When the President of Lyft, the ride-hailing service, John Zimmer said that private car ownership would be dead within 10 years many in the car and motor fleet industries dismissed his claims. They did so for two reasons. Firstly, it was based on us all using self-driving cars, and secondly, Lyft’s future prospects rather hinge on people abandoning their own vehicles in favour of hail and ride alternatives. Since then, however, other voices have echoed his sentiments. A Business Insider poll of nearly 1,000 motor industry executives revealed that 60% believed 50% of current car owners would lose interest in ownership by 2025.
So, if the future of transport is a move away from car ownership to vehicle hopping what does that mean for fleets, company cars and for fleet insurance? In his latest blog from Coversure Hull – the fleet insurance specialists – we’ll look at this potentially seismic change in detail and try and answer the question, is car ownership in the UK doomed?
What’s Driving People Away from Vehicle Ownership?
The reasons for this declining appetite are complex and include cost, environmental concerns and a simple lack of use – why pay a fortune for something that sits idle for 96.5% of the time? The principle factors then are:
• Cost of ownership – even the most ardent petrol head won’t deny that cars are expensive hobbies. With fuel costs having risen by 29% since 2010 according to the RAC Foundation, vehicle excise duty having spiralled ever higher and with the cost of vehicles also on the up, more and more people are finding them an expensive option that they can live without.
• Lack of need – for city and urban dwellers the need to own your own vehicle has diminished significantly. With governments both local and national pumping billions into public transport and the rise of the likes of Uber and Lyft, there simply isn’t the need to own your own. Indeed, with cities becoming more congested and more crowded, cars are fast becoming a positive burden. Pressure on land has driven housing densities up and the idea of every dwelling having a parking space has stopped being a reality for many. These ride sharing services are also much, much cheaper. A US study has predicted that by 2021 using electric ride-shares will be 4 to 10 times cheaper per mile than buying a new car, saving a typical family $5,600 per year.
• Accessibility – the need for clean air has become a major concern for councils up and down and many have turned to charging to deter vehicles. This can not only make driving in cities a costly affair – London’s Ultra Low Emission Zone (ULEZ) – will cost a car driver £22.50 a day to enter, but may soon mean an outright ban. Oxford has been considering banning diesels from the centre for some time and others are looking at making town centres a no-go area for private vehicles.
• Insurance costs – whether you’re a private car driver or looking for cheap fleet insurance, you can’t help but have noticed a rise in the costs of cover. Changes to the Ogden Rate and successive rises in insurance premium tax (IPT) have made getting the protection you need a costlier business.
• The rise of environmentalism – the outrage that was felt in the wake of the VW emissions scandal not only effectively signalled the death of diesels, but galvanised a generation around the harm fossil fuelled vehicles can do. While many are now seeking cleaner alternatives, which has prompted a surge in demand for electric vehicles in 2019, many are deciding that public transport is the only real green alternative.
• Changing nature of work – working practises have changed beyond all recognition in the last decade. According to the Office For National Statistics (ONS) over 1.5m people now work from home, a rise of 78% between 2008-2018. This, and technologies such as Skype and cloud-based collaboration software means that the daily commute is becoming a thing of the past for more and more people.
• Lack of use – it’s a staggering statistic, but a car in the UK is parked for 96.5% of its life. With the average journey of 20 just minutes, most cars are only on the move for 6 hours a week. The rest of the time they are sitting idle, depreciating and costing you cash.
Does This Mean the End of Vehicle Fleets?
While it is probably premature to talk of the death of fleets, it is probably fair to say that the fleet industry – like the car industry – is in for the greatest period of disruption since its creation. For a start the sheer number of fleet vehicles on our roads is so high that it will take many years for them to be run down – far longer if you factor grey fleets into the equation.
Then there’s the continuing popularity of company vehicles with employees. Despite some pretty sharp rises in benefit-in-kind (BIK) rates, the prospect of a company or fleet car remains a major draw. Figures released by the HMRC in 2017 revealed that 960,000 employees paid BIK tax on a company car in 2015/16 – a 1% rise on the revised figure of 950,000 recorded in the previous financial year.
Some businesses simply need to have their own fleet of vehicles. Pharmaceutical companies need reps on the road visiting doctors. Utility giants like BT and Anglian Water need engineers on the road to upgrade connections and fix leaks and the construction and haulage industries could not function without their special types fleet or plant fleet vehicles. Then there’s those servicing rural sectors where ride sharing is still some way off. Like electric vehicles, driverless and on-demand services will be urban options, at least in the medium-term, so alternatives to these alternatives will still be required.
So, What Does This Mean for Fleet Owners?
In short, a lot and much of it, somewhat perversely, is extremely positive.
• Cost – no matter how good a lease deal your fleet manager has cut, no matter how good a fleet insurance quote they’ve managed to secure and no matter how efficiently your fleet is run, the costs are still high. Moving to an on-demand model will save companies huge sums. In the US the impact on private households will be the releasing of around $1 trillion per year by 2030, so imagine what it could save Britain’s businesses…?
• Faster journeys – studies suggest that this new technology could cut the number of passenger vehicles on American roads from 247 million in 2020 to 44 million in 2030. Fewer vehicles obviously mean less congestion and less congestion means less time and money wasted.
• The rise of fleet mobility – fleet mobility has been a buzz term over the last couple of years and with a move to on-demand this is a trend that can only accelerate. Integrating services such as Lyft or Uber will be easy and driven by intelligent technologies so further cutting costs and waste.
• Death (at last!) of grey fleets – grey fleets have long been considered by many to be a false economy and this latest wave of innovation should see their demise. After all It’s going to be some trick to ask an employee to use their own vehicle for business purposes if they don’t own one!
Is Car Ownership in the UK Doomed?
While predicting the future with certainty is a fool’s errand, all the signs are that the model of ownership we have grown up with is set to go the same way as the Dodo. In the short-term we are likely to see more and more people using these ride services – especially in urban areas and cities – owing to costs and environmental concerns. For fleet owners the attractions are obvious, but there will be resistance from those who have a company vehicle.
A question mark also hangs over autonomous cars. Will the public accept them and if so under what terms? Who will pay the insurance and who (or what) is liable in the event of an accident? These are issues that will need to ironed out and fast.
Whatever the outcome one thing does look clear: that the automotive and fleet sectors are in for the biggest shake up since Henry Ford invented mass production. It will be fascinating to see what’s coming down the road… and if anyone is driving it.
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