COMPANY cars will remain a vital part of business culture, despite growing numbers of firms looking for new ways to reward their drivers, according to industry leaders. Businesses are reporting rising interest in providing alternatives to the company car as they consider the effect the April 2002 introduction of carbon dioxide-based company car tax will have.

Drivers covering mileages of more than 18,000, who currently pay tax at 15% of a car's list price, are almost certain to see their tax liability rocket under the new system, which taxes on a percentage of list price according to emissions, with average Ford Mondeo-type fleet cars being charged at about 25%.However, shrewd fleet managers are off-setting potential tax increases by encouraging the choice of low CO2-emitting vehicles and looking to reduce mileages. Already building materials giant Hanson has announced it is moving to a structured personal leasing scheme where drivers own the vehicle so do not pay benefit-in-kind tax.

But speaking at the launch of the HSBC Fleet Survey 2001 - Business Car Expectations, Tim Holmes, director and head of HSBC Vehicle Finance, said: 'People are asking 'is the company car dead'? Most certainly not. Some companies have extended replacement cycles and we are seeing a lot of pent-up demand.' He added that firms moving away from company cars must be careful to ensure drivers continue to present the right image on the road, as they could choose any vehicle they liked.

Report author Peter Cooke, head of the Centre for Automotive Industries Management at Nottingham Business School, said: 'The clear message is that the industry is in a state of revolutionary change, in the way vehicles are provided and managed. The company car is here to stay, but in all likelihood it will be in a different form in future. Fleet management will have to reinvent itself if organisations are to continue their transport requirements.'

Despite the change, fleets continue to give a vote of confidence to the company car. Manchester-based telecoms company YES Telecom has invested £250,000 in a new fleet of 3-series BMWs, complete with registration plates lettered from X1 YES to X13 YES. The vehicles are provided as part of a recruitment drive to entice 50 staff to the new company. Director Colin Jones said: 'The decision to invest heavily in our fleet of cars is reflective of our positioning as an employee-led brand. This is an exciting and growing industry to be in, one that demands the best people, and the job packages we are offering are designed to attract exactly that.'

Pearl offers a BMW as standard and has the largest BMW fleet in the country, with the German marque accounting for 1,750 cars on the 2,300-vehicle fleet. The car is not simply a perk, but a valuable tool for staff whose office is on the road. In one recent jobs supplement alone, a company car was featured prominently in 60% of adverts examined.