Paul Barker grabs a cuppa and a chat with one of fleet’s most influential figures – Audi UK Head of Fleet James Buxton.
As we exited the lockdown, Audi’s fleet boss Jams Buxton sat down for an online coffee to chat through how the brand has been dealing with operating in a pandemic.
QHow have the past few weeks been and how are things starting to move now?
If I’m honest it’s going surprisingly well. I think we are really pleased with the performance of the brand in what has been a really difficult time and difficult situation, and right across the business. Order take and inquiry levels have been incredibly positive, and perhaps slightly ahead of our expectations.
We spent a lot of time during lockdown speaking to customers, and it’s really interesting in terms of the big spread of different issues and different challenges that customers are facing. To give you an example, we have some customers that are focused in the healthcare sector, which are a bit desperate for cars, and it needed us to work with them to deliver what we could while the dealers were largely closed. Then we’ve got other customers that are suffering a different set of challenges, and it which perhaps helps to give them a little bit more time before vehicles arrive.
‘Robust’ lease rates helping EV adoption
Improving residual values are underpinning the drop in lease rates to make electric vehicles available for more drivers, with Audi fleet boss James Buxton saying that future purchasers will be willing to pay the same for an EV as equivalent conventionally powered vehicle by the time new cars being leased now hit the used market.
“The residual value positions taken by most leasing companies on BEV products are pretty robust in my opinion,” he told Company Car Today. “I don’t think they’re under-calling the potential future value of those vehicles, and certainly that did happen with the early vehicles,” which he described as a “roller coaster” in terms of predicted values.
“From a used car perspective, by the time those vehicles return to the market in three years’ time, I think we’re going to be in a very different position from a customer consideration perspective,” Buxton continued. “I think there will be far more people that will be considering a used electric car than there are right now, and I think the leasing companies are right to be pitching the residual values broadly in line with what would be the value for conventionally powered vehicle.”
QHow did you gear up for things coming out of lockdown?
It’s a good question and it’s a difficult question to answer. Certainly we knew that the more tactical fleet channels would probably recover quickest. In terms of our strategy, we’ve been focused on making sure that we had extremely competitive offers in the marketplace in that more tactical areas of small business – business contract hire for example.
We’ve also been really fortunate in that we have a couple of major product launches ostensibly during lockdown which hopefully will benefit our corporate customers. We’ve had all-new A3, which, unfortunately, the main launch with our leasing company customers and press etc was postponed. But that’s a fantastic car, and the price increase is minimal versus the outgoing model; in some derivatives it’s literally a £20 difference in list price, but the RV position is significantly enhanced. And even on the core petrol and diesel engines you’ve got up to a 6% reduction in benefit in kind, just from the latest technology that’s fitted to that car, versus the outgoing car. We took over 500 deposits on that vehicle, despite being in lockdown.
And then the other key car as well, is A6 50 TFSIe, the [plug-in] hybrid version of A6. That car gives us another really good reason to be speaking to corporate customers.
We very much see that you need all three powertrains to be successful in the fleet markets, so we need efficient and premium vehicles that are still powered by a conventional petrol or diesel engine, and you need a good range of plug-in hybrids. Then obviously, you also need the full battery electric vehicles which I think we all know will become the cornerstone of the business moving forward. But we’re still in that transition period.
Q As the first in the new range of plug-in hybrids, how has the Q5 been received, compared to what you were expecting?
It’s performed probably more strongly than we originally expected. So certainly, in the fleet space, our order bank is not entirely PHEV, but is dominated by that particular derivative and it is a very strong product in that market. And when we look at A6 TFSIe, we’ve taken the learnings from Q5, and the majority of our production on that car – not all of it but the majority of it – we’re expecting to go down a corporate fleet channel.
Then when you look at e-Tron, again, maybe you could call a slightly short sighted, but that vehicle order take-wise has found a really nice place in the fleet market and 70% of the e-Tron 50, which is a smaller-battery electric vehicle, has been down a fleet channel.
The fact we have some clarity from the government around company car taxation moving forward has accelerated that transition because fleet managers, leasing companies and policy setters can now speak to their drivers with some confidence. Certainly, when you look at a product such as e-Tron or e-Tron Sportback, on an e-Tron 50 over a three year period, it would cost a 40% taxpayer £20 a month over the entire period. When you compare that to even the most efficient petrol or diesel vehicle on the market, not just from our brand but any, and the difference is staggering.
Also, what’s exciting is that we’re hearing anecdotal reports of people opting back in, be it a full company car or be it a salary sacrifice product, which has got to be good news for the industry. Personally, I believe it’s good news for the employer as well because it takes care of some of the concerns that I know a number of our large corporate customers have around grey fleet, compliance and what vehicle is X person turning up in to Y company or Y customer. Hopefully it’s the start of some growth in corporate that will continue into next year and beyond that.
QIs all that growth into low-emission vehicles off the back of the tax changes? Is that what’s driving people back into company cars?
I think there’s two sides to it. I think there is a general shift in consumer awareness and behaviour towards ultra low-emission or effectively zero tailpipe emission vehicles, and I think that potentially will be accelerated as a result of the Covid pandemic. But we know from history that where there are incentives or advantages from a taxation perspective, it can accelerate the uptake of new technologies and we’re clearly seeing that in this space.
I do however, understand and recognise that there will remain the three choices for the foreseeable future because from a company perspective there are still a large number of company car drivers, especially the essential-need drivers, that are probably better suited still, especially from a cost perspective for them and the business, to a conventionally powered vehicle. And then there’s those people in the middle that perhaps sits slightly across both camps when a PHEV is better for their overall commutes, how they operate and how their business operates. But definitely more people are making the full transition than perhaps we originally anticipated.
QWhat’s that doing to lead times and supply for you?
We have a sensible lead time on e-Tron 50 at the moment, so around October as we sit today. We are fortunate in the fact that we are the fourth biggest market globally for Audi so we have always a very positive conversation around production. The factory fully understands the advantageous nature of a BEV from a taxation perspective and so far we’ve been able to secure enough production to satisfy demand.
QHow has the switch from NEDC to WLTP emissions figures gone, and are drivers aware of how their tax bills might have jumped from old car to new car because of the switch to the WLTP?
I definitely think it’s accelerating the transition from ICE to BEV and PHEV, when you run those numbers as a driver, they are very significant. So it’s certainly having an impact there, and I still think, as I said previously there’s a place for diesel and for petrol to a certain extent, especially in the essential user area, the job need area of the market. But as a brand, we have lots of essential user customers but we also have a lot of what I would term the more perk fleet vehicles. And certainly in that perk fleet arena, that transition is underway. On A4 maybe not so much because that kind of straddles the essential user and perk fleet channels, but certainly on the larger cars, the conversation is very much around PHEV and BEV.
And again, one of the challenges we have at the moment is to work with our customers so that they understand that transition, and that we can help them with transitioning their own fleets. For example, with the e-Tron 50, we have a sort of all-encompassing wraparound offer so regardless of the channel, each customer that orders vehicle is entitled to a free wallbox unit. We also have what we call an e-Tron access card which accesses around 50% of the public charging stations in the UK. And that comes with a prepaid amount of credit. Then we’ve also got what we call an e-Tron concierge so if you take an e-Tron, you have access to our 24-hour WhatsApp line, which links directly into our customer services centre. Because, I think, every customer that takes delivery of a vehicle knows how to put petrol and diesel in it. Not every customer will immediately know how to access X charging points versus Y charge point . And traditionally as well, I think those offers those type of offers would have been focused around retail predominantly, because that’s what we’ve always done. And, but we’ve had a bit of a shift internally, so they are now all encompassing offers that include our fleet customers as well.
QAre there other things you can do to ease the transition into electric vehicles?
There are lots of things we need to do and improve if I’m honest. Certainly, the way that we communicate with customers prior to them taking delivery of an electrical vehicle is something we’ve been working on. It’s about sending customers specific communications that will help them make that transition. To give an example, we’ve got a suite of ‘how to’ videos that even before you take delivery will explain some of the aspects that are going to be really important to you – what services you need to sign up for, what’s going to come in the car, what charging cables come with the vehicle so we can try and soften that transition from ICE to what will be in a lot of instances, a customer’s first battery electric vehicle.
We are very good at delivering a car off the transporter, nice customer representative, sit in the car, here’s your handover, off you go. That process now takes a little bit longer, and it’s also compounded by the fact at the moment that you can’t sit in the car.
QWith the pandemic, and Brexit looming on the horizon, how do you see the rest of this year panning out from a demand perspective for the industry as a whole?
That’s the million-dollar question isn’t it? I think all of our underlying data at the moment is positive, in terms of inquiries across all channels, order take across channels, stock conversion, everything that we that we look at. The question is how long does that last and is that solely as a result of pent-up demand, or, is the fact that nobody’s been able to go out and spend any of their disposable income, is that an indicator that we’re actually going to see growth in the market in the latter part of the year? I think our view is that the decline in the market we saw in April, May, and to a certain extent June, will not be fully recovered in the calendar year. So I suppose we’re broadly working towards a flat, half two verses our original planning.
QTo outline where you are with PHEV, obviously Q5 was out last year, and you’ve got A6, A7 A8 and Q7 all hitting the road about now?
We’ve got A6, A8, Q5, Q7 and A7 open for ordering as we speak now, and we’ve two more due for launch by the end of this year, which will include A6 Avant, which will be a nice alternative for corporate customers that maybe want the increased boot space but don’t necessarily need or want a full SUV. [Ed’s note – James wouldn’t comment on the A3 PHEV being the other model rumoured to join the range by the end of 2020!].