The British Vehicle Rental and Leasing Association has been upping its game in terms of lobbying, consultation and research at a time when the fleet picture becomes increasingly complex. The association’s boss Gerry Keaney talks through the industry’s latest challenges and how to address them.
QSo, what’s actually going on in the fleet and leasing industry at the moment?
What everybody would talk about is the backdrop of uncertainty that our members are seeing. The picture becomes confused about what is causing the uncertainty – is it WLTP; is it Brexit-related; is it economic uncertainty as a result of Brexit? End-user customers are not placing orders, and can the orders that are being placed be met?
On the other hand, the uncertainty is good news for many of the rental members; rental companies are generally having an extremely good time in the marketplace because I think this uncertainty is clearly deferring some investment decisions but you still see businesses moving. If your business is moving along, you still need a vehicle, you still need to move your people around, so they seem to be resorting to rental as a short-term viable solution.
BIRMINGHAM READY TO TACKLE NEED FOR CLEANER AIR
The introduction of the Birmingham Clean-Air Zone at the beginning of 2020 will be a big deal, says the BVRLA because it’s the first major scheme of its kind outside of London.
“I think this first wave of Birmingham, Manchester, Leeds are critically important because these are cities with real issues they are trying to tackle,” BVRLA boss Gerry Keaney tells Company Car Today.
“London has got a considerable head start, but learning from Birmingham, Leeds and Manchester will be critical to the further subsequent employment of future clean air zones into cities such as Bristol or Oxford,” he continues.
“We need a national framework, which has now been accepted, and presumably some sort of national framework in terms of signage, charging, consistency of which vehicles will be charged,” he says. “There is a general understanding that we live in a world of national fleets that operate across the whole UK, so we do need to have some consistency in terms of a national framework covering clean-air zones.”
QBut extensions can only go so long before a business has to make a decision?
Increasingly, we see the distinction between a lease company and rental company on all vehicles – trucks through to cars – becoming increasingly blurred.
For our own purposes we can try to compartmentalise these things into silos, but the world has changed and is continuing to change. So, we’re working with members to get to grips with what that means and to understand all these alternatives – mobility solutions, flexi-leases, extended leases etc – that have come into the company car market, and what that means for everyone.
For end-user drivers it seems to be good news, there is flexibility, but the whole thing needs to be put through the mincer in terms of what it means for costs.
The technology, the economics, the availability, the distribution networks; they’re all coming together and giving end-user drivers flexibility as we look to the future. And that is definitely a platform that all of our members see; a lease company sees that as a legitimate business opportunity; a rental company sees that as a legitimate business opportunity; peer-to-peer platforms, whatever they are going to be in the future, they see it as a legitimate business opportunity. We’ve still got a way to go, but it is starting to come together.
QAnd you think that’s going to take on a wider role in the near future?
It’s going to take some time to get operating at a granular level but companies are looking all the time for efficiencies in the cost of operation, or how they motivate their staff. They’re also going to look at the flexibility in terms of how they move their staff around, how they discharge their jobs, how they reward them, how they recognise them and how they are going to give them access to a company car benefit without it necessarily being a company car. All that has got to be considered going forward.
But it goes beyond the platform. This is where lease and rental companies will have an opportunity to really develop because it’s not just about getting the vehicle to a driver, it’s about getting the right vehicle to a driver at the right time, and it’s also about how you support the driver.
QDo you feel that there is a danger in underestimating the importance of the company car and the problems with opt-outs in terms of environmental and safety credentials?
We agree totally with that, and the evidence shows that to be the case. Our quarterly leasing surveys show that for a number of years, company car fleet CO2 levels were declining, and doing so at a much faster rate than the rest of the marketplace as our members were picking up new technology and supporting it. Now, our evidence shows that CO2 on our fleet is increasing again; our rises are discernible and significant. This is one of the consequences of Government policy which is rather disconnected, to say the least, in term of a green policy for reducing CO2, reducing emissions, getting new technology on to the roads. Then there’s a taxation policy that is completely disconnected from that in terms of the reduction in the plug-in grant, the lack of insight into forthcoming benefit-in-kind rates and the uncertainty around WLTP and the impact that it will have on BIK. We are plugging away and working hard to get answers out of Treasury and out of HMRC on this, but at the moment there’s not much that is forthcoming.
QAre you getting a sense of whether that is an accidental cause and effect, if it’s a deliberate thing or whether everyone is too busy to deal with it?
I don’t think it’s an accident, but neither do I think it is a well-thought-out strategy being implemented. There has been an increasing divide between Treasury objectives and other Governmental objectives. And that may always have been the case but I suspect it is more polarised now than it has been in the past.
QEven if you can see the logic in what the Treasury is doing in terms of trying to ramp up income from company cars, is it going to work or have they miscalculated just how many people could eventually opt out completely?
We think the treasury have underestimated the problem. We have more data than the Treasury has because they will always be at least one or two years behind. So we think they are underestimating the impact on the company market and we believe they are underestimating the impact that will have on their revenues long-term. And they are underestimating the impact this will have on the wider, low-emissions green agenda.
But at the same time, on behalf of the fleet sector, we were also saying to treasury that we recognise that we are here long-term, not just about fire-fighting for today and we want to have a discussion with you about the tax revenues that come to you out of our sector.
QWhat position are you taking on future taxation of the sector?
We can’t ignore the fact that as we increasingly move towards electric, we will see the fossil fuel taxes declining, and start to decline really rather rapidly, and we want to be part of a discussion with Treasury about how revenues from our sector over a period of time can be sustainable. It’s unrealistic to think that they will throw their hands in the air and say ‘OK there is no tax coming from fossil fuels now so off we go somewhere else’.
We’ve issued our Road to Zero document, which is the first time we’ve got the key stakeholders in the whole sector talking about potential opportunities of how tax revenues might be secured long-term. It has gone out into Treasury, I think they like it, they like the direction it is pointing to and they like the fact that there is a longer-term discussion that can be had here. But at the same time we need some short-term fixes because the policies at the moment are so unconnected that it is getting in the way of sensible business decisions being taken.
QWhat are your answers to the problems the industry faces?
We have some very clear answers for the short-to-medium term. We do need long-term visibility on BIK rates; we do need much more closely connected policies in terms of EVs and tax incentives; and we need to be able to get recognition that the company car market and the role it can play in terms of the green agenda is being undermined at this point by the lack of connectivity to the taxation system.
I think they have squeezed benefit-in-kind as much as they can and they need to accept that what they have got they need to stick with and freeze. We don’t see any justification for any further increases in BIK rates, either on the back of WLTP or on the back of any other disjointed thinking that may go on. And then the longer-term solution – we talked about road charging and road pricing. Politically, talking about road charging is a nightmare, no one in Government wants to talk about it, but we believe that is something that needs to be legitimately discussed, because it is definitely one of the sensible opportunities.
Moving to road charging in the future
I don’t think there is any choice. Politicians need to stand up and be prepared to have some of these discussions because it makes no sense to say we will even more heavily tax a smaller and smaller population of company cars. There are officials in Government, I suspect, that recognise that this discussion needs to take place.