UK-based fleet solutions provider, Fleet Alliance, has achieved a 214% surge in orders for electric vehicles (EVs) in the last 12 months as companies seek to capitalize on lower tax rates and boost their green credentials.
Currently managing a fleet of more than 37,000 vehicles, the company noted that since the start of 2018, there has been a rise in EV orders of more than 5,000%.
Despite the pandemic-related restrictions, 2020 was a record year for EV sales at a national level, with one in eight orders were for EVs in 2020, up from around one in 505 in 2019.
In an effort to find out what was driving the recent surge in EV orders, Asset Finance International sat down with Martin Brown (pictured above), managing director of Fleet Alliance.
He said: “Personally, I think that the government signaling the end of combustion in 2030 is a huge factor. But looking at it from a baser level, people can save a lot of money by using an EV as a company car.
“It’s obviously key that we focus on the whole-life cost rather than just the running cost because the actual EVs are often more expensive in rental terms. However, if an employee has to travel a lot of miles for work, if you take out the cost of their fuel and replace it with electricity the numbers show a stark difference in favor of the EV. Then, you also have to factor in that there is no Benefits-in-Kind tax (BiK) for EVs which pushes the cost down considerably further.”
Worst performance since 1992
According to the Fleet Alliance, the increased demand for EVs came about despite a 30% downturn in total new car sales, the worst performance since 1992. However, the demand for battery electric vehicles (BEVs) grew by 185.9% to 108,205 units, while registrations of plug-in hybrids (PHEVs) rose 91.2% to 66,877.
Furthermore, the make-up of the Fleet Alliance fleet has changed in recent years, with the number of pure EVs amongst the company’s orders for Ultra Low Emission Vehicles (ULEVs) reaching 48.2% in 2020. This marks a sizeable increase from 28.5% in 2019.
In the past few years, several cases have emerged of companies opting to use PHEVs in their fleets to capitalize on the incentives and tax reductions, and then only using the internal combustion engine to maintain the convenience.
When asked whether he still sees any examples of this, Brown said: “Well, we know that this type of behaviour occurred in the market, however I think it was slightly overplayed. In my opinion, people were taking the actions of one or two companies and generalizing it as an industry-wide scam. However, we try to mitigate the risk of this happening by suggesting our clients go full-battery electric and avoid PHEV altogether.
“Our entire management team now drive EVs because we think that you have to be in it to understand it, and we also have a full-electric consultancy service which places us in a prime space to advise a customer on what type of vehicle to go for. Therefore, we are able to walk a customer through any concerns and explain how a BEV would make more sense for them than a PHEV.”
Pure EVs now account for 15.2% of the Fleet Alliance managed fleet compared to just 3.8% in 2019, and 0.3% in 2018.
What are some of the barriers to adoption?
Brown continued: “One challenge that always sticks out to me is that we have a couple of people in our team who live in flats and therefore are not able to charge their vehicles from home. I think this will pose a problem, as we haven’t really seen any clear solutions other than them travelling to the nearest fast charger a couple of times a week to top up. However, the big energy companies are starting to sense the opportunity in changing their old petrol stations and combustion sites into fancy eco-friendly charging sites.”
According to the Fleet Alliance, the clearest indication of how buying habits are changing can be seen in the orders for new diesel cars from its customers. These have plummeted to just 26.2% of the fleet, compared with 45.4% last year and 58.5% two years ago.
Make up of Fleet Alliance fleet
Brown added that these figures reflected the desire of company car drivers to move to less polluting, tax-beating models, allied to the government’s recently announced decision to ban fossil-fuelled vehicles from 2030.
He said: “Benefit-in-kind tax rates for pure EVs are 0% in the current tax year, rising to 1% from April and 2% for 2022/2023.The 2% rate is then frozen for the following two years. This has had a big impact on buying habits.”
How has the Fleet Alliance fared during the pandemic?
“As we came into 2020 with a record sales pipeline, we were of the mind that it was going to be a great year. Needless to say, it didn’t go quite how we envisaged!
“Luckily, we had already been diversifying our range of services to the point where we now cover most areas in the market from consumer, SME, small fleets of 25-30 vehicles, all the way up to larger fleets and fully-outsourced fleet management with clients up to 1,000 vehicles.
“The run-rate from August 2020 suggests that this year will be good for us and we’re in a good, stable place. As an example, we currently have more than £1 billion of assets on our book”
Founded in 2002, Fleet Alliance provides a range of independent supplier of vehicle funding and fleet management services including its Fleet 360 model which provides a combination of advice, products, competitive pricing, and outstanding service. The model delivers its services and solutions to clients through the cloud-based fleet management reporting suite, e-Fleet, and supports drivers with the smartphone app e-Fleet Mobile.
Brown continued: “Traditionally, one of the objections to using a broker was that people didn’t want the hassle of dealing with multiple funders for different assets. We decided to overlay technology to make that journey really easy for the drivers and fleet managers and e-Fleet is what we came up with. Put simply, by inputting their registration number a driver can connect directly to the funder that applies to that vehicle. We developed it completely in-house and it has since become a key part of our offering across our entire fleet.
“In terms of this digitalization trend, we managed to get ahead of the market a few years ago and we’ve stayed that way for a long time. But, in 2021 our main aim is to advance our digital journey so that we’re not caught with legacy systems and can better serve our customers. The reason that many people deal with brokers is to get a better price, but that will be diluted if the good price comes at the expense of easy digital services.”
According to the Finance & Leasing Association (FLA), broker-introduced business suffered a 37% decrease in the three months leading up to July 2020 compared to the year before.
However, Brown stated that he had not seen any leasing brokers falling by the wayside.
He said: “In fact, due to the surge in consumer online sales during the pandemic, I think that many brokers have done well. However, whilst I haven’t seen any dropping out of the marketplace, I have seen consolidation. A lot of the smaller lifestyle brokers who do around 1,000 cars a year have seen the compliance getting more intense coming out of the pandemic and are turning to consolidation to deal with that. An example of this is our acquisition of Neva Consultants back in 2017.”
Speaking on the future of the Fleet Alliance, Brown explained that 2021 is forecasted to be a record year for the company.
He said: “We’re aiming to be the leading EV leasing broker and we think that, in terms of volume, we’ve made good inroads there. Also, I think it’s crucial that we focus on building and improving our digital journey because it also ties in with EVs. For example, the tech in EVs seems to be leagues ahead of the combustion engines and people like Tesla are changing it so drastically which has led us to think about whether our tech needs to change to match this. Looking ahead into 2021, we’ve forecast that more than 60% of our sales will be non-combustion which is unthinkable from 24 months ago.”