Analysis
26 Jan 22

IFMI: Which alternative powertrain will peak in Europe in 2022?

The International Fleet Managers Institute (IFMI)'s first live event of 2022, hosted by Fleet Europe Editor-in-Chief Steven Schoefs, was another immense learning experience for fleet managers, as Marc Odinius, CEO of Dataforce and Alexander Unfried, European Automotive Tax Sector Leader and Partner, PwC, discussed the alternative powertrain market and presented their predictions in corporate fleet strategy for the coming year.

They were joined by a panel of experts including: Virginie Pochat, Senior International Consultant, Business Intelligence & Consultancy, ALD Automotive, Nicolas Michel, Senior Consultant, Arval, Andrew Wilson, European Business Development Manager, Mobility Solutions Division, MHC Mobility, David Wefers Bettink, Senior Consultant, LeasePlan and Pawel Zin, International Key Account Manager Europe South/West, SEAT

According to Marc Odinius, the beginning of 2022 won't be promising in the overall European market, but this shouldn't dishearten anyone because when we compare the figures of the last two years to the "benchmark super year" of 2019, as Odinius puts it, there is much to seek comfort in. 

All the segments struggled in 2021 and 2022, but the Road to Zero dashboard of Dataforce has shown something phenomenal, according to Odinius:

  • Overall adoption of alternative fuel vehicles (AFVs) reached 29%, increasing 10.3% from the previous year.
  • While diesel represented 22% of the whole segment, AFVs outplayed them by 27%. 
  • AFVs grabbed 32% of the fleet segment, increasing 10.2% in a year. 

Germany: Absolutely amazing 

Germany, the largest market in Europe, has witnessed a remarkable change in terms of AFVs, reaching 33% in the fleet market in 2021. Substantial tax incentives boosted PHEVs, while sales of BEVs increased significantly despite the lack of charging infrastructure. 

Monthly figures from December 2021 show that alternative powertrains grabbed 40% of the fleet segment.

"I think that is quite a swift development that not many would have expected," Odinius pointed out. 

But that is not all. In the same month, alternative powertrains had 47% of the private segment, which Odinius expresses as "absolutely amazing." 

Strategies scatter among Europe

The impact of taxation is best observed in the Netherlands:

  • AFVs reached 43% of the fleet segment in 2021, 
  • BEVs led with 28%, and PHEV represented 9%, 
  • Diesel vehicles only grabbed 3% of the segment. 

Odinius explains this shift by the dynamics created by government incentives and taxation changing every year. 

This picture is not the same in every European country. Given the stiuation in Norway, where AFVs represent 92% of the whole segments, we can understand the distinct characteristics of countries much better. 

What are the predictions of Odinius from the future?

  • PHEVs will peak in 2022, then will start to decline as OEMs heavily invest in BEVs.
  • AFVs could reach 50% by 2026 overall in Europe,
  • The incentives on AFVs will also decrease, but the uptake will remain high.

Tax incentives to diminish in 10 years 

The increasing domination of AFVs in Europe will change the fundamentals of taxation. According to Alexander Unfried, in several countries, including France, Germany and Finland, incentives and benefits will remain limited until 2025. 

Between 2025-2030 Europe will see higher adoption of AFVs, while governments will replace the loss of abandoned taxes mainly with digital taxes imposed on software services and downloads. 

What is the future outlook? 

  • Several countries will move away from taxation but ban ICEs by 2030, 
  • New business models in connected car services will introduce new taxes, 
  • The tax cost of EVs may increase between 10-20% in the next five years,
  • Tax beneficial treatment of EVs will diminish in the next five to ten years.  

Unfried thinks the taxation on company cars won't change because it is easier to collect taxes directly from the owner than the user. After 2025, the EV market will thrive, but there will be many components to consider for fleet managers, including balancing the mobility and cost of corporate EV vehicles. 

In time, taxes on road usage may also emerge but not soon, says Unfried. Connected vehicle technology will provide vast amounts of exchangeable data, so taxes depending on the mileage may surface. But, according to Unfried, privacy laws will be a critical issue at this point. 

Anticipate costs for the fleet strategy 

The panelists all agreed that supply shortages will continue to be a significant challenge for fleet managers in the coming months. According to Pawel Zin, the market is improving, even though it is rather slow. At the moment, it is more important to be patient and anticipate developments in the market. 

Under the current conditions, the manufacturers are doing their best to meet the demand, says Nicolas Michel. This effort is positive, and the delivery time for EVs is improving. On the other hand, Michel expects the TCO of every model to increase by around 5% in the coming months. 

Virginie Pochat agreed with the positive approach and said that while there are many challenges for fleet managers, they should use the opportunities and take initiative for innovation under the current conditions. One way to do this is to listen to the drivers and understand their needs in terms of the change of mindset coming with electrification. 

Fleet managers are also facing increasing prices in the market. Pawel Zin underlines that this trend impacts everyone and it's not easy to say when it will stabilize. Therefore, fleet managers sould consider every possibility to come up with the best approach.

Andrew Wilson and David Bettink agree while summarizing what to expect in the coming months: 

  • Fleet managers are not just focusing on TCO, but need to balance this with all challenges, 
  • Many of the current difficulties are temporary, and fleet managers should not constrain themselves only to electrification or any one particular issue,
  • OEMs will try to maximize their profit with the limited supply they have. 

“Try and discover the best solution”

The AFV market is rising. But will it be possible to supply the best charging solutions? 

David Bettink believes that fleet managers shouldn’t expect only one provider to meet all specific needs but focus on the local suppliers to have the best offer under certain conditions and legislation. 

Charging policy, the impact of prices and the suppliers, are just a few parameters to assess, according to Virginie Pochat. Fleet managers should analyze the cost of energy and infrastructure by looking at the big picture and seeing how feasible solutions are. At this stage, Andrew Wilson underlined the importance of accessing the data, which is critical for analysis. 

Finally, how shall fleet managers set up their international fleet programme? This is tricky, and fleet managers can’t find a specific solution, says Nicolas Michel.

“There’s no one way to go. Fleet managers must be more open-minded and consider their options. Try and test to discover the best.” 

Nicolas concluded by saying that the more fleet managers discover new mobility solutions, the more positive the outcome. 

Image: Shutterstock.

Authored by: Mufit Yilmaz Gokmen