Low Carbon Vehicles Fleet Buy-in Factors

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1 PCWG-P Low Carbon Vehicles Fleet Buy-in Factors Paper to LowCVP on Promoting Low Carbon Vehicles to the UK Fleet community prepared on behalf of ACFO (representing the demand side of the market) & BVRLA (representing the supply side of the market) The UK fleet market is large (ca 4.25m cars and vans within parc; ca 2.4m pa cars and vans within overall TIV. The simple arithmetic suggests that the fleet market absolutely dominates (65%+ of TIV) the production of used cars for ALL the rest of the market. What fleets buy today, will be within the population for up to the next 20 years. UK Fleets operate under a wide range of methods: Funding Outright purchase Outright purchase Simple funding (HP/ Lease) Simple funding (HP/ Lease) Complex Funding (RVs) (Maintenance)/ Operation in-house operation in-house operation - and under a wide range of fleet management expertise (from fully qualified and experienced professional fleet managers to purchasing manager s secretary ). Some fleet operators are highly involved in positive aspects of best practice; others are only concerned about minimising costs (capital and/or revenue); others only with maximising employee benefit/ taxation. In general, UK fleets have had a good uptake of innovation, including green and safety considerations: Unleaded petrol Diesel (when it was still considered clean in early 80s) Catalytic converters Airbags BUT: fleets have, in general, been wary of many improvements because of adverse perception (buy dual-fuel car/ can t fill up without difficulty) and/or poor marketing by government and/or manufacturers. LCVP Fleet Buy-in factors October 2004 Page 1

2 This market is essentially conservative, and operates to very long planning cycles (the average fleet policy review cycle time is 6 8 years; average vehicle replacement cycle > 42 mths). It is essential that all those involved in promoting Low Carbon vehicles (essentially cars) understand this conservatism and plan accordingly. There are three main components to a green fleet policy (of which the LCVP is one part). Environmental benefits (ideally, ones that can be included in marketing) Commercial viability (on overall costs and business productivity) Daily operation (driver attitude, running costs, uptime, access to business areas etc) Therefore the vehicle choice is just one factor in the overall equation. With some 60% of all drivers of company cars having some element of choice in what car they drive (only 20% - in the very small fleet sector - for vans), the vehicles must have a clear driver appeal. For fleets, the key issue is Sustainability & Stability. Businesses will remain suspicious of any new technology which looks like a here today/ gone tomorrow idea. They simply will not consider buying them in any volumes if they look like a short-term, politicallymotivated quick fixes. While the ultimate aim must be to motivate and excite all fleets, initial effort must be concentrated on those fleets which are most likely to have a positive attitude towards these emerging technologies. Research is required to identify these most-likely candidates. Their potential enthusiasm must be developed and nurtured so that they can be expected to provide critical mass at an early stage, and permit volume production/ lower unit costs, ready for the second wave of interest. ENVIRONMENTAL BENEFITS There needs to be a clear, long-term assured technical background to new vehicles with different technology. This means settling which emissions/ pollutants are being targeted, then applying this consistently in the long-term (up to at least 2020), for all official purposes (Treasury, DEFRA, DfT etc; AND into Europe) [Major new proven revelations on pollution/ health etc aside] Fleets need to know whether it is only CO 2 or some mix of CO 2 NOx and/or SOx and/or particulates and/or noise etc. There needs to be clear & consistent information provided on these matters - NOT like the petrol vs diesel vs LPG vs CNG confusion. LCVP Fleet Buy-in factors October 2004 Page 2

3 COMMERCIAL VIABILITY Any new vehicle/ fuel technology must also be backed, right from the start, with clear, visible, accessible and convenient infrastructure provisions for any fuel types selected. The LPG experience demonstrates that only a few fleets will buy more expensive vehicles without a tangibly high likelihood of using that fuel for the majority of the (business) mileage. Any favourable taxation treatment must be set in place for the long-term. Short-term promotions will attract some one-off, opportunistic purchases, but will not sustain a complete change in commercial attitude and behaviour. There must be guaranteed integration with other aspects of vehicle/ fiscal regulation: the rules for/ exemptions from Congestion Charging/ Road tolling/ Low Emissions Zones/ Clear Zones etc need to be set and maintained for the long term, at the national level; not city by city (government has so far shown no understanding that company cars and vans actually tend to travel the country, rather than simply commute). DAILY OPERATION Drivers must be confident that innovative vehicles will not cause them disadvantage. This may be by personal taxation; by personal productivity issues (having to divert long distances for refuelling and/or servicing), and vitally in status terms. With such a huge wealth of excellent vehicles available, drivers will not willingly commit to funny cars without an overwhelming range of guaranteed long-term benefits. LCVP Fleet Buy-in factors October 2004 Page 3

4 Fleet buy-in factors The following points summarise the key factors that the numeric majority of fleet operators (representing the majority of vehicle acquisition decisions) will consider as pre-requisites for adoption of new Low Carbon cars and vans. They are particularly relevant to those fleets which are most likely to be innovators/ early adopters. : Disciplined and focused messages from all tiers of suppliers (no room for cowboys!!) Recognised place at ALL the official decision-making forums Variety of access modes, irrespective of fleet operating methods used Robust, simple, ready reckoners/ impact calculators freely available Rational taxation/ fiscal/ grant structures balancing capital and revenue factors, with commercial drivers Standardised glossary of terminology and forms of measurement, to eliminate confusion Focus on true WLC projections for first fleet life and beyond Consistent OEM supply assurances Visible, nationwide, accessible fuel infrastructure, with no confusion over planning permissions, shared bunkering facilities etc Consistent in-use maintenance and support infrastructure There needs to be clarity and innate fairness over qualification: the issues of grey imports and Single-Vehicle type-approval must be considered. The positive effects of clean vehicle technology from the domestic manufacturers can only be diluted if consumer choice permits or encourages the import of dirty cars for personal gratification. It will be excellent for the UK to achieve a clear, world-class technological lead but UK business cannot be held in isolation to the detriment of fleet operators. That is simple commercial reality. IN-LIFE FACTORS Driver behaviour must be considered as an integral part of any long-term strategy to deploy LCVP technology and individual vehicles. There needs to be absolute clarity of purpose in terms of defining and promotion of consistent terminology. We have already raised the issue of well-to-wheel measurements replacing tank-to-wheel figures. Confusion over simple factors like this will cause drivers and fleets to avoid the complexities. Driver training to exploit fully the technologies in use must be considered as an integral part of promoting LC vehicles. The lessons of laissez-faire in the matter of Health & Safety driver training need to be incorporated, to avoid opportunistic exploitation by some service providers or a total lack of suitable and relevant training. LCVP Fleet Buy-in factors October 2004 Page 4

5 Corporate behaviour must be influenced to ensure buy-in. It appears likely that the Motorvate scheme or something like it could play a significant role in communication and measurement of success in LCV deployment and use, as with its current programme for conventional vehicles. An encouragement from government for even better Green reporting requirements in company accounts, to include fleet (or rather, all business mileage/ transport) performance, would provide a spur to the leaders, the conscientious and the innovators, to participate in this movement. Specifically, a standardised fuel consumption monitoring & management template would provide a level playing field (as with the standardised fuel consumption testing). Aftermarket conditioning for used-vehicle buyers is an essential part of the process. Fleets manufacture used vehicles and there is a clear role for consistent messages about the long-term stability and suitability of these vehicles long before they start to appear on the used markets. This can only optimise the residual values and therefore the holding costs in fleet life. Any form of public purse support must be considered carefully. Powershift has helped to create a level of demand for current alternatively fuelled vehicles by capital grants, but has failed to convince fleets that these are a no- or low-risk option. All aspects of in-life costs and other factors must be considered to ensure that the taxpayer gets lots of bangs per buck. This includes the practical issues such as a good refuelling and maintenance infrastructure no later than the launch of the vehicles themselves. This will allow all parties (manufacturers, government etc) to promote the availability of commercial advantages (assumed for the moment!), even before any altruistic benefits to wider society. These actions must reflect corporate reality, and must not be wishful thinking on the part of government. NO SPIN This is a serious and long-term (permanent?) programme. It must be initiated and treated always as such, to protect its integrity and to build the brand. Against this background, there is no room for short-term initiatives to attempt to achieve short-term targets for political ends. The LCVP programme must have long-term vision, targets, tax regimes and messages to match fleet operator planning cycles/ fleet replacement cycles. If fleets in general do not feel completely comfortable with the aims, objectives and deliverables of the programme, they will simply ignore it and stick with conventional and therefore safe technology. With little demand, unit costs will be high, reducing commercial drivers for adoption, reducing demand further ad nauseam. This cannot be allowed to happen. LCVP Fleet Buy-in factors October 2004 Page 5

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