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How can the hybrid be saved?

Sales of hybrid cars have collapsed in the UK. What can be done to attract business buyers back into these models? Julian Kirk reports.

The removal of the Plug-in Car Grant and tinkering with the Benefit-in-Kind tax system has negated any plus points for plug-ins among the company car market

With sales of plug-in hybrids down by a third so far this year, the sector is in dire need of a shot in the arm to re-ignite these models’ appeal among buyers.

A perfect storm of confused Government policy, supply issues and a lack of understanding from drivers has conspired to drive new car buyers and user-choosers away from the vehicles – seen as the stepping stone from conventional petrol and diesel to pure EV.

The main issue has been from Government – the removal of the Plug-in Car Grant and tinkering with the Benefit-in-Kind tax system has negated any plus points for plug-ins among the company car market. The recent 2% BiK cut will help, but does it go far enough?

No, according to Alphabet’s principal consultant David Bushnell: “We would like to see continued Government commitment and investment in real-world incentives for plug in hybrids, not just EVs. The return of the Plug-in Car Grant (PiCG) for PHEVs would be a welcome step to help consumers.

“Similarly, home and workplace charging grants need continued commitment beyond the end of the year to support businesses and. In addition, we also need to speed up the roll-out of investment in the public charging infrastructure to make EVs as easy and convenient to fuel as a combustion engine vehicle. Right now, anyone who drives an EV regularly knows it’s not as easy as it could be, whether that’s due to availability or inter-operability of charging solutions.”

Bushnell believes that without further plug-in incentives, drivers will simply make the big leap straight from petrol/diesel to pure EV. He adds: “We need the Government to provide tangible, financial incentives to all drivers who want to do the right thing.”

An education programme is also required for both fleet managers and drivers. Arval fleet consultant David Watts says: “The user profile for plug-ins, hybrids and mild hybrids can be quite different and the key to the success of all hybrids is matching the driver, vehicle and travel needs correctly.”

Jon Lawes, managing director for Hitachi Capital Vehicle Solutions, adds: “To attract businesses back towards hybrids, there needs to be greater awareness of the benefits of alternatively fuelled vehicles. Over and above the obvious environmental benefits, newer hybrid models have improved technology, safety features and a reduced fuel dependence, which provide further cost benefits to businesses when compared with petrol or diesel vehicles.

“While many see the switch to electric vehicles as a significant business cost, there are actually major savings to be made from a migration to hybrid vehicles. Our research found that if all Britain’s vans and HGVs were to switch to electricity, businesses could save around £14bn a year in fuel costs alone.”

Cap HPI’s electric vehicle expert Chris Plumb agrees: “The 2020-21 BiK rates may support sales but, equally, a zero-rating for EVs is likely to incentivise perk drivers from hybrid and plug-in hybrids into an electric vehicle. Hybrids must be made more attractive to the company car driver by ensuring BiK rates are attractive enough to make the switch.”

This has been achieved, to a certain extent, but the Government could have gone much further in pursuit of its ‘Road to Zero Strategy’. Simon Staton, director of client management at Venson, says: “The Government needed to incentivise the take-up of zero emission and plug-in vehicles through the Benefit-in-Kind tax regime over a much longer period of time as by April 2022 tax rates will be back to where they were at April 2020.

“It is also important to note that the Government has not changed already published Benefit-in Kind tax rates for cars first registered before 6 April 2020. Consequently, rate rises already slated for 2020/21 will be introduced as planned, although for cars registered prior to 6 April 2020 they are frozen at the 2020/21 rates until 2022/23.”

According to Staton, the review of company car tax has made it “abundantly clear” that plug-in and ultra-low emission vehicles are the vehicles that fleets must embrace wherever possible to limit employees’ tax burden.

Looking ahead

Arval Mobility Observatory research shows that 53% of fleets are looking at adopting hybrids over the next three years, and 46% plug-in hybrids. Also, 22% of fleet managers moving out of diesels are looking to replace those vehicles with EVs or hybrids, compared to just 4% who will switch to petrol.

The view from the auction halls

While hybrids’ popularity as new vehicles wanes, the opposite is true of used models – according to analysis from Aston Barclay the average value of a used hybrid/EV has risen from £11,365 in the final quarter of 2017 to £13,636 during the second quarter of this year.

Group managing director Martin Potter says: “This is great news for the leasing industry where they are better able to set future values based on the increased confidence of the used market for low or zero-emission vehicles.

“This also means monthly rentals are likely to continue to fall. Competitive rentals enable more company car fleets to add hybrids and EVs to their choice lists as monthly lease costs are more in line with their diesel and petrol counterparts.”

But aligning lease rates is not the only important issue for hybrids – there needs to be tax incentives too, otherwise drivers simply won’t choose them.

Alex Wright, managing director of Shoreham Vehicle Auctions, adds: “Business drivers are very fickle and have only opted for plug-in hybrids because they have offered lower rates of tax.

“The majority of used plug-ins that we get back at auction have still got the charging leads in their original plastic bags unopened.

“Based on this trend perhaps it’s good to see that fewer plug-ins are being purchased, as if they never run on electric power they are not providing any benefit to emissions and urban air quality.”

Looking beyond the figures:

Is the fall in hybrid registrations really as bad as the headline figures suggest? According to Arval’s fleet consultant David Watts, much of the drop in registrations is down to supply issues – primarily, discontinued hybrids such as the Audi A3 and Q3, BMW 3-Series, Kia Optima and the Volkswagen Golf and Passat plug-ins.

Watts says: “In most cases, their replacements are only just coming online. It’s possible to argue therefore that there has been a relative rise in PHEV penetration. Similarly, sales of hybrids are down but only in line with the overall market. This is not the sales disaster that is being reported.”

Both of the major forecasting price guides also point to the supply problem from late last year.

Glass’s chief car editor Jayson Whittington says: “It is well known that the supply of some of the most popular models has been affected post-WLTP testing; however, what is more difficult to judge is the effect that the removal of the Plug-in Car Grant has had.”

Cap HPI’s Chris Plumb is more unequivocal: “There can be little doubt that the cut in incentives had an impact, as did negative press around real-life consumption figures.

“The supply issues were due to the backlog of vehicles to be tested under WLTP. Some plug-ins also performed poorly under the tests and lost their tax benefits, which ultimately led to some models been pulled them from the UK market.”

Try before you buy:

Two giants of the industry are attempting to kick-start low-emission take-up by offering business drivers the opportunity to try before they buy.

LeasePlan is offering a range of incentives for businesses and drivers to embrace low-emission vehicles; including a flexible rental option for electric and low-emission vehicles, allowing a business to sample a vehicle for a minimum of three months.

Matthew Walters, the firm’s head of consultancy and customer data services, says: “This enables fleet operators and drivers to discover if it’s a viable option for them and if the range capabilities suit their driving needs, before they commit to a long-term lease.”

Europcar now has 3,500 hybrid and electric vehicles available to rent and has enhanced its offering this year with additional charging points at key locations. Its E-Car Club off-shoot is also offering hourly hire off the street.

Peter Crabtree, corporate sales director at Europcar Mobility Group UK, adds: “Try before they buy is an ideal way for fleet managers to assess the viability of hybrid and electric vehicles without any commitment – and rental is the ideal fit for this, particularly if working with a business that has demonstrably committed to reducing emissions. The E-Car Club provides a ‘right time, right place’ cost-efficient and simple way for businesses to begin to introduce electric to their mobility options.”


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Julian Kirk

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