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FUTURE OF FLEET: Fleet 2020 report

Date: 02 March 2010

From taxation to rethinking the role of the company car, a new report considers what the fleet industry will look like by the year 2020, writes Rachel Burgess

Companies need to regularly assess fleet strategy to ensure maximum capital gain, says a new report on the industry.

Researched and written by automotive expert Professor Peter Cooke on behalf of the UK's second biggest leasing firm LeasePlan, Fleet2020: Business car or business mobility? interrogated more than 100 fleet industry professionals via a series of group discussions.

Prof Cooke analysed the economic framework considering reviews by the Bank of England, the Treasury, political parties, other banks and consultancies. CBI economic reviews have been used to gauge the framework company cars will operate under.

The research recognises it is unrealistic to seek evaluation of the fleet industry in the medium to longer term, but suggests it is still important for organisations to think strategically about the way fleets develop for the future.

Prof Cooke found in his industry discussions that fleet operators are beginning to come to terms with potential issues associated with less capital availability, the changing nature of business and globalisation, and the need for more forward planning.

Meanwhile, he said, the fleet and leasing industry will need to develop products and services demanded by the user: the challenge is for the user to determine changes in the business environment against what cars will be required.

Cooke advised that Business will need to be aware of the real, rather than desirable, needs regarding company cars and be conscious of the total cost implications of such a high-cost working tool.

BusinessCar has digested the 35-page report, and takes you through the more notable concerns and opinions of the contributing experts.

More aggressive taxation

It is assumed tax policy will become more aggressive for the foreseeable future, due to the unhealthy state of Government finances, which, in turn, may impact on investment decisions for vehicles.

The challenge is whether the Government intends to retain certain taxes as revenue-generating methods as was originally suggested, or use tax nudging as a way of rewarding acceptance of, and movement towards complying with, the green agenda.

Taxation issues associated with personal or company carbon footprint as well as opportunities for carbon trading were also considered to be a driver for change.

Some benefit was seen, from a CO2 point of view, of having a single consolidated tax. Fuel, road use and any associated tax could form one vehicle use-linked tax policy.

Generally, CO2 issues will continue to rise through the agenda and respondents felt technology - telematics, alternative fuels, monitoring - will help manage total emissions.

Fleet managers take more central role

The role of the fleet manager and certainly the person responsible for fleet funding are expected to become more central to the business.

More management involvement will become the norm as core fleet decisions such as costs, CO2 issues, safety and duty of care become more important. Risk management, meanwhile, will become a high-profile part of the fleet operation.

As the company car is reined in as an ongoing cost, fleets will also become more integrated into total company operation. Fleet operation will see a significant split between administration and management roles, with the former being widely outsourced and internal staff focusing on management.

Outsourced services to specialist organisations could include capital provision.

Return on investment for car provision, either directly funded or though a leasing deal, has started to penetrate fleets and will become the norm sooner rather than later, according to Fleet2020.

Overall, fleet management will become more professional, thought respondents.

Cars no longer a perk

The perk of a company car is set to be severely restricted with vehicles becoming merely working tools.

Opinions veered to an expectation that the number of people receiving company cars would be reduced.

Other widely discussed issues for car recipients include zero, or potentially negative, financial benefits from the provision of a company car, and the benefits tightly monitored through telematics. The concept of benefit-in-kind is also expected to change.

Employees may move towards a 'menu remuneration' basis, with the company car just one of a series of available benefits.

Cars will become more utilitarian and downsized (see 'Alternative forms' box, right).

While the role of company car will move to a working tool, some companies may still use it to recruit "exceptional and scarce talent" said the report.

Alternative forms of business mobility

Downsizing of company vehicles has started and will continue, but there may be problems with senior executives who would rather "pay and be damned" than lose their prestigious business cars, predicted respondents.

In the short to medium term, there will be a move towards city cars in some urban situations to minimise/avoid congestion charges.

Company or departmental pool cars, locally hired, could be used to replace grey fleet vehicles and, over time, other company cars.

Funding is set to be an ongoing problem. Therefore, vehicle manufacturers, dealers and leasing companies may seek to provide finance across the whole review period.

Electronic communications will also play a much bigger part in business as total business mileage is scrutinised and face-to-face contact is reduced.