The Future of Vehicle Fleets

Having offered fleet insurance services for over thirty years, our team has seen an awful lot of changes in the vehicle fleet sector. We've seen models and manufacturers come and go, diesel's rise (and fall), benefit in kind taxes rise (and not fall) and inner-city road charging become adopted and (grudgingly) accepted.

The vehicle fleet industry has always been a fast-moving one, though even industry veterans such as us have been taken aback by the pace of change that has overtaken it in recent years. Such has been the maelstrom that has engulfed it - what with questions over fleet fuel types, tax and vehicle ownership, that some have even questioned whether fleets as we know them today will even be in existence in another 5 years. In this latest blog from Quick Fleet Insurance, we'll look at what the future might hold and look to some of the changes and challenges that lie ahead.

The Future of Vehicle Fleets

The Death Of Diesel: The Electric Dream Becomes A Reality?

The debate over diesels is a topic we've blogged about in the past and it's one that extends well beyond company vehicles. Since the VW scandal, sales of diesels in the UK have plunged. In the first two quarters of 2018 alone, they fell by a third with 153,594 new diesel cars registered in March 2018, down from 244,593 the year before according to figures from the SMMT. The collapse in demand has been brought on by a variety of factors, including;

  • The perception that diesels are dirtier than we have been led to believe
  • Rises in vehicle excise duty that have made them more expensive to own
  • Rises in fuel duty that has made them far more expensive to run
  • Diesels being linked to the decline in air quality and 20,000 premature UK deaths

While the environmental impact of diesel is debatable with reports showing that many are actually better for the planet than their petrol equivalents and with manufacturers producing ever cleaner models, it seems clear that their days are numbered. The government has announced an outright ban by 2040, one that is already under pressure as leading industry figures call for their demise by as early as 2025. The practicalities of imposing such a ban – even by 2040 – looks imposing. Diesel accounts for over 40% of UK fleets and phasing them out completely will be both expensive and difficult to achieve.

But let us suppose that by 2025 we are forced to face life without them; what then? What will power our cars? In an ideal world we'd be looking to electric vehicles. With running costs as low as 2p per mile, better reliability and emissions cut by 40% they appear to offer the best of both worlds. The question is when will there be the models, the charging infrastructure and the vehicle range to make them viable for fleet owners? All the big motor manufacturers, as well as new players like Apple and Dyson, are pouring billions into electric motor development, but thus far only Volvo has pledged to ditch conventional fuels and niche players like Tesla have, for all their hype, failed to turn out the mass production that will be required.

No; the fleets of the future will be fossil fuelled for many years to come with hybrids being the most likely stepping stone to the clean electric dream future we've been promised. Advances like BP's recent acquisition of Chargemaster and its goal of adding fast charging points to its 1,200 forecourts will help, but with just 2% of the UK's cars being electric, there's a very, very long way to go…

Grey Fleets: Will Companies Wake Up To The Cost?

Grey fleets – those made up of private rather than company-owned vehicles – have been on the rise as businesses look to cut costs. Ironically grey fleets often turn out to be more expensive owing to businesses having to spend time checking insurance levels are high enough and the risk of legal action. The 1974 Health and Safety at Work Act states that employers and employees have a responsibility to not put others at risk owing to driving for work. In other words, just because someone you employ is driving a car that they own rather your company, it doesn't follow that if they have an accident while driving for work that you can't be held liable. The law around corporate manslaughter also still applies, so if a company cannot adequately prove it's fulfilled its obligations towards a driver following an accident, the consequences could be severe.

With the whole model of fleet provision changing – what with more companies looking at rental and fleet mobility solutions (see below) – it must be hoped that grey fleets will soon become a thing of the past.

Changing Fleet Ownership Model

The traditional model of fleet vehicle provision is also changing. Not so long-ago drivers were given a list to choose from and fleet managers bought or leased what they needed. As technology has progressed, however, new models are emerging. Rental fleets have been pioneered in the UK by firms such as Nexus who service over 1,000 customers with an on-demand vehicle service. Offering advantages in terms of capital outlay and running costs, rental also fits in well with the changing face of the workplace, with more people working from home and allows for vehicles – even special types fleet vehicles – to be accessed as and when required.

The future for this model looks bright. Nexus have posted double-digit growth in the past 4 years and 2018 is expected to be their biggest year yet. As the technology continues to advance and costs fall, this could well be the solution that more and more firms adopt.

The other big trend in terms of operational modelling is fleet mobility. Fleet mobility allows firms to reduce costs of fleet travel while lessening their environmental impact and often involves the merging of fleet, travel and compliance departments to create travel efficiencies. The aim is to not just use company vehicles but also public transport to move personnel and goods. As Martyn Briggs of research company Frost and Williams puts it, 'We are witnessing a shift away from just considering the total cost of ownership of fleet towards managing the total cost of mobility for the organisation.'

The government is keen on this idea and is promoting it as part of its 'sharing economy', with incentives on offer to encourage its use. Given the cost and environmental benefits, this is another innovation that looks to have a big future.

Benefit In Kind (BIK) Tax Levels

When it comes to company cars, the level of tax charged could well be a determining factor as to their future. New figures from the HMRC show that the level of driver take-up for company cars is continuing its decline with 940,000 paying BIK in 2016/17, down from 960,000 in 2015/16. According to the HMRC, the main cause of this is believed to be the increases in the appropriate percentage for company car tax. Since the days of Nigel Lawson, company cars have been seen as a soft target for revenue-hungry Chancellors, but if the decline continues, as it looks set to do, then they're in danger of killing the golden goose. The situation could be made even worse when the new World Light-duty Test Procedure (WLTP) CO2 checks come in on the 6th April 2020 and emission level calculations change.

Fleet Insurance Costs

Finally, and on a more positive note, fleet insurance quotes could be set to fall. The price hikes caused by the unexpected, and frankly ill-thought through, Ogden Rate change of 20th March 2017 which took the discount rate from 2.5% to -0.75% should have been reversed. Agreement has been reached that the rate will 'regularly reviewed' and this should give insurers the certainty they need to keep premiums down.

The Future of Vehicle Fleets

The future of fleets looks set to be one of continued change and development. Many uncertainties remain – the future of diesels, the government's attitude to the sector in terms of tax and support, and drivers' appetites for company vehicles. Realistically the sector will do what it's always done in testing times and adapt and thrive. Big changes are coming, and it will be fascinating to see how they pan out.

If you'd like to know more, then please feel free to get in touch by calling us on 01869 389 421, or if you'd like to get a cheap fleet insurance quote then please click here.

Coversure Insurance Services (Leyton) T/A Coversure Insurance Services (Worcester Park) is authorised by the Financial Conduct Authority. Ref. 307715.

Registered Address: 177 Lea Bridge Rd, London E10 7PN. Registered in England No: 04259052.

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