Fleets go greener

If you read nothing else, read this …

• New cars have undergone rapid evolution in terms of fuel-efficient and reduced-emission engines.

• Employees are pushing for greener vehicles to reduce their benefit-in-kind tax liability.

• Employers are keen to save fuel costs and promote their corporate social responsibility agenda.

• Vehicle manufacturers are pushing the boundaries of environmentally friendly performance to meet the needs of company fleets.

Case study: Freshfields staff sign up for green drive

Law firm Freshfields Bruckhaus Deringer, an Employee Benefits Awards 2011 runner-up in the category for ‘Most effective travel strategy for business and perk car drivers’, introduced a green car scheme in 2009 to which it made major changes in 2010.

The law firm, which had not operated a formal company car scheme for years, introduced a car salary sacrifice arrangement within its flexible benefits scheme in 2009.

The deal included discounts for environmentally friendly cars and encouraged staff to lease low-cost and green company cars.

In 2010, it extended choice to include new cars from BMW and Audi that fall below the 120g/km emissions limit. This saw take-up increase, and Freshfields relaunched the scheme within flex.

Gary Wilkins, head of compensation and benefits, says: “It has opened up the possibility of having a company car to all levels of staff and there has been an enthusiastic response from staff that have taken it up.”

The monthly cost of taking up the scheme covers tyres, insurance, breakdown and maintenance.

Employers, employees and manufacturers are all pulling in the same direction on green cars, says Sarah Coles

The company car has undergone a dramatic and rapid evolution. New makes and models have produced paradigm shifts in fuel consumption, engine types and various other vehicle attributes.

Corporate fleets are under growing pressure to increase fuel efficiency and cut CO2 emissions. Employees are pushing for cost-efficient cars that use less fuel and emit less CO2, and therefore fit into a lower tax bracket for benefit-in-kind taxation. Employers are pushing for fuel-efficient cars that fit into their corporate social responsibility agenda. Meanwhile, manufacturers are racing to make money from meeting these needs.

Employees, who are being offered a greater choice of cars, are largely responsible for driving changes in car manufacturing. Their enthusiasm for reducing fuel consumption is reflected in the growth in popularity of smaller models. Marcus Puddy, head of consultancy services at Lex Autolease, says cars such as the Ford Focus, Volkswagen Golf and Audi A3 are particularly popular. This is not only because smaller cars have better fuel efficiency, but also because manufacturers are making these cars as spacious as possible.

Paul Jackson, managing director of The Miles Consultancy (TMC), says: “We are increasingly seeing employees lobby their employers for greener cars on the list. We recently had one employer that was put under pressure to move from Vauxhall to BMW so it could offer employees the option of selecting the Golf and the Passat, which are particularly fuel-efficient for their class.”

Employers are also interested in the costs that can be saved by going green. Jackson adds: “Organisations want to save money. They used to be wholly focused on the monthly cost, but now they take a more holistic view, looking at the cost to the individual in benefit-in-kind tax and fuel, the whole-life cost, the cost of a lease, and so on.”

Green fleets are often part of a broader focus on corporate social responsibility, and reducing an employer’s carbon footprint. Corporate reporting requirements and legislation mean green fleets are now a serious focus for many employers. Ian Hughes, commercial director at Zenith, says: “Some very high-profile fleets have an overt strategy of CO2 reduction, and have had significant success in lowering CO2 limits by restricting car choice and incentivising drivers to select lower-emission cars.”

Puddy adds: “We will see more employers introduce caps on CO2 and those that have caps will bring the maximum levels down.”

Average carbon dioxide falls

In the past 24 months, the average CO2 for company cars on Zenith fleets has fallen by 10g per km, partly because of the availability of high-powered, low-emission cars, such as the Efficient Dynamics range from BMW, which have CO2 emissions as low as 109g/km, says Hughes.

“Advanced engine technology is also producing highly efficient cars with lower CO2,” he says. “For example, stop-start technology is being introduced almost as standard on some models, creating a zero-emission car when stationary. Improved aerodynamics and improved tyre technology with better rolling resistance have also contributed to reducing CO2.”

But manufacturers are not stopping there. They are racing to reduce emissions, to make themselves first choice for fleets and private buyers, so cars are evolving further. Jackson says: “They are focusing on bringing CO2 below 110g/km or 100g/km because they can see where the revenue will go next.”

The government is committed to gradually increasing benefit-in-kind taxation on cars at the higher end, which further incentivises manufacturers to push the boundaries in bringing down fuel consumption. Jackson adds: “If they can get below 100g/km, they will be safe for some time.”

Growth in alternative fuels

There has also been major growth in alternative fuels. Hughes says these are already appearing in fleets, and are favoured by some employers above all other models. “Toyota has been leading the trend with the now-famous Prius petrol/electric hybrid,” he says. “We also anticipate seeing diesel hybrids coming very soon.

“The nirvana manufacturers are working towards is the hydrogen fuel cell vehicle, a zero-emitting solution. We do not see it happening in the very near future as the technology has some way to go before it can be mass produced affordably.”

Hughes is also seeing increased use of electric cars, such as the Citroen C-zero and the Peugeot iOn. “These cars typically take 12 hours to charge fully, so you need to be sure about your usage,” he says. “What will both help and hinder electric cars will be the charging infrastructure and their range. While they may be appropriate for urban and local use, for longer ranges, an electric hybrid like the Vauxhall Ampera with its range extender may be a better option.”

The evolution of the company car has been rapid and dramatic, and clearly it has not finished. While the employee, employer and manufacturer are all focused on the same goals, there is no reason why fleet cars should not get cheaper, more efficient and greener every year.

Top five fleet manufacturers

  1. Audi
  2. BMW
  3. Volkswagen
  4. Ford
  5. Vauxhall†

Top five car makes in salary sacrifice plans

  1. BMW
  2. Audi
  3. Volkswagen
  4. Ford
  5. Mini

Source: Zenith

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