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BVRLA: Can low-emission cars survive Government?

Date: 13 September 2012

BVRLA chairman John Lewis

Announcements in the Government's recent Budget have the potential to damage the take-up of low-emission vehicles, especially for fleets. BVRLA chief executive John Lewis talks to Paul Barker about the implications, and the solutions his organisation suggests

Although there's no hiding the fact that there are some serious financial holes that need plugging in the UK, it was still a surprise to many when the 2012 Budget announced by George Osborne in March contained some measures that have the potential to handicap or even kill off the uptake of ultra-low emission vehicles, namely the new breed of electric and plug-in hybrid cars that are yet to establish themselves in the UK market.

British Vehicle Rental and Leasing Association chief executive John Lewis fears the Government has problems with trying to balance its needs to raise revenues and the desire to promote low-emissions vehicles to cut carbon emissions. "They seem to have competing policies," Lewis declared to BusinessCar, pointing out that the business case for electric and plug-in hybrid vehicles is already a struggle to reconcile.

"There is a disconnect between Treasury objectives and that of the Government overall," he continues. "When you start running the business model through, it's strained at the moment and the changes are pushing the ownership model further." In March, the chancellor announced future changes that included charging

drivers of low-emission vehicles 13% BIK on what is already a much higher P11D figure than that of a regular diesel model, and ending leasing companies' ability to claim the 100% writing down allowance on low-emission vehicles.

Lewis has written to treasury minister Chloe Smith, CC-ing chancellor George Osborne, to point out "the impact on a business model that's already strained". He says some people will pay a premium of 10%, or even 15% for eco-friendly premium, but not many, so the Government needs to make the technology available without companies and drivers taking a financial hit.

With some of the Budget announcement having since been rescinded, including the likes of the pasty tax, static caravan tax and the recent announcement that the fuel duty rise due next month would be postponed, there's no hint yet that changes could come to renew the appeal of low-carbon models. Lewis speculated that, as with the areas the Government has changed its mind on, the Treasury could be trying to "push the boundaries and see how much push-back they get". So far, the Department for Transport's Office for Low Emission Vehicles and the Low Carbon Vehicle Partnership has reportedly raised concerns on incentives to promote low-emission models.

It's not just about the first user, with vehicles and demand needing to filter through to the used sector to ensure the technology has a long-term future. "They risk killing off new technologies and having no flow-through to the used market," says Lewis, pointing out that rental units could become used cars within 12 months and leasing volume from around three years. "Now the Government is saying it will catch you with BIK so people are saying they'll run the most efficient diesel instead, which is a bloody disappointment when you think about it," declares Lewis.

There are also concerns about how benefit-in-kind payments will work on Renault EVs in particular, as the French firm is continuing with plans to lease batteries rather than giving customers the option to purchase the powertrain along with the vehicle. Lewis says the Treasury has made it clear that the list price is not the BIK - there will be a taxable element to the battery lease. With BIK payments on low-emission vehicles coming in less than three years, and the potential for company car drivers to run electric vehicles longer to leverage the fuel-saving benefit, it could be that business drivers don't know at the time of taking on a vehicle how much BIK they'll be paying for at least the two years that they commit to running it. Other issues the Treasury is still to state a clear policy on include Approved Mileage Allowance Payments for electric vehicles, currently set at the same mileage rate as petrol and diesel cars, and also on plug-in petrol-electric models where it's impossible to prove whether the mileage was covered using electricity, potentially charged at home or at a company premises, or using the petrol motor. "They're trying to get their mind round AMAPs. There are not currently enough vehicles to make it worth worrying about but there will be in time," says Lewis.

He also questioned the implementation of the £5000 Government discount for ultra low-emission vehicles, asking whether it is helping to keep prices artificially high. He speculated that the grant could be better used to keep the vehicles tax-exempt for longer, or even to subsidise charging points for future users to help stimulate second-hand demand and improve residual values. "The second owner needs to be attracted to the vehicle - £1000 for a charging post is a lot of fuel differential for the second owner and they're not going to spend it," he says.

The basic message from the BVRLA is a call for long-term clarity and for logical application of policies around low-emission vehicles. "Everyone appreciates they have got to pay tax, but it's the cliff edges brought in to balance the book that are the problem; we need long-term vision," says Lewis. He pointed to the problems for the industry in meeting certain criteria, with Transport for London's congestion charge zone having a different CO2 level for what it classes as a low-emission vehicle at 100g/km, while the Government pinpoints 95g/km through its future BIK regime. Lewis is also concerned about TfL's plans to drop the 100% discount level to either 80g/km or 85g/km with only a few months' notice. "People need longer signaling," he declares.