LowCVP: Fleet vehicles that don’t cost the earth

From a purely financial point of view, running electric or hydrogen fuel cell vehicles does not currently stack up for a fleet manager. The charging/refuelling infrastructure is not yet sufficiently established and electric vehicles all have range constraints.

Yet EU regulation aimed at reducing carbon emissions is already affecting saloon cars and light commercial vehicles. In the not too distant future, it will cover large trucks. While this will boost the uptake of more fuel-efficient petrol and diesel engines, it is also likely to further encourage alternative engine technologies, including hybrid vehicles.

Add to this a range of financial incentives throughout much of the EU for the purchase of electric vehicles, together with disincentives in the form of road pricing aimed at reducing the use of internal combustion engines in urban areas, and the case for alternatives is becoming stronger by the day. The EU is even floating the idea that by as early as 2020 no vehicle with a conventional combustion engine will be driven in any European city.

Research conducted by the Low Carbon Vehicle Partnership (LowCVP) - a public/private partnership promoting more efficient, greener engines - shows that the total cost of ownership (TCO) of a conventional vehicle over a four-year term compared with an alternative fuel option is due to narrow significantly by 2030. But until the cost of batteries, a key factor, comes down, the capital cost of an electric vehicle will remain higher - even though running costs are lower.

LowCVP managing director Greg Archer explains: "If you look just at the narrow cost of ownership, at the present time electric vehicles have a TCO around £5,000 a year higher than an internal combustion engine equivalent. However it depends what your form of operation is. For example, if you are a business strongly promoting your environmental and corporate responsibility, and that is a big part of your selling message, then electric vehicles will add some value to that."

Driving down costs

One reason fleet managers continue to buy combustion engines has been the dramatic improvement in their economy and lower carbon emissions. Archer is critical of the time it took for this to come about. "I think there has been a classic market failure whereby there are enormous benefits for drivers for having more fuel-efficient vehicles available to them, but there was no real incentive in place for the vehicle manufacturers to supply those vehicles onto the market.

"Historically, they made a lot more money selling higher-performance, larger vehicles and for a decade from 1990 to 2000 that is exactly what they did." Until recently, says Archer, car-makers were reducing CO2 emissions by an average of 1% a year; this is now up to 4% annually.

"The impact on fleet managers of vehicles that are more fuel-efficient is of course to bring down costs," he explains. "That is also helping to offset the very high fuel costs that people are experiencing. And that is likely to be the trend in the future as well."
The size and splendour of a company car also remains a sensitive issue for some HR and fleet managers, but Archer points out that a third of UK companies now offer a cash equivalent in value.

Employees would therefore use their own vehicles for work. But Archer sounds a cautionary note. "This carries the challenge of mileage rates and incentivising people to use their vehicles for work," he warns. "There is also a risk they will not maintain and MOT their vehicles. Yet the company has a duty of care if those vehicles are being used for work purposes."

He also notes that a remarkable number of UK fleet managers never seem to consider the TCO of their vehicles. "Even quite large fleets aren't really managing their vehicles on a cost-of-ownership basis. I guess there is an important role for the finance director here, in recognising that there may be a need to invest up-front in order to get those paybacks over a longer period. There are many examples of more fuel-efficient vehicles that offer benefits in terms of capital allowances, fuel consumption and lower vehicle excise duty rates. The numbers really stack up," he says.

A European commission is currently working on proposals that aim to extend EU emissions regulations already in place for motor cars to light vans, with LowCVP acting in a consulting capacity. "I would expect within two, maybe three years to see formal proposals on regulating truck emissions," says Archer. Trucks will generate new, more efficient engine technologies, most likely centred around biomethane - natural gas created by the anaerobic digestion of waste - as well as new aerodynamic designs.

The fleets of the future

Since the 2008 crash, private car sales have held up well on both sides of the Atlantic, but there are now clear signs that consumer confidence is fading. This means that fleet purchases are of more significance to automakers, all of whom are aggressively chasing business. Fleet managers by contrast have been stretching out their leases. Yet with the rising cost of fuel impacting their budgets, there is a case for early investment in greater fuel efficiency, perhaps in the form of hybrids and new technologies.

There is also an emerging subset of options such as regenerative braking, which captures the energy produced from brake pads and feeds it to a battery. Another choice is the so-called mild hybrid system, where relatively small batteries are used to power lights, heating and air-conditioning, leaving the engine devoted entirely to motive power. Archer suspects that ultimately there will be a mix of ultra-efficient internal combustion engines, electrics, hybrids, hydrogen fuel cells and biofuel.

Roadside recharging infrastructure for electric vehicles is now being rolled out, with government support, in selected areas in the UK, while the EU is seeking to harmonise plug connections and set-up systems that will inform drivers of the location of the nearest charging point. The application of GPS technology is also set to become far more extensive. "There is an enormous role in a whole range of areas for GPS," says Archer. "For fleets there is a great opportunity to be using it for route planning and to reduce empty running and vehicle mileage."

The technology will also permit fleet managers to see how their drivers are behaving, so that they can be encouraged to drive in a more economical way. For all vehicles, GPS will ultimately permit automated collision avoidance, as well as governing engine performance to match speed restrictions.

"When we actually have collision avoidance on our roads, then we will not need to put in all the very heavy safety systems that we have at the moment, to protect vehicle occupants," Archer explains. "We can also move away from steel to lightweight materials - if we have much lighter vehicles they will be much more efficient in fuel terms."

Archer cites electric vehicle research work that uses the undulations of a road, to maximise the benefits to the battery. "So, for example, if your vehicle knows that you are going to be going up a steep hill and then you will be going down a steep hill on the other side, the power management system would be willing to put extra energy out of the battery into the wheels to get you up the hill, knowing that it will be able to recharge that very quickly going down the other side," he says.

"What we shouldn't expect is that all of these problems are going to be resolved overnight," he adds. "Neither, frankly, do they need to be. This is going to be a transition that takes 20 years."