19th June 2017
A realistic outlook on how UK fleets will likely change during the next few years amidst growing pressure to adopt AFVs
Europe is unified on few topics in the current Brexit climate, but reducing air pollution as rapidly as possible is one of them. Athens and Madrid recently stood shoulder to shoulder at the C40 conference1 alongside Paris to announce their plans to make diesel cars and vans things of the past on their respective roads by 2025. The French have been Europe’s leading anti-diesel voice since such notions first bubbled up, and Aberdeen2, Oslo3 and even BMW’s hometown of Munich4 look set to follow suit and ban diesels in the relatively near future.
What’s happening to diesel statistically?
The snag is, diesel accounts for around 50% of vehicles sold in Europe, so despite the noble aims of parties like the Lib Dems whose recent manifesto5 included removing diesel buses and taxis from built-up areas by 2022 and a complete ban on diesel vehicle sales by 2025, it’s not going to happen overnight. Numerous legislative, economic, social and other changes need to be properly thought through and smoothly implemented. Additionally, although SMMT figures6 point to a 20% diesel decline in May 2017, 63% of vehicle rental customers still plump for diesel whilst 78% don’t fancy hiring an EV according to one recent survey7, whilst another poll8 labelled fleet requests for petrol cars as “virtually unknown”.
Impacting residual values
The continuous decline in UK diesel vehicle registrations means that residual values for such cars will carry on falling quite significantly, auction buyers standing to be greeted with an even greater array of ex-fleet diesel bargains. Poor residual values directly impact monthly contract hire prices, making diesel cars and light commercial vans more expensive for fleets to lease, which is expected to become more and more noticeable amongst larger brokers’ client bases – although smaller brokerages will probably continue to see strong client demand for diesel for a while yet.
Petrol still can’t hold a candle to diesel for economy
Despite growing animosity against the fuel from the black pump, manufacturers seem to remain proud of their increasingly greener diesel engines, though. When Nissan last week revealed details on the imminent facelift of its relentlessly popular Qashqai, Europe’s third-best-selling vehicle, it emphasised the 1.5-litre 110PS diesel unit as the segment leader, and who can blame them? After all, emitting 99g/km CO2 and offering fuel economy of up to 74.3mpg seem like no-brainers in the fleet world, compared to 129g/km CO2 and 50.4mpg from the greenest petrol engine in the lineup.
A damaging headline like the Guardian’s ‘Extremely polluting Nissan and Renault diesel cars still on sale’9, based on real-world testing by Emissions Analytics, may indeed make greener-minded company bosses, HR and fleet managers think twice, but in a market dominated by the likes of the BMW 5-Series, Mercedes A and C-Class and Volkswagen Golf, diesel remains the default pick for many, blending prestige with frugality.
Manufacturers argue Euro 6’s case
While it’s fair to say that private car purchasers and leasers will start embracing alternatively-fuelled vehicles (AFV) more quickly, motivated by the negative diesel sentiments being banged on a variety of drums and given a helping hand by subsidised home charging schemes, many fleet managers still see Euro 6 diesel vehicles as the answer over the next few years at least. They appreciate that Euro 6 diesel engines emit 0.08g/km of harmful NOx compared to the 0.50g/km NOx pumped out by older and dirtier Euro 3 units. Particulate matter (PM) has also been reduced from 0.05g/km to 0.005g/km so, in the words of Professor Colin Tourick10, “the blanket ‘diesel is bad’ analysis is a bit unfair on car manufacturers”.
Fleets wary of number 11’s next move
October will see the £10 T-charge introduced to penalise diesel vehicles entering London if they’re not Euro 4 compliant, and clause 54 of Defra’s reluctantly-published draft plans for reducing nitrogen dioxide strongly hints at the government seeking to discourage businesses opting for diesel from this point forwards, through increased National Insurance, VED, BIK tax, write-down allowances, AMAP rates and any other mechanisms they can use.
Quite rightly, the BVRLA11 quickly responded, urging the government to resist introducing any new taxation schemes that will punish businesses for vehicle procurement decisions “made based on previous government policy”, effectively having a pop at all those years of Europe-wide encouragement to choose diesel. The BVRLA would like to see the government work with them in developing an engagement campaign educating businesses on mobility alternatives such as short-term vehicle rental and car clubs, alongside continued grants for PHEV adoption, consistent taxation of ULEVs, and a fair diesel scrappage scheme for older commercial vehicles.
Fleets are certainly dipping their toes in the EV pool
We see it as a given that SMEs whose fleets are predominantly comprised cars will turn to AFVs, especially EVs, more quickly than larger firms or those with mainly commercial vehicle fleets. News that a firm like Shepherd Chartered Surveyors in Scotland has introduced six BMW i3 electric cars to its 140-strong car fleet is always welcome. It still only represents less than 5% of their total fleet, though, which isn’t perhaps surprising after our rough calculation that their average fleet car typically covers just less than 300 miles per working day – out of the range of most EVs bar the Tesla.
In the city
Electric vans are becoming more familiar sights in cities, an example being Grimsby13 where the council recently placed its trust in eleven Nissan e-NV200s. But we know of a number of property maintenance companies, for example, that have recently renewed their fully diesel van fleets for another three years, so it’s a mixed bag out there.
London will benefit enormously when all of its black cab drivers will have to upgrade to LTC’s latest range-extender model14 in order to comply with TFL legislation coming into force early next year. Not only will cabbies just require one daily top-up while travelling the whole day on electric power, but the lives of pedestrians and cyclists will also be substantially improved.
Many bus operators across the UK are commendably adopting hybrid and all-electric power where feasible, from Nottingham with 45 electric buses and London with 120 (along with 2,000 diesel-electric hybrids) to Brighton where the first solar-powered15 electric bus was announced recently.
What alternatives exist for road hauliers?
When it comes to heavy goods vehicles that form a huge chunk of the UK’s continually swelling traffic volume and have historically had no choice but to rely on diesel, Martin Flach, Iveco’s alternative fuels director16, sees biomethane as the logical alternative fuel move to make. Coca-Cola, Tesco and Waitrose have already introduced a number of such HGVs to their fleets. Running them on compressed natural gas (CNG) is generally 40% cheaper than diesel and also results in a CO2 reduction of 70%, but the vehicles cost around 50% more than their diesel equivalents17, which could prove prohibitive to a fair few haulage and other commercial operators.
Horses for courses
Taking a realistic view, it’s likely that many of the UK’s fleet managers will put an ever-increasing impetus into encouraging their employees to ditch traditionally desirable badges in favour of perceived ‘budget’ brands’ PHEVs and EVs that fit into their company car allowances. We’re referring to cars like the Hyundai Ioniq and Kia Niro, which have a lot to offer. Whether this strategy aimed at user choosers proves successful remains to be seen, but we can see company bosses also gravitating towards hybrid models from Audi, BMW and Mercedes, along with pure electric cars like the Tesla Model S if funds allow.
Taxi firms and bus companies will continue to grow PHEV and EV sales, and some brave HGV fleets may take the plunge and trial biomethane/CNG. But business drivers who cover long distances, along with van-driving sole traders and most definitely nationwide couriers, will likely stick with diesel for the foreseeable future.
By saying it’s a case of “horses for courses” we run the risk of rekindling nostalgia over the days of zero-emissions horse-drawn transport, but until the UK’s charging infrastructure improves, contract hire pricing for PHEVs and EVs falls, and the treasury’s AFV intentions become clearer, that’s how it’s likely to remain for a while yet.