the importance of clarity
for fleet planning

As anticipated, the Chancellor’s 2018 Spring Statement brought no new announcements for the fleet industry, meaning there is still a lack of clarity to help fleet planning post 2020/21. From tax bands to charging point infrastructure, a lack of clarity could hinder businesses' ability to make informed fleet decisions in line with the government’s target of reducing vehicle emissions and eliminating petrol and diesel car sales by 2040.

POST 2020/21 COMPANY CAR TAX BANDS

We recently ran some Twitter polls and were surprised to find only 54% stated that a lack of clarity about company car tax after 2020/21 is impacting future fleet decisions.  

We believe clarity is extremely important for businesses. Fleets need to be able to plan in 4/5 year cycles for there to be confidence in the decisions they make to be as effective and cost efficient as possible for the long term.

Therefore improved clarity around taxation post 2020/21 would really help this planning especially around long term electric vehicle (EV)/plug-in hybrid electric vehicle (PHEV) suitability.

To enable fleets to future proof their policies, we believe there needs to be greater clarity on:
•    any further tax hikes on diesel vehicles which could make them prohibitively expensive
•    whether tax incentives for electric vehicles will be maintained to incentivise immediate investment in a more environmentally friendly and cost-effective fleet

29% of those polled agreed bringing the 2% tax rate forward to 2019/20 is the one factor that would increase the uptake of ultra-low-emission vehicles (ULEVs).  We agree greater clarity on the future tax structure will support more informed decision-making, helping businesses build a fleet that not only matches operational needs but is also cost-effective and meets driver choice.

2% COMPANY CAR TAX

The cautious uptake of EVs/PHEVs by UK companies must be partly due to the current punitive short-term tax increase on ULEVs and the overall mixed messages that this gives. The 2017/18 tax rate on zero-emission company vehicles is set to nearly double from 9% to 16% by the 2019/20 tax year. Then in 2020/21, the tax rate will drop sharply to 2%.

This steep interim tax increase has caused many businesses to hesitate before investing in electric. In fact, the tax increase coupled with the high acquisition cost can make certain ULEV and electric vehicles more expensive than their diesel or petrol counterpart.

The slow rate of adoption shows just how important a factor tax rates are when it comes to making decisions about fleet acquisitions. The uncertainty behind long term tax strategy creates budgeting challenges for businesses and taxpayers fearful of future tax rises.

Ashley Barnett, Head of Fleet Consultancy at Lex Autolease, said: “We believe an increase in the tax incentives for ULEVs ahead of 2020 would be welcomed by fleets and tax payers alike. The cost of many of these vehicles already makes them prohibitive for some from a fleet perspective.

“This really would make a difference to the level of ULEV uptake we’re likely to see from fleets in the short and longer-term. This could provide fleets with the incentive and certainty to commit to a vehicle policy weighted towards ULEVs.”

Decision-making for ULEVs is already difficult enough. The pace of technological development and change in this sector is so rapid1 that it can throw doubt on even the most-informed decisions on fleet acquisition and driver choice – the lack of clarity on tax bands after April 2021 just compounds the issue.

CHARGING POINT INFRASTRUCTURE

Our Twitter poll also looked at whether an improved charging point infrastructure would enhance consideration of a plug-in vehicle. 79% of respondents said that it would make a difference.  

In 2017, the government announced that it would establish a £400 million fund for developing a national charging network for electric cars, with the expectation that the number of electric charging point locations will outnumber traditional petrol stations by 2020.

In February 2018, a parliament report on electric vehicles and infrastructure stated that: “The present Government believes that infrastructure is best planned and delivered locally by public authorities, businesses and individuals.”2

Chris Chandler, Principal Consultant at Lex Autolease, said: “Although we welcome government investment in charging infrastructure, definite plans for the rollout and placement of charging locations across the UK remains uncertain, and this can make it difficult for managers when determining how big a part ULEVs will play in their fleet. A definitive statement on whether the government plans to devolve investment in charging infrastructure would be welcome.”

GOVERNMENT GRANTS

Our Twitter poll asked whether government grants are crucial to encourage the further uptake of electric vehicles. 67% of respondents said they were; 33% said they were not.

Currently the government plug-in grant covers 35% of the purchase price of vehicles up to a maximum of £4,500, that emit less than 50 grams of CO2 per kilometre and can travel at least 112 kilometres with no emissions at all. The grant was set to cease in 2018, but was extended in the 2017 Autumn Budget to 2020.

These results demonstrate that the longevity of the grant is an area of concern for the continued growth of alternatively fuelled vehicles.

CLEAN AIR ZONES

In 2017, the UK government published a Clean Air Zone Framework3 that sets out the principles for what it calls a “transition to a low emission economy”. In addition to London, there are currently five cities which will introduce Clean Air Zones (CAZ) by 2019, with another ten proposed.

Although only 6% of respondents in our Twitter poll stated that CAZs would be the main factor that would increase their uptake of electric vehicles, the potential exclusion of non-compliant vehicles from CAZs could become an increasing factor in fleet decision-making and, particularly for Light Commercial Vehicles where engine technology lags behind cars.

Although it was not expected, the UK government provided no updates on the implementation of CAZs, Chris Chandler commented: “CAZs are essential to improving air quality in urban areas. Although clearly local authorities need the flexibility to implement zones that suit their locality, a standard regulatory framework of incentives and measures to encourage cleaner fleets would be a positive step. UK fleets are at the forefront of green fleet adoption so it’s essential that there are consistent regulations and administrative procedures across cities and regions that don’t increase costs to businesses or drivers.”

VEHICLE AVAILABILITY

In addition, in a separate poll 35% of respondents said that vehicle availability was the most important factor when considering a plug-in vehicle. We agree this is important and welcome vehicle releases and look forward to increased volume and innovation in this area to meet consumer demand in all car segments. The availability of ULEVs has improved considerably over the past few years – over 40 models are now available in the UK, with high-profile cars such as the Mini E and Volkswagen ID set for release in 2019 and 2020 respectively, and with the recently released Jaguar I-Pace having an EV range of 300 miles.

The UK government has made a commitment to ban the sale of all new petrol and diesel cars by 2040. However, electric vehicles currently make up only around 2% of the total new car market4.

This slow rate of adoption is no doubt partly due to ill-founded perceptions about electric cars – just 27% of business decision makers currently think that electric vehicles are a practical option for company cars. However, the desire for all-electric vehicles remains strong, with 70% of business drivers stating they would choose them if their range and performance matched that of petrol cars5.

The charging times and range of electric vehicles has increased, with some models offering a range of nearly 480 kilometres (300 miles)6. However, ‘range anxiety’, pricing, charging times and – in particular – the lack of a widespread charging infrastructure continue to hinder the wider take-up of ULEVs.

OUR CALL FOR GREATER CLARITY

Lex Autolease will continue to support businesses that wish to embrace electric vehicles, and will carry on providing advice and data that can help fleet managers and their employees to make key decisions on vehicle cost and choice7.

Lex Autolease will also continue to seek greater clarity from the UK government with regards to company-car tax plans – clarity that is essential to support business decision-making and provide guidance for businesses that wish to incorporate an electric fleet.

We also urge businesses and drivers to take part in UK government consultations on these important issues.

TAX GUIDE

This guide provides an overview of changes announced by the Chancellor, supported by easy-to-read tables which display the main personal and corporate tax rates.

FUEL CHOICE & EMISSIONS

For more information about fuel choice, emissions and incorporating electric vehicles into a balanced business fleet, read our Fuel Choice & Emissions whitepaper.

CASE STUDIES

To hear first-hand experiences of investing in electric vehicles from our clients, watch our video case studies: Implementing an electric fleet and incorporating electric fleet infrastructure.

DRIVING TECHNOLOGY

To find out more about the benefits and challenges of adopting new technology and changing the way business fleets operate, visit our dedicated Driving Technology page.

PODCASTS

Download our podcast discussing the future of the business fleet, which features a business fleet manager and prominent vehicle manufacturer.