Bigger and stronger – BVRLA 2013 fleet industry outlook

John Lewis

The BVRLA kicked-off 2012 with a ‘Fleet Optimist’s Guide’ and this positive message certainly seemed to rub off on the industry last year.

John Lewis
John Lewis

The BVRLA kicked-off 2012 with a ‘Fleet Optimist’s Guide’ and this positive message certainly seemed to rub off on the industry last year.

Latest figures show that the association grew its membership in all categories when compared to 2011, seeing an increase in Rental, Leasing, Commercial Vehicle and Leasing Broker members.

The BVRLA member fleet starts 2013 at 2.75 million vehicles, having risen 9% over the last year to its highest ever level. A 10% rise in the car (2.2m) and van (430,000) fleets was offset slightly by a 7% decline in the larger commercial vehicle fleet (102,000).

“Even as the economy continues to limp along, these figures are a sign that the vehicle rental and leasing industry is as strong as ever, a vital cog in the UK’s transport network,” said BVRLA Chief Executive, John Lewis.

The outlook for 2013 is no less uncertain than it was a year ago, but the BVRLA is confident enough to make some predictions:

• Leasing industry

The fleet sector will continue to be the mainstay of the new car market and a reliable source of business for manufacturers who will struggle to cope with what is likely to be a volatile retail market.

New fleet car registrations will continue their recovery from the slumps of 2009/10, with slow, but steady growth. This will continue to be driven by greater penetration into the SME market and the continued popularity of salary sacrifice schemes with larger corporate customers.

The slump in van registrations towards the second half of 2012 took many people by surprise, especially as it was offset by a strong rise in truck registrations (which nonetheless remain well down on pre-Credit Crunch levels).  We expect steady growth in both sectors next year, with truck sales in particular driven by operators choosing to replenish their fleets ahead of the introduction of new EURO VI emissions standards.

New business car tax thresholds will continue to have their desired effect, pushing average fleet emissions down, probably by another 3 or 4%. Fleets will review their policies and move emissions caps to 130g/km giving an advantage to those manufacturers who have been able to produce a significant range of models below that level.

• EV sales

The potential surge in EV registrations we pointed to last year didn’t happen, but we are not going to take the blame for that. Prices are still too high and the catastrophic own goal scored by the government, whose March 2012 Budget will result in fleets actually being incentivised not to lease EVs from this April, did the damage.

The UK is not alone in failing to jump-start this market – EV sales are struggling worldwide. Where they are doing well – Norway for example – it is because the government has unveiled a group of incentives that support the USE of these vehicles as well as just their up-front purchase. Prices of EVs will continue to come down, but in isolation this will not be enough to create significant momentum in this market.

• Funding

What a difference a year makes! The industry enters 2013 with healthy supply of funding and funders, with a range of new entrants firmly entrenched in the market and lending. Another massive bonus is the decision of the industry’s largest funder, Lloyds Banking Group, to renew its commitment.

• Industry Consolidation

This is a perennial topic, but apart from the recent deal between Avis and Zipcar, we are not seeing much of this at the moment. The BVRLA reported an increase in members during 2012 and we see continued growth in the short term at least. Much of this growth is coming from ‘captives’, because manufacturers, who have traditionally remained in the background as suppliers of finance, are becoming directly involved in the sector, either as leasing providers or suppliers of ‘pay-as-you-go’ mobility solutions.

In an era when demand for the traditional company car is static at best, these new entrants are helping to enlarge the overall vehicle rental and leasing market.

• Telematics

For many years sold as a way of obtaining greater cost controls within fleets, telematics is becoming cheaper and companies are increasingly using it as a tool to help them meet their duty of care responsibilities. This can only be good news and should hopefully feed through in the form of reduced insurance costs.

• RVs

These will remain strong. No-one currently knows what a normal used car or van market looks like and seasonal trends have almost disappeared. All we can be sure of is that the UK is facing an almost unprecedented supply shortage of quality young used vehicles. With the economy hopefully entering a more sustained growth phase, this shortage will continue to support stronger residual values.

• Roads

Government strategy is always difficult to predict, particularly with such a revolving door at the Department for Transport. But one thing that seems depressingly clear is that the government will continue to place greater priority on a White Elephant high-speed train line than creating a sustainable, long-term plan for funding the high-quality road network that this country so desperately needs.

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