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With fleet and company cars usually accounting for half of the annual new car market, how will a post-coronavirus working environment affect the use of cars for business travel?
Last updated: 15 Mar 2021 5 min read
The fleet sector is an important component of the UK’s new car market, accounting for 53% of sales in 2019, with 1.23m cars going to business users. In addition, vans contributed 365,778 sales to the fleet sector last year, which was the third highest total on record.
In short, without the array of fleet vehicles, pool cars, company cars and ‘perk cars’ (company cars or allowances with no expectation of business use), the UK’s new vehicle sales would be a great deal lower every year.
A pandemic-instigated recession is therefore not good news for car manufacturers – or the leasing companies that supply the vast majority of vehicles to fleets.
This is compounded by uncertainty around the future of working life in the UK. Many commentators and trend forecasters are eagerly looking at the working from home movement that has been thrust upon many British workers in the last few months. Will it become the new normal or will we all be happy to return to our offices and workplaces when it’s safe to do so?
The lockdown has had a number of repercussions for fleet drivers, with not only leases expiring during the period, but also important changes coming into effect that govern how company cars are taxed.
Paul Hollick, co-chair of the Association of Fleet Professionals (AFP), the fleet industry’s membership organisation, says: “It’s been impossible to get lease vehicles collected, because of coronavirus and the lockdown. Most people have extended them with a leasing company for those three or four months.
“Where it gets quite emotive, though, is that in the UK, even if the vehicle is not being driven, it’s taxable as a benefit in kind if you make a car available for private use. A lot of people have got a bit upset, employees in particular, because they’ve got a vehicle on a driveway and they can’t get it collected. But they’re still having to pay tax on it, even though they’re not driving it.
“The Inland Revenue made some dispensations. If you sent your keys back to your employer, you could then remove it as a taxable benefit. But logistically, that’s a bit of a disaster, because you’ve got keys going all over the place. What happens if you just wanted to move it, get it off the driveway for a bit? The whole thing, logistically, was just impractical.”
While the lockdown has largely ended and, since 1 August, people are free to return to workplaces, the reality is that companies are being cautious about returning to business as usual – which has an impact on business travel and, as a result, car use. Even the type of car being used could be reconsidered.
Steve Young, managing director of ICDP, an international research and strategy organisation that specialises in automotive retailing, says: “Maybe working from home will mean people will rethink at least the type of car they have, or if it’s a business car, the business will rethink whether it actually makes sense to give cars as a perk.”
“Maybe working from home will mean people will rethink at least the type of car they have, or if it’s a business car, the business will rethink whether it actually makes sense to give cars as a perk” Steve Young, managing director, ICDP
Hollick still sees a place for fleet cars, though: “Cars obviously fulfil a business need because they’re doing particular things, so they will still continue. And then you’ve got perk cars, which will probably still be there as long as the employee is still there. The main thing is just the shifting economic patterns, with digitalisation also changing things. What Covid’s done is just fast-track a lot of technology, which was going to happen anyway.”
One thing is certain: even if we do return to business life as we knew it before the pandemic, that won’t be for some time. And in the meantime, changing working practices will have an effect on the immediate demand for fleet cars.
Young says: “The changes in business life, in terms of the people working from home – even if they are going into the office, not travelling for meetings but doing them by Zoom – is a permanent change. Nobody that I speak to, in the UK and abroad, feels that we will go back to the same level of business travel as we used to have.
“Perhaps there are some implications around the types of car that people buy, or choose, if they’re on a lease. The same goes for the number of businesses that can find a justification as to why they should give a car as a business perk. I think those changes to the work pattern will be permanent. The changes in travel behaviour, commuting behaviour, avoiding public transport? I can see them unwinding over time, but it will depend an awful lot on the evolution of the pandemic, public behaviour on public transport and how much more traffic is on the roads.”
The pandemic has also possibly halted the move towards the trend for mobility as a service (MaaS), which was expected to have a major effect on fleet car numbers over the next decade and beyond, as business travel moved away from individual cars to shared assets.
As Hollick says: “People will still need vehicles and mobility to move around. And whereas pre-Covid, we were talking about a move, with urbanisation, to usage rather than ownership, and whether people would be sharing more and having more of a sharing economy around assets, Covid has pushed that the other way. People are now thinking about personal mobility, rather than shared assets.
“I’m pretty sure there will be fewer cars on the road because there’ll be fewer employees working in organisations. It’s going to be interesting.”
Manufacturing and Automotive, Future Mobility