Companies keen to embrace mobility, finds Arval Mobility Observatory

Changes to travel behaviour brought on by the coronavirus pandemic have created a once-in-a-lifetime opportunity for Government to reshape how transport is delivered and used, and to support and promote the most effective transport modes.

That’s the strident view of leading transport strategists in the latest edition of Smart Transport, the journal for the eponymous influential public-private membership sister organisation to Fleet News.

In the company car and van sector, there is a willing audience to embrace change, particularly among the larger fleets, although the biggest challenge will be persuading people to give up their company car in favour of a mobility alternative.

The latest Arval Mobility Observatory (AMO) research reveals that more UK companies are using and intend to use new mobility solutions compared with a year ago.

More than six-in-10 (62%) have introduced a mobility solution, with a quarter of fleets formally adding mobility options to their car policy.

While the top alternatives include ride share, PCH/salary sacrifice and public transport, a growing proportion are planning to adopt mobility budgets and booking apps.

Shaun Sadlier, head of Arval Mobility Observatory in the UK, says: “Companies are looking at an overall offering for their employees. It’s not just the company car, because that might not be what they want.”

However, while he detected “quite a lot of enthusiasm” for the adoption of mobility solutions, many drivers remain resistant to handing over the keys to their company cars. Just 18% of decision-makers said their drivers would be willing to give up their car for an alternative mobility solution.

“These findings really illustrate just how resilient the company car remains within UK corporate culture, with fewer than one-in-five fleet managers reporting that their drivers have a definite willingness to give up their vehicle for a mobility alternative,” says Sadlier.

Here, we examine the key findings from the AMO survey, including fleets’ approach to risk management, their biggest challenges, uptake of alternative fuels and funding forecasts.

Congestion remains biggest operational challenge

Lack of road infrastructure, which causes greater congestion, is fleet’s biggest issue, according to the survey, although the proportion of companies ranking it as their number one concern has fallen year-on-year from 49% to 43%.

The Government has pledged £27.4 billion of investment into the strategic road network over the next five years as part of the Road Investment Strategy 2, managed by Highways England.

Reducing travel times is one of the priorities, as well as reducing the number of people killed or seriously injured, but the plan is facing a legal challenge from environmental campaigners who wish to see funds diverted into public transport, rail freight, walking and cycling.

Nevertheless, with Government setting Highways England some tough key performance indicators (KPIs) around journey times, safety and road maintenance, fleets should see improvements in the coming years.

In recent months, congestion has also been eased by more people working from home, which has taken cars off the road. This could become a longer-term trend.

“There is already the comment that companies may not go back to having the same level of people working in the office and early indications are that we will see fewer people commuting,” Sadlier says. 

Increased vehicle taxation has dropped down the list of challenges after the Government set out benefit-in-kind (BIK) rates, which affect employers’ national insurance, for the next four years last year.

These were ratified by the Chancellor in the March Budget – after the AMO research concluded – so it’s likely to be even less of a concern now.

Heading in the other direction is clean air zones. Last year, they were highlighted as a main challenge for 16% of fleets; this year it is 30%.

This is likely to reflect inconsistency over how zones in different cities are being implemented, including charging fees, administration and the types of vehicles affected. However, many fleets are not affected, while many zones themselves have been delayed for a year due to Covid-19.

“Our view is this complexity is probably at the root of the concerns reported because the rules being adopted in the majority of cities are quite moderate,” Sadlier says. “When we look at our customers’ fleet profiles, it’s rare we see issues.”

Acceleration in alternative fuel uptake

Implementation of alternative fuels is a growing challenge for fleets, with 30% putting it among their major priorities compared with 19% a year ago.

In terms of battery electric vehicles (BEVs), 16% of fleets have already implemented (the same as last year), with another 37% looking to add them over the next three years, up from 25%. Meanwhile, 38% are looking to introduce plug-in hybrid, with 25% having already done so.

This “noticeable acceleration” in adoption of alternative fuels is partly down to the right tax incentives and partly down to a much wider range of models coming to market, says Sadlier.

Companies are also motivated by their corporate social responsibility, with many larger organisations working towards a zero-emission fleet by 2025 or 2030, earlier than the Government’s proposed 2035. This means a wholesale movement of forthcoming vehicle replacements to full electric.

However, there remain hurdles to overcome for some companies. Topping the list is public charging points, with 67% of fleets saying this is an issue – although charging is a problem across the board with 55% having no charge points at the office and 55% saying their employees did not have charging points.

In reality, at home until you decide to choose an electric vehicle (EV), an employee has no need for a charge point so this should be easily overcome.

For Sadlier, it’s about “busting myths” around the average range of the EV and the journey profile of the driver.

“If they can charge either at work or at home, it is rare that they will have to use a public charging point,” he says.

“We are moving away from discussions about which is the right powertrain and looking at how much planning does a driver have to do to make an EV work for them. It’s rare that an EV couldn’t be used with just a little planning.”

Driver reluctance is now one of the lesser issues to overcome, with just a quarter of fleets saying it was a constraint. “We are seeing that customers and drivers are much more willing now to move straight from ICE (internal combustion engines) to full BEV,” adds Sadlier.

Surprisingly, 65% point to the fact that the purchase price is higher than a diesel car – an argument easily overturned by measuring total cost of ownership instead.

“Our real-world experience is these cars and vans are highly competitive when compared on wholelife costs with their petrol and diesel counterparts,” says Sadlier. “Clearly some education needs to take place to explain this point.”

Car dominates mobility solutions

Mobility solutions are gaining in popularity with companies, but many of the options they are employing within their fleet operations are still heavily reliant on the car.

Just over six-out-of-10 (62%) of companies have implemented at least one mobility solution. However, four of the most popular five rely on the car as the mode of transport – the one exception is public transport, now used by 34% of fleets, with a further 11% considering offering the option to employees.

Almost half of fleets (48%) expect to be using ride-sharing within the next three years (up from 45% last year), with 29% already using it; 22% are offering private lease (PCH or PCP) or salary sacrifice to employees, likely to rise to 46% within three years (up from 23% last year); and 25% are using mid-term rental, with a further 15% considering introducing it (totalling 40%, up from just 22% in 2019).

Corporate car sharing is also popular, but the numbers drop off when it comes to bike sharing (8% now, 23% within three years), which is one of the Government’s key active travel growth targets.

The coronavirus pandemic is widely anticipated to have a short-term impact on mobility solutions, particularly public transport, where research from Transport Focus suggests that just 20% of people will be happy to start using buses and trains again as travel restrictions are eased. In addition, 71% say they won’t use public transport until social distancing is in place and 48% say they will drive more for journeys where previously they would’ve taken public transport.

Sadlier adds: “Many mobility solutions rely on the sharing of transport assets and this simply may not be as viable in the short- to medium-term.”

A growing number of companies are starting to implement mobility cards and budgets, and introducing mobility apps to their employees.

Almost a third of fleets (29%) expect to have a mobility budget within three years (up from 21% last year), with 12% already doing so, while 26% are introducing a mobility card.

“We are having more conversations on mobility – it’s being mentioned in more RFIs/RFPs (requests for information/proposals),” says Sadlier. “It represents a genuine shift in approach to business travel.”

Arval has car-sharing trials in Italy and France, and a mobility card in Benelux which brings together all travel options, from public transport, to car-share, to bikes. Both will be rolled out to other countries, including the UK.

However, few drivers appear willing to give up their company car for a mobility alternative – just 18% according to AMO. And, even among those who would, their preference is for a car-based solution such as personal lease or car share. Just one-in-20 would happily replace the car with a mobility budget.

“A company car is a very easy means of ownership, with everything effectively taken care of for the employee, who can also benefit from more regular access to new technology,” says Sadlier. “This is why it remains such a popular benefit whether it’s an essential component of a job or as an employment perk.”

He adds: “Mobility is in its infancy, but we see it speeding up. There will be a generational element where younger people don’t want a car; they will want mobility – as long as it is a cost- and time-effective alternative to the company car.”

Could this result in a long-term decline in the company car? “That has to be seen over the coming months, but what it could result in is a mix of mobility solutions for employees,” says Sadlier.

“With some of our large corporates, the company car fleet has actually reduced, but the number of cars we supply to those companies through PCH or salary sacrifice is actually more.”

Gaps in risk management policies

The bigger the company, the more likely they are to have a robust risk management strategy. They have the health and safety teams, full-time fleet managers and company-wide risk policies, while the potential returns on investment are much greater with the higher number of drivers.

Large employers are also three times more likely to be monitoring drivers in order to manage their risk than the smallest, using telematics, fuel consumption and fines data to build scoring matrices to identify the best and worst drivers.

However, even among the largest companies there are gaps in policy – 22% do not undertake any risk assessment, for example, while 44% do no on-road driver training.

Training is the main omission across the board. In total, just 38% of companies offer on-road training and 33% classroom training. With 62% doing a risk assessment, the obvious question is what they are then doing with the results if they are not investing in driver training.

“When we are talking to clients about road risk, we would be saying that when they identify those drivers that have a certain level of risk that’s not acceptable, that we would anticipate that they would do on-road training,” Sadlier says.

‘Potential leap’ to leasing

Arval’s observatory research has shown a gradual creeping towards leasing for several years, but the results in the 2020 survey are striking: 26% of fleets intend to increase or introduce leasing over the next three years compared with 12% a year ago.

The growth rate is largest among the biggest companies, rising year-on-year from 17% to 38%. Sadlier describes the mood swing from a “gradual shift” to a “potential leap”.

He adds: “What is also interesting is that this research was carried out before the coronavirus crisis. In a business future where there will undoubtedly be increased and perhaps substantial pressure on company budgets in the short and medium terms, there is every chance that operational leasing will look even more appealing.”

The number of companies offering funding solutions to non-company car drivers is also accelerating, rising from 12% in 2019 to 20% this year. Cash allowance is the most popular, offered by 52% of those businesses, but the two biggest growth areas are PCH (28%) and salary sacrifice (39%).

“Salary sacrifice flatlined for a while but in the past 12 or so months, we’ve seen a lot of interest from our client base and also responding to RFP requests,” says Sadlier. “We also expect PCH to continue to grow in popularity as part of an employer benefits package and also to individuals.”