Analysis
29 Jul 19

Arval Mobility Observatory new Barometer: sharing up, petrol down

Diesel-bashing saw petrol’s fleet fortunes rise – but corporate mobility’s future is electric after all. That’s the opinion of Arval top executives, backed up by the findings of their annual Barometer. That Barometer – produced by a rejuvenated ‘Arval Mobility Observatory’ – delivers a host of data based upon which Arval is adapting and accelerating its mobility strategy.

The Arval Mobility Observatory is the new incarnation of the former Corporate Vehicle Observatory. It has just published its first annual European Barometer (the 15th in total), based on 3,541 fleet manager interviews in 12 countries (Belgium, Czech Rep., UK, France, Germany, Italy, Netherlands, Poland, Portugal, Spain, Switzerland and Luxembourg). 

The Arval Mobility Observatory Barometer offers insights into what fleet professionals expect from their industry in the years to come. From this most recent Barometer, Arval has taken to heart the rising popularity of car-sharing, and will accelerate the introduction of its own new solution, now live in Italy, into other markets. Just these last few weeks, Arval concluded a car-sharing contract for 1.000 vehicles with the Belgian Army. 

Here are the Barometer’s main conclusions, with comments by Yaël Bennathan, Head of the Arval Mobility Observatory; and Bart Beckers, Arval’s Chief Commercial Officer (CCO). 

Fleet size: widespread but weakening optimism

There’s strong and widespread optimism among fleet managers about future fleet growth – across all company sizes and in all national markets. 

  • 26% of very large companies (>500 employees) expect the size of their corporate fleets to increase over the next few years. Only 11% expect a contraction. 
  • Among the smallest companies (<10 employees), 11% still expect increasing fleet sizes, with just 5% predicting a decline. 
  • The optimism was shared not just in each separate company size segment, but also in each of the 12 countries surveyed. The most optimistic countries are France, Luxembourg, Poland and Belgium. The least optimistic ones are Spain, Portugal and Italy.

YAËL BENNATHAN: “Predictions of fleet growth are not surprising: the company car is part of the standard package and also a way to retain talent across many countries and industries, especially among large and very large companies.”

BART BECKERS: “Among our own international clients, we witness fleet growth of around 10%. Among local, mid-market clients, we see organic growth of about 5%. That’s more than one would expect – and more than we’re projecting forward. That’s reflected in the Barometer: it’s optimistic across the board, but in general a bit less so than before.”

EVs and hybrids: rapid increase

Until recently, fleet vehicles were almost all running on diesel. Under pressure from the consequences of WLTP implementation, as well as other regulatory and social pressures, that is rapidly changing. 

  • Increasingly, very large companies are implementing electric vehicles (30%) and hybrids (29%) in their fleets. 
  • All companies are preparing to accelerate the integration of EVs and hybrids into their fleets over the next three years. 
  • 62% of very large companies (and 50% of large ones, i.e. 100-500 employees) have already integrated alternative-energy vehicles (HEVs, PHEVs or BEVs) into their fleets, or plan to do so over the next three years.
  • Those figures remain high for medium-sized companies, with between 10 and 100 employees (31%); and small ones (26%). 
  • The leading countries for integrating alternative-energy vehicles into corporate fleets are Belgium, the UK, the Netherlands, France and Germany.

YAËL BENNATHAN: “You could ask why these figures are not higher. But we have to remember that until very recently, the standard corporate vehicle was a diesel. The landscape is changing fast. More and more car policies are open to alternative powertrains, and employees are also concerned citizens, who want to contribute to this change. At present, there are almost 150,000 public charging stations across Europe. Some OEMs are developing EVs for their whole model range. So an even greater powertrain mix is coming for corporate fleets.”

TCO: crucial turning point

The Total Cost of Ownership (TCO) of alt-energy vehicles approaches that of combustion-engine cars – and is already better in some cases. As a result of this crucial turning point, EVs are becoming a regular feature of more and more car policies. 

  • What helps: national governments often design fiscal policies to stimulate the introduction of EVs. Also, lease companies are more confident in offering EVs because the Residual Values (RVs) of these EVs (and in particular of their batteries) are becoming more predictable.
  • What still needs to improve: the charging aspect, not just in terms of infrastructure density, but also real-world range under varying conditions and last but not least, charging speeds.  

BART BECKERS: “We see EVs with RVs significantly above expectations of even a few years ago – mainly because batteries perform better than expected. In some cases, they outlive the cars themselves. So we expect TCO of battery-electric vehicles (BEVs) to be similar or better than that of combustion-engine vehicles even before 2021. One uncertainty is the sticker price of the new generation of diesels, which will of course directly impact TCO. And it also depends on the specific usage of the vehicle. It won’t be one size fits all. That’s why we profile individual driver behaviours to determine the appropriate powertrain.”

Vehicle ranges: strategic shift

As OEMs must adapt to stricter EU emissions norms (95 g CO2/km by 2020), lease companies help their customers make the right tactical and strategic powertrain choices. Those customers increasingly see emissions reduction (to zero) as an important Corporate Social Responsibility (CSR) goal. All of which factors combine to produce a strategic shift on vehicle ranges offered by fleets.

  • 67% of very large companies (and 51% of large ones) already take into account the implications of the new WLTP test regime, or intend to do so over the next three years. 
  • Overall, 26% of companies intend adjust the range of vehicles offered to entitled drivers in order to compensate for the impact of the WLTP test: 17% by offering lower-emission models, 11% by offering lower-taxed models, 6% by lowering the category of cars offered, and 14% by offering different powertrains.   

BART BECKERS: “Everybody’s waiting for available EV models. We expect they’ll be on the market from next year. And everyone is gearing up for Horizon 2021, when OEMs will have to fulfil CO2 objectives by having around 4% of BEVs and 7% of PHEVs in their range. Arval wants to take the lead, and next year grow the electric share of our offering twice as fast as the overall market – in anticipation of 2021, when electric takeup will get real.” 

Emissions reduction: diesel’s death?

Half of companies surveyed reported that they were taking measures to reduce the amount of emissions by their vehicle fleets.

  • For 39% of companies, those actions concern CO2. But 22% are are also seeking to reduce emissions of fine particles, and 18% of NOx.
  • NOx is one reason why the share of diesel vehicles in fleets is declining. A substantial 42% of fleet managers said they would continue to buy diesel vehicles if diesel cars would emit no more NOx and fine particles than petrol cars. And 4% would even increase the share of diesels again. 
  • However, 7% said they would persist with their current policy of not buying diesel cars, and 34% said they would further reduce the share of diesels in their fleet.

YAËL BENNATHAN: “We’ve seen a lot of diesel-bashing recently, but diesel remains a relevant option if you have to drive a lot. In future, we’ll see a fine-tuning of the powertrain mix, based on the usage of vehicles.”

BART BECKERS: “Right now, we’re reviewing our assumptions on Residual Values (RVs). We’re expecting the RVs of the new diesel generations to stabilise, and maybe even go up a bit – as is happening in Germany. As a counterpart, we expect petrol RVs to go down. Petrol cars have increased their market share more than most had expected, but mainly because there was such limited availability of EVs, hybrids and other alternatives. We’re assuming that from 2021, the shift to electrification will come, and petrol takeup will go down again.”

Financing: operational gains

Operational leasing is the preferred solution for large and very large companies, but it has been steadily gaining market share with smaller companies too. 

  • Overall, 30% of companies use operational leasing as the main method of financing their fleet. That figure rises for large (41%) and very large (52%) companies.
  • Over the past five years, operational leasing has become more popular as well with small businesses (increasing from 9% to 13%) and with medium-sized companies (17% to 22%).
  • Considering all companies surveyed, operational leasing is most popular in Germany (48%), Spain (46%) and the Netherlands (45%).
  • However, self-purchase (outright purchase + credit purchase) remains the most popular option overall (40%), and more so for both the smallest companies (48%) and the medium-sized ones (43%).
  • Country-wise, self-purchase is most popular in Switzerland (64% of all companies surveyed), the Czech Republic (54%) and the UK (47%). 
  • The rising trend in operational leasing is expected to continue, with 26% of companies stating that they intend to develop this financing method in the near future – a rise of three percentage points over the 2018 results. That intent is strongest in France (44%), Germany (42%) and Belgium (37%). 

YAËL BENNATHAN: “If we look at large and very large companies alone, operational leasing is most popular in Spain, the Netherlands and France, with percentages respectively of 72%, 71% and 65%. On the other end of the spectrum, only 10% of large and very large companies in Switzerland use operational leasing, and just 12% in Poland. Here, self-purchase remains the most popular option.”

BART BECKERS: “If we look at Arval’s contract portfolio, we see that contract duration is fairly stable, with an average of about 42 months, but there are exceptions in some markets. Some clients and OEMs are pushing for shorter durations – in the case of OEMs because they want to push out metal. This has typically been the case in the UK, and in Brazil. The ideal contract length for EVs is still up for discussion: on the one hand, it shouldn’t be too long, because the technology is still evolving fast; but not too short either, because of the relatively large initial investment.” 

Alternative mobility: rising interest

Fleet managers are increasingly interested in alternative mobility services for their companies – mainly car-sharing and ride-sharing, but not ready to give up company cars in exchange. 

  • 23% of those surveyed said they had already deployed car-sharing solutions or consider doing so over the next three years. For very large companies, those rates rose to 43%. Per country, the figure (for all companies) was highest in Switzerland (34%), the UK (31%) and France (29%).
  • 29% of those surveyed said they had already deployed ride-sharing solutions or consider doing so over the next three years. For very large companies, the figure rose to 45%. Per country, that figure was highest in the Czech Republic (46%), the UK (45%) and Switzerland (36%).

BART BECKERS: “It’s important to make a distinction between various types of car-sharing. A lot of companies see car-sharing as a good way to optimize their fleets. The easiest first step is to improve the management of pool cars by implementing better software solutions. The second step is to broaden the definition of pool car use, to more employees and perhaps even to private use. It’s typically only after this optimization phase do we see the adoption of other mobility solutions such as ride-sharing. These other solutions are often local pilot programmes – like the solution Arval is running with Swiss railway company SBB, where we offer train subscriptions plus EV-sharing. The better these pilots work, the more they will be shared.”

  • Mobility budgets (18%) and private lease solutions (12%) also elicited interest and curiosity from companies – and again, significantly more so from very large companies (33% and 18%, respectively). 
  • On a per country basis, mobility budgets were most popular in Belgium (36%), the Switzerland (30%) and the Netherlands (27%). For private lease, the top three was the UK (23%), the Netherlands (18%) and France (14%).  
  • However, just 16% of fleet managers said they were ready to give up all or even part of their company car fleet in exchange for the implementation of alternative mobility solutions. 

BART BECKERS: “Some years ago, we launched a mobility budget platform in the Netherlands. We also introduced it into Belgium, anticipating on the changes in regulation on mobility budgets. France will be next – we’re just waiting for the confirmation that mobility budgets will be fiscally incentivised. Many companies are interested in mobility budgets, but it requires fiscal neutrality at least. Until then, people won’t move.”

Authored by: Frank Jacobs
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