures but also freefalling demand, especially in those markets particularly hit by the epidemic. In Italy, sales in March were down 85% while Spain and France fell by around 70%.

Figures from the association as of 20 April show just how much of an impact the factory shutdown has had; production losses have amounted to at least 2,068,832 motor vehicles (passenger cars, trucks, vans, buses and coaches) while the average shutdown duration at this date was 26 working days. It’s already led to reports that carmakers have called for a delay on the EU CO2 standards – and resultant punitive fines – that come into force this year.

There have been some positive stories during this time, including collaborations in PPE manufacture. In Spain, the SEAT Leon line at the Martorell plant has been used to help make automated ventilators with adapted windscreen wiper motors, while Nissan’s Sunderland facility in the UK being used to help put together up to 100,000 face visors a week for frontline health workers. Carmakers have also offered help in other ways. Jaguar Land Rover for example has provided a 160-strong global fleet to support coronavirus response. In the UK, 57 vehicles including 27 new Defenders from the press fleet have been put into service with the British Red Cross.

Work is also underway on plant reopenings. Volkswagen will restart production in Europe on a step-by-step basis from this week while ensuring strict protection for workers. Audi has also announced that its plants in Europe will slowly return to normality by the end of April, with the focus on “a safe working environment”.

And Vauxhall has said it’s started preparations to reopen its Ellesmere Port plant in the Wirral in the UK after implementing a range of safety protocols to help protect workers, although a restart date has not yet been announced.

The work has been guided by measures already in place in China where carmakers have been gradually restarting operations since mid-February; 32 of Volkswagen Group China’s 33 plants have now returned to production.

The ACEA, which has been urging for car production to resume as soon as possible, has also called for measures to help restart car demand, including fleet renewal schemes.

There have been measures to keep new car interest going during the lockdown too, including the virtual model tours operated by Škoda and SEAT’s product experts from their driveways, while Deloitte says a number of dealers have already moved their interactions online, and adds that the ability to support this will become imperative in the longer term.

According to Autocar, Vauxhall has also said new ways of working during the pandemic – such as its new phone-based direct sales system – could change the face of car retailing going forwards. Rupert Pontin, director of insight at Cazana, has said that it’s “prudent to acknowledge that post-lockdown the way people buy cars will need to change in the short-term and in all probability the way consumers research and buy cars will change permanently”.

Jon Lawes of HCVS also believes the way consumers and drivers research new vehicles could change permanently. “Social distancing will be a priority for most long after lockdown has lifted, meaning footfall at dealerships could take longer to recover and car sales operations will need to continue to adapt a more digital approach to a more flexible, distant way of selling,” he explains.

But he continues: “The UK’s car industry is resilient and we’re confident the sector will begin to bounce back once the lockdown measures are gradually lifted. We’ve already seen positive steps being taken by manufacturers such as Vauxhall and Volkswagen to resume production with additional safety measures in place to protect their employees.”

Telematics

While non-essential fleets have been laid-up during the crisis, essential operators – such as in food or medical deliveries – are facing demand spikes, reinforcing the need for smarter working practices where possible due to “unprecedented supply chain challenges”.

This is being met by support from the telematics industry despite a general lockdown on all field-based installations, defits/refits and service calls in line with government guidance.

This includes Ctrack, which is offering free loans of its Plug & Play solution, so customers can self-install units to gain the required tracking capabilities in the short- and medium-term.

Trakm8 is also offering fleets free access of its Insight Optimisation platform to support operators during the crisis, enabling them to maintain and improve the efficiency of operations through AI-based route planning.

Microlise has also stepped up to the challenge; it’s making its SmartFlow driver and workflow management app free of charge for the duration of the coronavirus crisis, both to customers not currently using SmartFlow, and to those customers who already use the application, with any increase beyond typical usage incurring no additional charges.

SMR remains essential

Although vehicle showrooms have been closed – and the Government has given a six-month MOT exemption for cars and vans – garages are allowed to remain open for essential repair work during the pandemic and are helping to keep the road transport network moving.

Isuzu has said it’s keeping the majority of its dealer workshops open and repairing pickups and vans of any make/model as part of its commitment to keeping Britain working.

And Rivus – formerly BT Fleet Solutions – has said it’s maintaining its usual levels of service as it works to keep both new and existing customers on the road while Selsia Vehicle Accident Repairers has been keeping its network of approved repairers up and running, backed by its cloud-based repair management platform.

Kwik Fit has also been working to keep centres open and operating along with its mobile fleet, again backed by hygiene and social distancing measures, such as no cash payments in centres. In the early days of the pandemic, the company had seen a 15% increase in enquiries for appointments for tyre fitting at customers’ homes.

Such services are vital to ensure the safety of those fleets still operating and those that are laid-up; TyreSafe has warned that fleets and drivers still need to ensure tyres are safe and legal despite the MOT suspension. And Meridian Vehicle Solutions has highlighted how fleets will need to ensure that unused company cars are carefully inspected in a risk management context to ensure drivers are safe when they return to the roads and vehicles aren’t in danger of breaking down. This includes company cars and vans that have been ‘virtually’ handed back with keys and fobs returned to quality for Benefit-in-Kind tax relief during the lockdown.

Leasing and fleet management services providers are also working to ensure they keep their fleet customers on the road; Arval for example has placed focus on finding service and maintenance suppliers that remain available for essential work and scheduling jobs so downtime is kept to an absolute minimum. It says it’s also extensively using mobile service and maintenance suppliers.

Hitachi Capital Vehicle Solutions also took urgent action prior to the lockdown to contact suppliers across its network through its new, dedicated Operations Incident Team to provide continued service for its customers with essential services and critical vehicles. In addition, the team has been working on optimising workshop availability to maximise fleet compliance and minimise downtime; the priority has been on ensuring HCVS keeps critical fleets on the move to continue serving vulnerable people during the pandemic.

New risk management issues and support

For those fleets still operating, new risk management issues have joined existing pressures during the lockdown; from reports of extreme speeding, to the need to keep drivers and the public protected from coronavirus, as warned by FleetCheck.

However, businesses have been rising to the challenge. This includes courier firm Crown Couriers, which runs a fleet of more than 600 vehicles and has been prioritising fulfilment of urgent, same day and 24/7 deliveries to the healthcare sector from the early days of the pandemic.

The firm has been working to ensure that vital parts continue to reach the right people, in the shortest time but most importantly, safely, supported by additional internal structures.

This has been underpinned by prioritising the health and well-being of the team, having taken a number of measures to ensure they are still able to complete their job or delivery while protecting themselves and others around them.

Driving Monitor has also highlighted how fleets need to help drivers stay safe and continue to keep the country running. It’s produced an essential guide for key drivers who still need to drive for business. The poster is available as a free download for all fleets with safety advice to help protect key workers who drive and the things they need to be aware of with their vehicle and driving.

And FleetCheck and Driving for Better Business have teamed up to produce a series of video guides to help fleets during the crisis.

Licence Check meanwhile has warned that with many businesses taking on new drivers in the current crisis, it remains vital to check their licences before assigning them drivers’ contracts. However, this must be done in as safe a way as possible, mindful of current social distancing advice; examples include its e-approval process, which can be carried out entirely online.

Driver training has also evolved, aided by fast work from the risk management firms to switch away from classroom-based solutions and shift online for everything from Driver CPC courses to speed awareness. Even furloughed employees can use the lockdown to enhance their driver training, as it’s not classed as providing services or making money for the employer.

Longer-term changes for fleets

With no crystal ball on how long the coronavirus pandemic will last, many of the questions on future changes for fleet remain unanswered, but Geoffrey Bray, executive chairman, Fleet Service Great Britain has said the slowdown could have a major impact on how the entire fleet industry functions.

Peter Eldridge, sales and marketing director of the recently formed Association of Fleet Professionals (AFP), created from the merger of ACFO and ICFM, says the pandemic could be transformational in the long-term evolution of the fleet industry.

“Corporate costs are always under the microscope and with so many employers introducing home working the UK is witnessing a massive reduction in the collective volume of miles being driven.

“That in turn is making the nation’s roads safer and simultaneously there are reports of an improvement in air quality – inadvertently making inroads into two of the biggest challenges fleet decision-makers and the country as a whole face,” he says.

The AFP also believes that, as the UK and the world emerges from the grip of the coronavirus pandemic, many organisations will recognise that home working delivers results in terms of employee productivity.

Research conducted by cloud software solutions firm iomart.com shows that search queries for Zoom have risen by 97% since January, Office 365 queries have increased by 46%, and searches for Skype have seen an 18% uplift.

But this might not just be a short-term blip; the temporary adoption of home working could leave businesses more receptive to longer-term changes, according to Peter Eldridge.

“Consequently, boards of directors can be expected to conduct a route and branch review of their entire business operation once the virus has been defeated and one of the outcomes may be that the established fleet model can be reworked.

“Fewer miles being driven would open the door for electric vehicles to be a truly viable option for many more employees, short- and medium-term rental could rapidly become a core solution for many members of staff and the idea of investing in a depreciating asset for a four-year term will only be applicable in the case of essential job-need cars.

“The fleet industry is already slowly witnessing change with the move to plug-in vehicles, autonomous vehicles on the horizon and mobility-as-a-service fast becoming a reality.

“However, an inadvertent outcome of the coronavirus pandemic could be a wholesale rethinking of vehicle allocation policies and a move to employees being provided with a monthly mobility allowance according to grade.”

Airmax Remote managing director Richard Perham also believes the outbreak could transform working practices and has pointed out that increased remote working would remove the need for higher-mileage vehicle contracts, and have benefits in other areas.

He explains: “SMR expenditure will also reduce. Lower mileages result in lower emissions, lower fuel spend, less congestion, improved air quality. A further uptake in mobility as a service (MaaS) could occur.”

Goodwood Corporate Mobility (GCM) has also said UK companies will adopt more flexible approaches to working practices and company car provision going forwards as a direct result of the Covid-19 pandemic.

According to GCM, businesses will look to provide a more ad-hoc approach to corporate mobility to keep employees mobile only while needed.

However, there will still be a large section of the company car driver population such as service engineers or public service workers who need to be mobile all their working hours and may need to transport equipment to carry out their work. These would fall into the medium- to longer-term leasing contracts section of a new modern-day company car policy.

Donnelly also said mileages will continue to fall in the future now that more businesses can see employees efficiently working from home. Technology will make this transition process the new ‘norm’.

Like Peter Eldridge of the AFP, Donnelly also thinks interest will remain high in zero-BiK electric vehicles; a viewpoint echoed in research by Venson Automotive Solutions. It’s found that the lockdown is having a dramatic positive impact on people’s awareness of the benefits of reduced air pollution – with nearly half of drivers now considering a switch to electric vehicles in the future.

Alison Bell, marketing director at Venson Automotive Solutions, says: “Fleet managers looking to introduce fully electric fleets could find employees more open to the idea now they have seen the global benefits it could bring to the environment.”

Hitachi Capital Vehicle Solutions also says it “absolutely” expects interest in EVs to continue to increase this year after drivers see the impact that lockdown measures have had on air quality.

Jon Lawes continues: “There may well also be an increase in the number of drivers considering to move to EVs sooner than they had originally anticipated, as the personal and business use of vehicles will have reduced dramatically during the lockdown.” As such, key hurdles will include establishing an adequate charging infrastructure framework and ensuring businesses educate employees now on the benefits of alternatively fuelled vehicles (AFVs) so they can make the right decisions on powertrains.

And finally

According to EV charging company Elmtronics, there may come a point in which a lot of companies will not be able to pay suppliers and suppliers may not be able to pay their suppliers, which will require a great deal of patience, empathy and understanding.

Dan Martin, CEO of the EV charging company, says: “These are unprecedented times and there has never been such a need for people to work together. Those who are in a position to maintain their supply lines need to keep communicating and keep going where possible; without both suppliers and customers there is no business. The main thing to keep in mind is to understand that this situation is finite, it will end in a couple of months and from there we as an industry can start to piece our lives and businesses back together, and not just survive, but thrive!”