There is pressure on the Government to upgrade infrastructure for road and rail users due to increased congestion. The Government has confirmed that the high-speed rail link HS2 is proceeding; although the Eastern leg, running from the Midlands up to Leeds has been scrapped. Instead, the Transport Secretary has said money is aside to upgrade the current transport in the area.
Infrastructure spending will become increasingly important following the pandemic to support broader economic growth.
The Government has also agreed to ban the sale of internal combustion engine vehicles by 2030. As a result, there will need to be an expansion of charging infrastructure to achieve this aim and meet demand.
Brexit is now complete, and a trade deal in place but there is still uncertainty around both short and long term implications which is disrupting supply chains.
Negotiations are taking place for trade deals with various states in both the goods and services industry, which will influence future costs and product availability in some countries.
China, US, and EU tariff discussions potentially significantly impact the cost of sourcing vehicles in different territories. The outcome of trade discussions will impact where manufacturers will focus resources over the medium term.
The Biden adminstration appears to have a more traditional approach to the presidency compared to his predecessor. However, there is still a significant contingent of Trump supporterers who still maintain an ‘America First’ approach.
Growth Prospects After Covid-19
The short term impact of Covid-19 on the global economy has been significant. At the time of writing, European countries are beginning to relax restrictions and open up to travel due to the increasing vaccine rollout.
Supply Chain Changes
The impact of Covid-19 on global supply chains has been significant. Car production has been hugely affected by the semi-conductor shortage, which has had severe impacts on the technology industry as a whole.
The increasing tax burden for company car drivers leads to the increased attractiveness of the cash allowance alternative. Company car volumes are lower year-on-year. The reduction of travel due to the Covid-19 pandemic is likely to exacerbate this trend as the tax from company vehicles reduces.
The exchequer will have lower receipts from fuel duty as there has been a reduction in general travel. There has been talk of road pricing due to the tax losses on fuel and vehicle excise duty.
The low interest rate environment adds to personal leasing through Personal Contract Hire (PCH) and Personal Contract Purchase (PCP). This segment of the market has seen significant growth in recent years and seems likely to continue. This will likely erode the potential demand from the traditional company car market as drivers opt for company car allowances instead.
Fleet Management Market Consolidation
Low interest rates lead to the consolidation of fleet providers through attractive returns from asset-backed funding. As a result, the leasing market is becoming more consolidated among the largest suppliers. Manufacturers are also expanding their footprint, as demonstrated through the acquisition of Inchcape by Toyota Financial Services.
Shrinking Overall Market
The reduced company run vehicle volumes are forcing Fleet Management companies to focus on profitability. This involves selling more additional value add services as part of a mobility mix. Fleet Management companies will review the relatively unprofitable businesses such as the broker market, with a view to accessing customers directly.
The long-running freeze on fuel duty helps with vehicle running costs, but this will come under increased pressure due to the pandemic and increasing penetration of electric and low emissions vehicles.
Asset Ownership Models
Generation Y are challenging the ownership culture, leading to a reduction in demand for passenger cars. Subscription services are becoming a widely accepted usage model within a variety of settings. The increased prominence of Uber and platforms such as Zipcar and Lime are adding to the available mobility mix.
Car drivers expect the Amazon shopping experience. Tesla has led the way in creating new deployment models for sales and in-life user experiences.
There is an increased focus from many, especially the younger generations, regarding the environmental impact of travel. Innovations in electric vehicles offer a genuine low carbon alternative to fossil fuel vehicles. Other fuel sources such using Hydrogen as a greener alternative to internal combustion powertrains are also being developed.
New electric vehicle technology is paving the way for a fully electric future. Infrastructure requirements at a local and national level will place additional demands on the national electricity grid. Other fuel technologies such as Hydrogen are also being investigated but remain a niche in the overall mix.
Autonomous driving technology is leading several manufacturers to rethink their product development strategy from products to services. However, there is still much work to be done before fully autonomous vehicles hit the roads, with legislation providing the biggest obstacle to deployment.
Mobile Phone Technology
The age of mobile apps facilitates the rise of mobility alternatives such as Uber, Lyft and Zipcar. The implementation of 5G will offer a vast array of other possibilities within the automotive sector.
The increasing availability of open-source information is helping to increase interoperability between transport options into a mobility solution. In the medium term, this will reduce the need for company vehicles.
Digitisation of User Experience
Increasing use of digitisation of the company car experience is helping to reduce the cost to serve and maintain or enhance profitability.
Connected car technologies offer increased opportunities within the big data and artificial intelligence space. Many of these services are in their infancy but are growing rapidly.
Worldwide Harmonised Light Vehicle Test Procedure (WLTP)
WLTP legislation impacts short term demand for vehicles due to the phased introduction and impact on personal tax.
EU Emissions Legislation
European legislation regarding new vehicle emissions forces manufacturers to invest in using new technologies to reduce emissions. Manufacturers face potentially huge fines for missing emissions targets.
Clean air zone (CAZ) legislation and legal challenges are enforcing action in many cities. Despite the delay in some CAZ implementations because of Covid-19, there is still a legal requirement for them to be put in place.
Covid-19 had a significant impact on traffic in local environments lowering emissions and improving air quality. There is likely to be pressure from local residets to keep some of these gains as we move forward.
There is significant pressure on government to reduce carbon emissions of which road transport provides a considerable proportion. The UK has committed to stopping the sale of petrol and diesel vehicles by the end of 2030.
Clean Air Zones
Local air pollution forcing many local councils to think about introducing clean air zones to avoid significant penalties. To see the impact and breadth of the changes, follow this link: https://www.bvrla.co.uk/resource/CAZmap.html
The pedestrianisation of inner cities is leading to alternative transport modes such as Santander Bikes in London and the rise of the e-scooter offering from Lime.