August 5, 2015

Fleet buyers shift from diesel to petrol, hybrids and EVs

New trends identified in fleet buying habits

Fleet decision makers are beginning to turn away from diesel power, the long standing fleet market standard, in favour of lean-burn petrol engines, hybrids and electric vehicles. Although the numbers are still small, they suggest the beginning of a fleet shift towards alternative power trains.

New analysis by fleet management specialist, CLM, shows that, although diesel is still by far the most popular means of propulsion amongst its fleet customers by an overwhelming margin, that dominance is beginning to erode in favour of the new generation of petrol-engined models and alternative-powered vehicles now available.

CLM looked back over months of new vehicle registrations to identify a series of clear trends developing amongst fleet buyers.

What are the recent fleet buying trends?

The first trend was the move away from diesel to other forms of propulsion. At the end of quarter four in 2014, diesel models accounted for 90.4% of all new models ordered on the CLM fleet.

However, by the end of quarter one of 2015 that rate had fallen by 4.8% to 85.6% of all new orders. So, although diesel is still the most dominant fuel by a country mile, its hold over fleet buyers appears to be eroding.

At the same time, the percentage of petrol models being ordered by CLM fleet buyers increased from 4.5% at the end of 2014 to 9.6% by the end of the first quarter of 2015 – its highest level for a number of years.

The change in the fleet mix could be partially explained by the fact that fleet buyers are becoming increasingly aware of the benefits of the latest generation of lean-burn petrol models in terms of improved carbon emissions and better fuel consumption.

At the same time, health concerns about the safety of diesel emissions, particularly nitrous oxides, have been increasingly publicised both here and in Europe, particularly France.

Meanwhile, hybrids and electric vehicles are beginning to increase their toe-hold in the fleet buying arena. Although the starting point is still from a very low base, the numbers of hybrids and plug-in hybrids ordered on the CLM fleet have increased to 4.9% of the fleet mix.

Pure electric vehicles, meanwhile, continue to struggle to make an impression on the order statistics, accounting for just 0.2% of the fleet mix at the end of 2014.

The growing move towards alternative fuelled vehicles reflects the current market trend. For example, the latest figures from the Go Ultra Low environmental campaign show that 8,573 passenger cars with CO2 emissions lower than 75g/km, primarily electric and hybrid vehicles, were registered in the UK in the first quarter of this year, a year-on-year increase of 386%.

Fleet buyers led the way in the move to cleaner alternatives, accounting for more than 68% of the ultra-low emissions vehicles, or 6,045 new models.

CLM has been regularly advising fleet clients of the importance of encouraging the take-up of low-carbon cars amongst company car drivers to cut tax bills, reduce the corporate carbon footprint and slash fuel costs.

Clients have clearly been heeding the advice as the falling carbon dioxide figures across the CLM fleet clearly demonstrate, declining by 5g/km year-on-year from an average of 125g/km to 120g/km at the end of last year.

Why the switch from diesel?

One of the reasons for the move away from diesel could be the introduction of stricter new Euro 6 emissions standards which apply to all new vehicle registrations from September 1 this year.

The new rules target a host of harmful emissions, especially those of nitrogen oxides (NOx) and cut the permissible limits for NOx from the current 180mg/km to just 80mg/km.

Manufacturers have been forced to introduce new, more expensive clean-up systems, including after-treatment systems, such as Selective Catalytic Reduction, which works with a reduction agent, typically known as AdBlue, and the Lean NOx trap, which is fitted instead of the normal oxidation catalytic converter.

These new systems come at an increased cost, some of which may be borne by the vehicle manufacturers, but most of which is passed on.

This increased complexity of technology also seems to fly in the face of a number of diesel’s main attributes, those of simplicity, reliability and longevity.

Many major cities are also considering additional congestion and parking charges for diesel vehicles.

The latest generation lean-burn petrol models face no such problems and their upkeep and maintenance, compared to future diesel models, could be viewed as less complicated and more straightforward, with, lower front end costs, improved economy and lower carbon emissions.

What’s the best fleet mix?

CLM’s advice to its clients on the best mix of vehicles for their fleets typically centres around the type of driving that they most commonly do.

For example, for fleets with a large percentage of high mileage journeys, typically on motorways, diesel vehicles remain the most cost advantageous option due to their lower fuel consumption.

At the same time, the 3% Benefit in Kind tax surcharge that diesels previously attracted has been removed by the Government with effect from next April, levelling the tax playing field for drivers versus their petrol counterparts.

For fleets with mainly low mileage needs, petrol-engined models usually present the best option because of their lower capital outlay compared to diesel equivalents, which have a front-end price premium.

And for fleets that operate in a largely urban environment with a lot of stop-start driving, the best mobility options can be hybrids, range extenders and pure EVs. The final choice comes down to the flexibility requirements of the fleet and overnight parking and recharging arrangements.

If you would like to discuss the right mix of vehicles for your fleet or fleet leasing services available at CLM, please get in touch.