Fleet Themes for 2020
As we enter a new year, and the start of a new decade, the future fleet landscape is as complex to predict as ever. We asked our Managing Director, John Lawrence, for his thoughts on the factors that are likely to shape 2020 and beyond.
If you attempt to list all of the legislative, technological, social and economic factors that are likely to have an effect on fleets and fleet management over the next twelve months you end up with a long and unwieldy list. To try to make this more manageable, and hopefully useful, I am sharing what I believe are the broad themes that will have the greatest impact on fleets during 2020. While none of these will be a huge surprise to anyone involved in fleet management, it is worth taking some time to consider the scale of the changes that the industry is facing and the ways in which we will all need to respond to make this a successful year.
At the outset, I am going to state that this is the only mention of Brexit within this piece. While the general election has provided a degree of certainty in terms of the overall direction the country will be taking, the implications, for UK business as a whole and for fleets in particular, remain highly nebulous, so further comment would be largely speculative.
The three themes that I would like to examine are; Electrification, Mobility and Driver Welfare.
With just over 14%1 of registrations being for vehicles with some form of electrification in 2019, the long-awaited tipping-point for alternative fuel vehicles is on the cusp of arriving. The huge number of models in manufacturers’ launch pipelines for the next two years is quite staggering and, with deliveries of important models such as Tesla’s Model 3 now underway and with orders being taken for VW’s ID3, expect electric-only cars to become a much more common sight on our roads this year.
This popularity will be reflected in demand by company car drivers as the new zero rate of tax kicks in from April for battery electric vehicles (BEVs) and, as fuel-efficient plug-in hybrids (PHEVs) continue to provide significant benefit-in-kind savings (BiK). The effect of this is likely to be boosted as the switch from NEDC-correlated to WLTP emission values send traditional petrol and diesel vehicles into ever higher BiK tax brackets.
With the maximum 37% rate of BiK now being charged on all vehicles emitting 160+g/km CO2, the minority of individuals determined to drive high emission vehicles are increasingly likely to seek private funding alternatives moving forward.
This transition will not be without its challenges for fleet decision-makers. Employee demand for electrified vehicles will put pressure on many fleet choice lists, as their higher list prices stretch existing benefit bands. This will make the use of whole life costs as the definitive measure of value ever more important; balancing higher list prices for BEVs and PHEVs against solid residuals and lower maintenance and running costs. For this reason, we expect to see the vast majority of electrified fleet vehicles registered in 2020 being leased.
Expect the burgeoning electrified vehicle market to also have an impact on the level of interest in salary sacrifice schemes. The Optional Remuneration Arrangement (OpRA) changes in April 2017 saw many of the tax advantages for vehicles acquired through such schemes removed, but these advantages are still available for ULEVs (Ultra Low Emission Vehicles). With drivers now spoilt for choice in the sub 75g/km CO2 category, many are likely to turn back to salary sacrifice as a cost-effective route to driving an efficient new car.
2020 will also see organisations across the UK needing to deliver an increasing number of workplace charging outlets to handle the growing number of pure-electric and plug-in hybrid company vehicles. While Government subsidies continue to be available to assist with this, the investment required can be considerable and there may be additional challenges such as space and electrical infrastructure suitability.
From an environmental perspective, through electrification, we will hopefully see the early 2020s begin to reverse recent increases in vehicle CO2 emissions2 that have resulted from the huge decline in diesel registrations and the ongoing popularity of SUVs.
The shape of business travel is likely to shift in 2020, as more organisations begin to utilise MaaS (Mobility as a Service) solutions to improve the cost, time and carbon efficiency of their activities. My belief is that, far from being a marker of the end of the company fleet, it heralds a new era where fleet vehicles are used in a far more efficient manner as part of an integrated business travel strategy.
From a fleet perspective, the combination of data from telematics and MaaS systems will provide unprecedented transparency of in-life vehicle costs and consequent opportunities to reduce these. Managers will face the emerging challenge of data aggregation and analysis from these sources in order to inform both tactical and strategic fleet decisions.
Transition from fleet management to mobility management will accelerate in 2020, with many role-holders no longer simply responsible for the provision of cash or car benefits but managing a wide range of travel options supported by MaaS solutions. One result of this will be a significant increase in the use of short and medium-term vehicle rental to enhance overall travel flexibility; this will be further driven by continuing growth in alternative, flexible, modes of employment.
The trend toward greater flexibility and agility in procurement of both vehicles and in-life services will also continue in 2020, as greater pressure is brought to bear on those responsible for fleet to maximise service and cost outcomes. This is likely to result in an increase in outsourcing of these functions to fleet management specialists, with sophisticated vehicle tendering and maintenance management solutions.
While this has always been a key area of concern for fleet decision-makers, the increase in driver deaths and serious injuries3 in recent years will give weight to a renewed emphasis in 2020.
With vehicle technology providing greater protection than ever in the event of an accident, along with assistance in avoiding them in the first place, focus in 2020 is likely to be on risk profiling and the development of skills to reduce the number of situations where incidents are likely to occur while driving for business.
Again, technology is playing an increasing role, with the collection of data through telematics providing insight into the driving behaviours and journey patterns that correlate with an increase in accident risk. The insight available allows for pragmatic, targeted interventions where they will have the greatest impact, be this reconfiguring territories and routes to reduce fatigue, redefining policies on the use of mobile devices, undertaking regular health assessments or providing practical road risk training.
2020 is also likely to see an upturn in interest in grey fleet management. With more drivers putting off the decision to acquire new vehicles, due to low consumer confidence, those private vehicles being used for business journeys are inevitably ageing. We expect vehicle checks, maintenance declarations and insurance and licence scrutiny to be stepped up because of this.
Alongside driver safety concerns, we also anticipate increasing interest in ‘all employee’ schemes that extend car benefits to the broadest possible base of individuals. These are becoming more and more sophisticated and the coming years will likely see additional demand for blended solutions that combine elements of contract hire, salary sacrifice, employee car ownership and personal leasing to best suit employees’ needs.
In this rapidly changing environment, it’s impossible for any individual to maintain the highest levels of expertise across all aspects of fleet and mobility management. That’s where organisation’s like CLM are able to offer the greatest value; through our team’s breadth of knowledge and decades of experience. If you’d like to discuss any of the issues raised in this post, or have business-specific fleet challenges, contact us and we’ll be happy to help.
1 SMMT – Electric Vehicle and Alternatively Fuelled Vehicle Registrations December 2019
2 European Environment Agency (EEA) statistics on average carbon dioxide (CO2) emissions from new passenger cars registered in the European Union (EU) 2017 and 2018
3 Department for Transport, Reported road casualties in Great Britain, annual report: September 2019