Zenith invests £400m-plus in electric vehicle fleet in 18 months

Zenith has invested more than £400 million in electric vehicles (EVs) in the past 18 months, as more company car fleets make the switch and salary sacrifice continues to gain traction in the market. 

The Fleet News Awards leasing company of 2023 (more than 20,000 vehicles), a category sponsored by Jaama, raised a £475m green bond at the start of last year, to help it source and finance EVs to meet growing demand in the marketplace. 

Tim Buchan, Zenith’s CEO explains: “One of the requirements of that was we had to buy £475m worth of qualifying BEV (battery electric vehicle) asset within two years.”

A year-and-a-half later, more than £400m of the green bond has been spent growing its EV risk fleet.

Full details of the level investment will be revealed in Zenith’s annual financial results, but currently around one third of Zenith’s funded car fleet is electric, excluding its managed vehicles, with the powertrain also accounting for more than half of the new vehicles it has on order.

The interest in electric cars from corporate customers continues to grow, but Buchan acknowledges that vans are failing to keep pace, with a similar uptake likely to be two to three years away, as operators begin to understand the technology and more capable EVs enter the market.   

“We have lots of pilots on the go at the moment,” says Buchan. “Lots of businesses piloting BEV on vans to see how that works.

“Each customer seems to have its own dynamic, its own laden weight requirements, its own job use requirement, which means that no one fleet is the same when you come to battery electric vans.”

Buchan notes that, while Zenith’s mission is to decarbonise the UK vehicle park, it will not do that at the expense of its customers.

“The transition is happening and it’s happening with salary sacrifice and company cars,” he says. “A lot of these fleets are still running petrol vans, some diesel vans, petrol cars, some hybrid, and battery (electric vehicles) on salary sacrifice.”

Vehicle lead times ‘improving’

Long lead times have been a major challenge for end-user fleets over the past two years, but Ian Hughes, CEO of Zenith's corporate division, believes there is now much more certainty in the market.

“We’re seeing a really stable and predictable supply chain now, which it wasn’t previously,” he says.

The improvement in new car supply was illustrated by the most recent sales figures from the Society of Motor Manufacturers and Traders (SMMT). 

They showed that the overall new car market grew by 25.8% in June, with 177,266 vehicles sold - the 11th consecutive month of growth.

Fleet and business new car registrations increased by an even greater 36%, with 97,468 registered in the month, some 25,995 units more than the 71,000-plus vehicles sold in June 2022, equating to a 55% market share.

It has helped meet pent-up demand and given fleet customers more certainty of supply, which Hughes acknowledges has been difficult over recent months.

Hughes explains: “We were never really able to give concrete lead times; concrete expectations to the customer, which then created some challenges from a service point of view.”

Vehicle leasing companies have suffered at the hands of supply chains being squeezed due to the War in Ukraine and Covid 19, with end-user fleets becoming increasingly frustrated.

In March, Fleet News reported how fleets were ready to walk away from some established manufacturer relationships after branding the level of service they were receiving as “disgraceful”.

A lack of transparency over vehicle availability, long lead times and vehicles being cancelled at the eleventh hour had left fleet decision-makers angry.

Buchan explains the market has “moved away” from that pre-covid ‘buy-it-now, get-it-now’ environment and, while drivers have accepted the need to order at an earlier stage in the replacement cycle, achieving consistency in supply was important.

With lead times now standing at around six months for new vehicle orders at Zenith, Hughes says: “Cars are now starting to arrive in line with their contract end dates.”

Market growth

Many employees moved away from company car schemes on the back of an increased tax rates in 2017, driven by the introduction of the new emissions testing regime, WLTP.

However, Buchan says an increasing number of employees are returning to corporate schemes. “We're now seeing a shift in the other direction, with people coming back out of consumer and back into corporate sponsored schemes, which includes company cars and salary sacrifice.”

That has been driven, in part, by new benefit-in-kind (BIK) tax rates, which have been kept low for BEVs, thanks to a campaign involving Zenith, the British Vehicle Rental and Leasing Association (BVRLA) and other FN50 leasing companies.   

High inflation is also persuading people to join corporate car schemes thanks to the fixed cost to customers, according to Hughes.

“You’ve got fixed-price motoring for three or four years,” he explains. “It’s an important inflation protection solution and we’re seeing an exponential amount of people joining these schemes.”

While benefitting from this re-birth of corporate car schemes, Buchan says Zenith has also gained more traction in the market thanks to its “one Zenith” proposition.

He explains: “We can go to our customers and say we can do all of your trucks, trailers, home shopping (vehicles), company cars, salary sacrifice and your daily rental.

“We believe that's one of the reasons why we've been successful over the last five years.”

The business is effectively made up of three core components: corporate vehicles, commercial vehicles and ZenAuto, its retail offering.

The breadth of its business was one of the factors it was crown Leasing Company of the Year (more than 20,000 vehicles) at this year’s Fleet News Awards.

Commercial vehicles

Zenith’s commercial vehicle offering has developed since it announced its owners had acquired Contract Vehicle Holdings (CVL), which specialised in the HGV market, in 2017.

It was followed-up with the acquisition of Cartwright Fleet Services, Cartwright Rentals and Cartwright Finance Sales from administrators in 2020. 

Today, its commercial vehicle division deals with everything from tractor units and rigids to trailers and home delivery vans. “We also have our four workshops and over 100 mobile service units that enable us to go to our customers reducing their downtime,” says Buchan.

“We think that the service that we provide with all commercial vehicle services under the Zenith umbrella, with the four workshops, with the trailer rental fleet, and the mobile service units is a very compelling proposition for our customers.”

Buchan explains that the majority of those customers, unlike company car fleet operators, are looking to Zenith to help reduce any downtime.

“One of the big areas for a customer is the downtime, not just the cost of the asset, but every hour, every day it’s off the road, that is a cost for them,” he says.

In order to help its customers cut downtime, Zenith has made a £25m investment in digital technology, transforming the experience of commercial fleet customers, enabling them to access all their vehicle data via a purpose-built online portal.

The fully scalable asset management platform, CVConnect, gives fleet managers valuable insight, saving them time and energy, and keeping vehicle off-road (VOR) time as low as possible.

It has also created CVLink, a supplier authorisation portal, providing suppliers with an online platform for submitting jobs and costs, providing a more streamlined approach to cost authorisation, and the ability to audit any costs or processes.

Corporate division

Zenith’s corporate division has been at the heart of the business for the past 34 years. It gives fleet customers access to company cars, light vans, salary sacrifice and fleet management services, including short-term rental.

Buchan says: “While the driver in commercial is about downtime management and keeping these vehicles on the road, the driver within our corporate division today is clearly the transition into battery electric vehicles.”

Salary sacrifice has helped increase the adoption of BEVs at Zenith, but Buchan stresses that, despite a growing fleet of plug-in vehicles, it still operates a mixed portfolio of powertrains, with a lot of demand for petrol.

Meanwhile, a new digital platform, originally developed for the ZenAuto business, is being rolled out to its corporate division, with its first salary sacrifice customer being enrolled on the system recently.

Buchan says: “We're going to start to transition that through our customers to create a much more seamless digital journey for the corporate user rather than just for a consumer.”

Hughes expects the rollout to be completed by March 2024. “We're looking forward to more and more people getting access to it,” he says.  

Buchan explains how much the interaction with drivers has changed over the past decade. “If we were to go back a decade, company car drivers were given a choice list,” he says. “Company car drivers are really all effectively consumers now. The platform is designed to make the experience better, faster and simpler.”

Consumer business

ZenAuto, Zenith’s consumer business offering, now accounts for 10,000 vehicles. However, with the cost-of-living crisis hitting home budgets hard, Buchan says consumer demand is a “bit more challenged” in the current environment.

He adds: “We basically set the group up to drive into the consumer markets, into the corporate markets and into the commercial markets.

"Each one of them operates depending where the economy is and it gives us a balanced business.”

People and diversity

Another area which was highlighted by the judges in this year’s Fleet News Awards was an excellent internal training scheme and career progression, which results in long-serving staff, along with a dedication to diversity.

Buchan also recently became the latest member of the Automotive 30% Club – an initiative which aims to increase gender representation within the automotive industry.

“We're investing very heavily in our people, because for all of the technology that you have, you need people,” he concludes.

“Without our people, we couldn't do what we what we want to do and support our customers without those people.”

FACTFILE

Company: Zenith

Risk fleet (cars and vans): 66,536

Chief executive officer: Tim Buchan

Chief executive officer corporate division: Ian Hughes

Turnover (2021/22): £589m

Employees: 1,200-plus

JUDGES’ COMMENTS: Zenith Vehicles has outstanding breadth of reach from retail to business with cars, vans, trucks and plant which has provided a great base from which to grow.

It has an excellent internal training scheme and career progression which results in long-serving staff and is a leader in sustainability, employing battery electric vehicle gurus, joining the Acceleration to Zero coalition, reusing parts and raising a Green Bond to accelerate the transition to electric.