Matt Dyer's blog: 21 September - Preparing your fleet for change
21 September 2016
As a great philosopher once said, the times they are a-changin'. And I might add, there are few places where this is truer than in the world of motoring.
Tesla is challenging the dominance of the more established manufacturers with their electric cars. Tech companies such as Apple and Google are preparing to enter the fray as well. And self-driving cars are already being tested on the streets of Pittsburgh and Palo Alto, with manufacturers hoping to roll them out to customers within the next five years.
And that's even before we consider the political framework around all these changes. In June, Britain voted to leave the European Union. Three weeks later, we had a new prime minister, a new Chancellor of the Exchequer and a new cabinet.
This, of course, means plenty of uncertainty. We don't yet know what the priorities of Theresa May's Government will be with regards to taxes and transport. We'll have to wait until at least Philip Hammond's Autumn Statement, later this year, until we discover what he has planned for fuel duty and company car tax - as well as what's in store for salary sacrifice schemes, following the completion of HMRC's current consultation.
However, there are important things that we can be certain about. Hammond's predecessor, George Osborne, instigated an overhaul of Vehicle Excise Duty, which will come into effect next April. This will tax new cars on the basis of their carbon dioxide emissions in their first year, with the highest-emission vehicles paying £2000. From the second year on, all vehicles will pay £140 a year - except zero-emission vehicles, which will be exempt.
Osborne also set out benefit-in-kind tax rates up to 2019-20. These are also tied to CO2 emissions, with the most polluting cars subject to a 37% rate. These rates will rise for all cars over the next three years, by up to nine percentage points.
He didn't announce what the BIK rates will be after that period, but he did declare his intention to continue basing them on CO2 emissions, which went against prior expectations that the system would be used to tackle the nitrogen oxides associated with diesel engines. He also announced a review of the rates for ultra-low emission vehicles to 'refocus incentives on the cleanest cars'. By 2019-20, they will be facing rates of 16 or 19 per cent. The Treasury recently launched a consultation on what this new system should look like.
We also know that BIK rates aren't the only way that politicians hope to incentivise greener cars. There are already Government grants for electric cars and for installing charging points at home - though their futures are uncertain.
London's new mayor, Sadiq Khan, has made the introduction of an Ultra-Low Emission Zone one of his top priorities. From 2019, cars and vans entering the current Congestion Charge Zone that do not meet certain emission standards will face a £12.50-a-day charge. Khan then plans to extend the zone to the North and South Circular Roads in 2020. In the meantime, from 2017 until the Ultra-Low Emission Zone is introduced, a new 'Emissions Surcharge' of £10-a-day will apply to the most polluting cars travelling through the Congestion Charge Zone.
Other cities are following London's lead. With the help of grants from Whitehall, Bristol, Milton Keynes and Nottingham are becoming 'Go Ultra Low Cities'. They are introducing new policies to encourage electric cars, such as letting them use bus lanes and offering them free or discounted parking.
We can expect more such policies in the years to come, as policy-makers seek to tackle climate change and air pollution.
And it's not just the Government driving the rise of electric vehicles; it's the technology itself. More and more manufacturers are bringing out electric models. Improvements to batteries and engine efficiency now allow drivers to go 150 miles or more on a single charge.
Despite all the uncertainty, then, one trend emerges clearly: towards ultra-low emission vehicles. With the technology in this field advancing so quickly, today's most futuristic-seeming cars may soon look out-of-date and inefficient. It will be more crucial than ever to keep up with developments, and renew fleets and fleet policies regularly.
This is a challenge not just for decision makers, but also for all of us in the leasing industry. With so much changing around us, our thinking should be a-changin' too.