Effective Fuel Management How to minimise fuel spend - both now, and in the future. WHITE PAPER
Table of contents 2. Executive summary 3. Establishing a fuel policy 3. Choosing the right cars for your fleet 3. Choosing the correct mix of cars 3. Tell me more about car choice - Diesel cars - Petrol cars - Hybrid cars - Plug-in hybrids - Electric cars - Range extenders 4. Management buy-in to a fuel reduction policy 5. Managing a fuel policy 5. What is a fuel card? 5. The benefits of using a fuel card 6. Understanding and managing fuel card data 6. Fleet management actions based on fuel card data 7. Mileage reduction policies 7. Conclusion 7. What to do next? FLEET ALLIANCE WHITE PAPER 1
Executive Summary from Martin Brown, Managing Director of Fleet Alliance Although the Chancellor confirmed cancellation of the September fuel duty rise in Budget 2014, and the pressure on fuel prices has been generally more benign recently, it would be only the foolhardy who considered that such a calm, steady state of affairs was likely to continue. It is vital that all fleets continue to investigate strategies that can minimise the cost of fuel to their business. Government long-term projections suggest a gradual but inexorable rise in oil prices, while more short-term issues such as the East-West conflict over Ukraine can also impact with sudden fuel cost spikes. This White Paper details a variety of effective fuel management action plans to help minimise fuel spend - both now, and in the future. I hope you find it useful. Martin Brown FLEET ALLIANCE WHITE PAPER 2
Establishing a fuel policy Does your company have a proper fuel policy? It should. Of the two major costs incurred in running a fleet, one is the cost of fuel, the other is the cost of finance. Effective fuel management begins with the correct choice of economical vehicle. Choosing the right cars for your fleet Apart from being fit for purpose, it s important to establish a fuel economy benchmark figure on which to base your fleet choice. So what s a good starting point? In 2013, the registrations-weighted average fuel economy for cars was 56.3mpg, according to the Society of Motor Manufacturers and Traders (SMMT). This would seem a reasonable place to start and allows your policy to embrace a variety of different vehicles to suit different grades of employees, although it can be higher or lower, depending on your preference. The benchmark can be reviewed on a regular basis to take into account the increasing number of more fuel efficient vehicles coming to market. 56.3 MPG Your starting point Registrations-weighted average fuel economy for cars in 2013. Source: SMMT Choosing the correct mix of cars A benchmark is one thing, but you should work with your fleet supplier to establish the mix of vehicles you require depending on the needs of your drivers. For example, is a diesel only policy the most effective for your fleet? Do all your drivers cover 20,000 miles a year or more? Would some drivers benefit from a hybrid car? Perhaps one of the latest highly fuel-efficient petrol cars would work if business mileage is predominantly urban? Or could an electric vehicle work if the daily mileage is relatively low? These are all elements to be considered. It s important to choose the most efficient cars for your needs in order to establish a really effective fuel policy. And a really effective fuel policy will lower your company s fuel costs. Tell me more about car choice There is a wide variety of vehicles using different sorts of fuels that may be suitable for your fleet. Here is a broad outline of the main choices available to you. D P Diesel cars The traditional choice for company car fleets because of the low CO2 emissions which are good for benefit in kind and provide superior fuel economy. Complex exhaust emission controls to regulate polluting particulate matter (via a diesel particulate filter or DPF) means diesel cars are not a good choice if used mainly in an urban environment. The DPF can become blocked if not subjected to regular long motorway journeys where the collected soot is burned off, necessitating costly repair. Petrol cars Car makers are producing more and more efficient petrol engines, often with fewer than four cylinders. The result is better and better fuel economy over 60mpg on the official combined cycle in some cases - without the issues associated with diesel particulate filters. A better choice for more urban environment travel rather than regular motorway mileage where a diesel will usually exhibit superior economy. FLEET ALLIANCE WHITE PAPER 3
Hybrid cars Hybrid cars use a combination of either a petrol engine or a diesel engine in combination with an electric battery. Hybrid cars can often run in electric only mode for short periods with the potentially high fuel savings that entails. However, hybrids are less suitable for motorway mileage where suggested fuel savings are rarely achieved in practice. Plug-in hybrids Plug-in electric hybrids or PHEVs are relatively new to the market. These cars use a petrol or diesel engine coupled to a rechargeable battery. They can travel for at least 30 miles in electric only mode, offering very cheap motoring if the engine is not engaged, and very low CO2 emissions overall. As with standard hybrids, the in-town efficiency gains tend to ebb away on the motorway. Electric cars Electric vehicles (EVs) use a rechargeable battery instead of a combustion engine. EVs offer zero tailpipe emissions, near silent running and cost very little to recharge, so the potential fuel savings are huge. On the downside is the limited range typically 80 miles before a recharge is required so they are unsuitable for high mileage drivers. Consider the alternatives There is a wide variety of vehicles using different sorts of fuels. Choose the most efficient cars for your needs in order to establish a really effective fuel policy. Range extenders Range extenders are electric vehicles that also feature a small engine on board. This motor doesn t power the vehicle, but instead acts as a generator to recharge the electric battery on-the-go, boosting range to around 200 miles before a recharge is required. While range extenders remove the range anxiety of EVs, they are costly and still may not be suitable for drivers required to travel high mileages each day. Management buy-in to a fuel reduction policy Whatever your choice of cars for your fleet, effective fuel management requires the entire business to buy into the fuel reduction policy; which means from the chief executive downwards. If the whole business is committed towards fuel cost reduction, then full engagement in the process is more achievable. Anything less will be flawed. FLEET ALLIANCE WHITE PAPER 4
Managing a fuel policy With the right choice of cars in place, and management engagement in fuel cost reduction, the next step in effective fuel management is to measure fuel expenditure to ensure costs are being contained and identify further potential savings. Fuels cards are an ideal solution to measuring costs thanks to the management information that they can provide. What is a fuel card? A fuel card has the appearance of a credit card. It allows your drivers to purchase fuel for their company cars at a variety of national fuel retailers and can be issued to individuals or to their cars. Most fuel cards provide a discounted rate for fuel, so you are purchasing fuel at a lower cost. One HMRC approved central invoice is produced itemising expenditure for the period usually weekly, fortnightly or monthly which then requires settlement. There are a variety of fuel cards available. Some are restricted in use to particular brands while others can include supermarket retailers. It is advisable to tailor your choice of card to the coverage of your fleet in consultation with your fleet provider. Fuel card benefits Centralise all fuel costs Reduction in admin Drivers are able to buy fuel only Full VAT compliance Up to 45 days of credit Vital management information But, in general, supermarkets tend to provide the lowest cost of fuel and drivers should be directed to use these outlets, unless your fuel card provider can demonstrate savings by using another source of fuel supply. Your drivers should also be briefed not to use expensive motorway fuel filling stations unless it s an emergency and, in such cases, fill up with just enough fuel to allow them to reach a cheaper alternative. The benefits of using a fuel card Centralisation of all fuel costs is the considerable benefit to using fuel cards, along with a reduction in administration time. Drivers are able to purchase fuel when it is required and by restricting usage to just fuel purchases it prevents the odd item of confectionary or coffee being added to the bill. On a large scale basis, such practices can add considerably to the fuel bill. For the business, fuel cards can cut down on administration: out go several hundred fuel receipts replaced by one HMRC approved invoice. This has the further advantage of full VAT compliance, since it is the company buying the fuel not the individual, and future proofs against possible issues with the EU 6th VAT directive. In terms of financials, the cost of fuel is bought at a discount and there is the added advantage of up to 45 days credit on fuel, which can help facilitate cashflow. The other considerable advantage is that a fuel card supplies you with valuable management information that is vital to understanding the fuel performance of your fleet. FLEET ALLIANCE WHITE PAPER 5
Understanding and managing fuel data Effective fuel management requires you to measure performance: how many miles does your fleet cover and how economical is the fleet? So it is vital to capture the number of miles covered by each vehicle and the amount of fuel that has been consumed. You will then be in a position to understand the fuel performance of your fleet and pinpoint areas where efficiency gains exist. It will also allow you to benchmark your performance and initiate further fuel reduction programmes, particularly if used with a fleet management tool (e-fleet from Fleet Alliance is one such example). For small fleets that don t require such sophisticated fleet management tools, capturing the information on a spreadsheet would also work. Above all, the ability to collect and analyse the data is paramount. Make it your mission to understand fuel data Are certain cars consistently below their weighted MPG? Are these vehicles right for your fleet policy? Are some drivers noticeably heavier on fuel than others? Fleet management actions based on fuel card data With the ability to analyse fuel spend against mileage and cars, you will be in a position to identify exceptions to general trends. Why are some cars consistently below their weighted average MPG? Does this indicate that such vehicles should no longer be included on your policy in the future? Or has the wrong fuel type of car been allocated to a driver whose driving patterns have changed? Are some drivers noticeably heavier on fuel than others? In which case, can you implement driver training courses to modify this behaviour? Should you introduce telematics to your fleet that can provide superior real time navigation and better fleet deployment based on improved logistics? And what would be the fuel saving following the introduction of a telematic strategy for your fleet? The benefits of understanding your fuel card information extend beyond the improved control of fuel spend. They include the ability to spend less on fuel thanks to the identification of costlier cars, and increase safer driving techniques and strategies, which will also then reduce driver risk and the likelihood of vehicles being off road through accident damage. FLEET ALLIANCE WHITE PAPER 6
Mileage reduction policies Fuel spend can also be curtailed by identifying ways to reduce mileage travelled and encourage more economical driving styles. The Energy Saving Trust has a list of Smarter Driving programmes on its website (www.energysavingtrust.org.uk/organisations/transport/products-and-services/ smarter-driving). These can assist your organisation with eco driving techniques that not only make drivers more fuel efficient, but safer, better drivers too. Having introduced smarter driving it is important to sustain smarter driving standards and maintain the downwards pressure on fuel use. This can be achieved through incentivisation programmes, such as the introduction of economy leagues with, for example, prizes for the most fuel efficient. Telematics can help you with mileage reduction strategies, but also consider how car use can be curtailed: are all business meetings necessary? Could teleconferencing or videoconferencing work in its place? It s always important to keep in touch with key clients, but would a reduction in face-to-face meetings and an increase in phone contact work just as effectively? If so, how would you instigate such a policy for your fleet? Conclusion Managing fuel costs effectively is a multifaceted task but the essentials are: Things to consider Choose vehicles based on fuel efficiency Centralise costs with fuel cards Analyse fuel card data Consider other fuel reduction methods the correct choice of car based on a fuel efficiency benchmark; fuel cards to centralise costs; using fuel card management information to measure and further reduce your fleet fuel costs; introducing additional fuel saving measures. Effective fuel management is central to a more efficient fleet. It also has the benefit of generally improving driving standards that can also lead to a reduction in the risks facing your fleet, enabling further fleet cost savings. What to do next? This White Paper should be read in conjunction with our previous White Papers on Free Fuel and Saving Money on Fuel. You should then consult your fleet management company to discuss your requirements further and how they may be put into practice. FLEET ALLIANCE WHITE PAPER 7
Additional Reading Visit www.fleetalliance.co.uk/whitepapers to download any of our previous white papers. Making company cars work for you This white paper is about how you can get the best company car you can drive, for the least amount of tax. Saving money on fuel Experience tells us that it is highly unlikely for fuel prices to become less expensive. This white paper explores fuel cost reduction strategies. Planning for tax changes This white paper considers April s tax changes and what these changes are and how it might impact on your company car policy. Free Fuel How do you break the stranglehold of free fuel provision? This white paper examines how this can be achieved successfully. Hybrids and their role in lowering company car tax Hybrid cars are one answer to reducing company car tax exposure. This white paper outlines how hybrid cars could work for your fleet. Company car tax This white paper discusses the effects of April 2012 changes on the company car tax system and how they have a significant effect on the benefit in kind system. Copyright Fleet Alliance Limited 2014. All rights reserved. Fleet Alliance Limited, Granite House, 31 Stockwell Street, Glasgow, G1 4RZ. T 0845 601 8407 F 0845 601 8408 E info@fleetalliance.co.uk W www.fleetalliance.co.uk