We have pulled together the opinions of four industry leaders, to see what business car operators can expect during 2014.
What follows are the thoughts of BVRLA chief executive Gerry Kearney, Lex Autolease’s senior manager, strategic fleet consultancy Andrew Hogsden, Leaseplan chief executive David Brennan, and ICFM chairman and Leasedrive commercial director Roddy Graham on the hot topics that they predict will be the key issues in the coming year.
The economy/growth
Hogsden: Although the economy has shown encouraging signs of recovery in the past year, the upturn is likely to be steady rather than spectacular during the next 12 months.
Keaney: As with 2013, new leasing business will come from SMEs looking for alternative sources of vehicle finance, the continued popularity of salary sacrifice schemes, and the growing popularity of competitively priced manufacturer-funded personal contract hire.
Residual values
Graham: Following a strong performance in 2013, the general consensus is that RVs will retreat a little next year. The average resale price achieved across the top 50 leasing companies was 8% above the expected RV performance. However, how well they have predicted future RVs when writing business this year, only time will tell.
Keaney: Average prices for used fleet vehicles hit record levels in 2013, and this trend looks set to continue this year. Rising consumer confidence will boost demand, and the continued dearth of quality three to five-year old stock will keep values high in the short to medium term.
With healthy demand from retail and fleet customers, the BVRLA hopes the continuing growth in new car sales will be well balanced, and that manufacturers will take a disciplined approach to self-registrations.
Funding
Hogsden: Contract hire is likely to remain the preferred choice for large organisations. As a total vehicle management package customised to the needs of the business, it is a highly desirable, manageable and affordable option for the majority of companies.
But while some things will stay the same in 2014, we may see continued growth and interest in employee car ownership (ECO) programmes and contract purchase in the coming year.
Keaney: BVRLA members are likely to see opportunities for refinancing as new funders wish to be part of this attractive sector, and we anticipate more investors will enter the sector in 2014.
Administration
Keaney: The Driver and Vehicle Licensing Agency’s move to providing centralised services from a new online fleet portal should result in major cost savings for fleets, but they will have to adapt to a new way of working. The introduction of the electronic V5C vehicle registration document and the withdrawal of the driver licence counterpart are two examples of existing processes that will have to change.
The driver licence changes are a particular concern, and the BVRLA is working with the DVLA to ensure the vehicle rental and leasing sector is provided with an alternative system for checking driver endorsement and disqualification information on a cost-effective, real-time, 24/7 basis.
Managing costs and vehicle choice
Graham: I don’t believe we will see any lifting of the foot off the cost-saving pedal for some years yet. Fleet operators will continue to make lowering costs their top priority, conducting a careful balancing act between achieving lower costs while not compromising customer service satisfaction. Influencing driver behaviour is another major way of cutting costs, not only on fuel but SMR, accident, mileage, and wear and tear.
Whole-life costs are, however, surprisingly still a neglected area by many, and a more sophisticated approach is required to gain a true picture on costs. Total cost transparency by fleet management providers is also essential, as well as world-class fleet management systems, integrated solutions and top quality people.
Hogsden: Fuel, of course, will always be a key consideration for fleets. But as manufacturers continue developing cleaner and more cost-efficient products, companies can increasingly look to smarter vehicle choices as a more sustainable way of managing costs in the future.
And while the petrol-diesel debate continues into 2014, we see traditional diesel remaining the fuel of choice with over 80% of our fleet cars diesel fuelled – and we don’t see that changing anytime soon. We will see greater emphasis on Whole Life Costs, giving organisations an in-depth and true breakdown of running costs for the life of the vehicle. Working with organisations in this capacity will be integral in ensuring they get maximum benefits now and in the future.
Business travel behaviour and operation
Brennan: The careful and effective management of fleets will remain a priority for the organisations that rely on the mobility of their staff to help meet their business needs. The Autumn Statement marked a positive end to the year, with the chancellor announcing a further fuel duty freeze, which will help to relieve some of the financial pressures felt by motorists.
Nevertheless, motoring costs are rising, and leasing companies must continue to provide tailored fleet solutions for businesses whilst also being prepared to review fleet structures for maximum cost efficiency.
Graham: “Business insight firm International Data Corporation has predicted that by 2015, 37% of the world’s entire workforce will work remotely using mobile technology. The implications for fleet are all too clear, especially given the drive to lower costs, the greater attention paid to corporate social responsibility, and the increased use of improved conference technology. With business mileage already dropping, expect business mileage to go just one way: downhill.”
Keaney: The gradual trend away from pay-to-own towards pay-to-use road transport will gather speed in 2014, particularly in urban areas. New car club, car-sharing and peer-to-peer car rental business models will continue to appear, while smartphone-based technology will make it easier than ever to book, use and pay for vehicles on-demand.
More fleets will embrace these business models when making their transport plans as they look to tackle the cost and duty of care issues surrounding grey-fleet drivers.
Data and technology
Brennan: Looking forward, it is probable that next year we will see the first real steps towards the connected car, as drivers increasingly link their personal devices to their vehicles, and driverless cars continue to inch towards widespread road testing.
Graham: Influencing driver behaviour can have a significant impact on fleet costs. More far-sighted use of available telematics technology can not only ensure that the vehicle asset is protected but that the all-important employee asset is too. The amount of big data now available is incredible and it is a matter of properly making use of that data, both from a legislative standpoint and from an intelligence viewpoint.
Telematics is now so sophisticated, it’s not so much a question of what knowledge we need to collect but how do we correctly analyse it for the common good of company and driver. Predicting driver behaviour to head off negative behaviour is far better and more useful than correcting it once it has taken place. Predictive analytics will therefore be a key tool in the telematics armoury.
Keaney: Vehicle and driver data will be a key focus this year as companies try to ascertain what is available, where it is, who owns it and how it can be used. The fleet sector must understand the opportunities presented by connected vehicles and smartphone apps, as it will face increasing competition from technology companies, vehicle manufacturers and other transport operators.
Electric vehicles
Hogsden: CO2-emission legislation and Government funding will undoubtedly power new developments in electric and plug-in vehicles. The Government’s pledge to invest tens of millions of pounds in developing infrastructure for electric vehicles shows confidence in its future.
And as manufacturers release new models to meet emission, efficiency and cost-saving demands within the marketplace, we are likely to see an increase in uptake.
Keaney: There are plenty of technological developments on the horizon, and 2014 will see the biggest push yet from EV manufacturers. Renault and Nissan will aggressively market their products against new models from competitors including BMW, Ford, Audi and VW, and this competition should produce some more attractive pricing and aftermarket packages, stimulating volumes through the 10,000 barrier for the first time.
The Office for Low Emission Vehicles is keen to boost fleet uptake of ultra low-emission vehicles and is developing a new set of policy measures and tax incentives. These changes won’t be implemented until 2015, so for the time being OLEV is likely to concentrate on boosting the awareness and understanding of ultra low-emission vehicles by working with organisations such as the BVRLA, the Association of Car Fleet Operators (ACFO) and the Energy Saving Trust.
Any other business
Brennan: Amidst these predictions, there is one certainty that we can look forward to in 2014: the death of the paper tax disc, a move which was announced in the chancellor’s Autumn Statement and one that is arguably long overdue.
Graham: As more organisations focus on their core activities, there will be more demand for fleet management. Medium and large-sized organisations will wish to leave fleet management to the experts and turn to fleet outsourcing specialists offering a wide range of services, from funding to salary sacrifice, and technological innovations. However, closer partnerships will be essential to maximising benefits, and clearer pricing transparency will become more prevalent.
As always, the number one prediction is that there will be more industry consolidation. The top five [leasing companies] registered the biggest fleet growth of 5%. As profits rise, and the wider economy continues to improve, certain leasing companies could become targets, and the sector will undoubtedly attract new investors. Interestingly, the biggest changes were in leadership, with six of the top 10 seeing new men behind the wheel, indicating possibilities for changes in direction.
