New year, new fleet challenges

After a turbulent 2021, what are the potential challenges ahead for fleets as the new year gets under way – and how can you minimise disruption for your fleet?

The automotive industry has had a bumpy road to post-pandemic recovery, as disrupted supply chains and shifting Covid-19 restrictions have hampered business as usual. There are some signs of optimism for 2022, and some emerging headaches too. Here’s what you need to know.

Semi conductor chip shortages continue

A global shortage of the semiconductor chips used throughout modern cars and vans made vehicle production incredibly difficult during 2021. The resulting bottleneck in supply caused long lead times and delayed or cancelled orders, with a marked effect on registrations. According to industry association ACEA, 3.3m fewer cars (-23%) were registered across Europe in 2021 compared to pre-pandemic 2019 [1].

Vehicle manufacturers are working hard to keep production going. Some have temporarily deleted options or trim levels, while others including Ford [2] and BMW [3] have signed agreements with semiconductor manufacturers to shore up supply. However, the consensus across both industries is that these problems will persist for several months, if not the rest of 2022 [4].

Semiconductor shortages don’t only affect car and van production. The Association of Fleet Professionals has warned that this could also restrict the supply of home and workplace chargepoints, which would leave drivers reliant on more expensive public networks and could slow demand too [5].

Pressure on rentals

Long lead times and disrupted deliveries are a particular challenge for rental companies, as they operate large fleets with short replacement cycles. Some manufacturers are prioritising retail sales [6] and the BVRLA has warned rental customers to expect reduced choice, less availability and for suppliers to have older, higher mileage vehicles than usual on fleet [7].

That’s on top of accommodating Covid-safe logistics, which restrict the opportunities for drivers to ride-share for collections and deliveries.

New chargepoint rules

OZEV announced changes to the home and workplace charging grants at the end of last year [8], closely followed by new laws which will affect all units sold in the UK [9].

This means:

  • The Electric Vehicle Homecharge Scheme will no longer be available to homeowners in single-occupancy properties (such as houses and bungalows) from 1 April 2022. This will make more funding available for flats, rental accommodation and apartment blocks. Installations made under the current scheme must be complete by 31 March, with claims submitted by 30 April.
  • The Workplace Charging Scheme is being broadened to include charities, accommodation businesses (such as B&Bs and hotels), commercially let properties and SMEs. Other businesses are still able to claim support for up to 40 charging bays, capped at £350 (or 75% of the cost) per outlet.
  • From 30 June 2022, the Electric Vehicles (Smart Charge Points) Regulations 2021 will introduce mandatory features for all home and workplace charging equipment – regardless of whether they are grant funded or not. Chargepoints will be required to have a built-in data connection, record usage information and defer charging to avoid periods of peak demand on the grid. However, drivers will be able to override any delays and charge immediately, and without interruptions, if they need to.

Find out more about funding changes here: Incoming Changes to Electric Vehicle Charging Grants

Details of the new smart charging regulations are available here: How will Smart Charging regulations affect EV drivers?

Battery shortages are possible

Global electric vehicle sales doubled during 2021, according to the International Energy Agency, reaching 6.6 million units [10]. There are signs that demand outstripping supply, including rising prices materials for materials used in battery cells [11] which some analysts are warning could be an even bigger challenge than last year’s semiconductor shortages [12].

Manufacturers are responding to that volatility. Tesla announced last autumn that it would use an alternative cell chemistry in its entry-level models to avoid production bottlenecks [13] and Ford [14] and Volkswagen [15] have similar plans. Any shortages would disproportionately affect the company car market, where BVRLA figures show 31% of business contract hire and 68% of salary sacrifice orders are EVs [16]. However, it’s still too early to predict the full effects.

Rising energy costs

Europe is facing a once-in-a-generation energy crisis. UK regulator Ofgem says wholesale gas prices were between four and eight times higher than the seasonal norms over the winter, and they’re and expected to remain above average for several months [17]. This also affects electricity prices, as gas is used to generate almost 40% of the country’s supply [18].

Some charging companies have already passed on those costs [19, 20] and home energy costs are about to follow suit. Ofgem’s energy price cap – which sets a limit for how much utility companies can charge customers for their gas and electricity bills – is being raised by more than 50% from 1 April [21]. The rates apply to end-of-contract ‘default tariffs’ and pre-payment arrangements, affecting 22m UK customers.

Total costs will vary between households, but electricity prices will be capped at 28p per kilowatt-hour (kWh) from April, compared to a UK average of 18.5p/kWh in 2021 [22]. However, for a mid-size electric car, that rise equates to a £274 (+51%) increase in charging costs over 12 months and 10,000 miles.

To find out more, visit our guide. How will rising energy prices affect electric vehicle drivers?

High fuel prices

Drivers of petrol, diesel and hybrid cars don’t escape rising costs either. According to the latest AA figures, pump prices increased by more than a quarter during 2021 [23]. That increase is the result of rising wholesale fuel prices [24] and retailers facing reduced margins and higher operating costs [25].

Based on the average efficiency figures HMRC uses to set advisory fuel rates [26], a mid-size petrol car would cost £313.87 more per year in fuel, or £275.60 for an equivalent diesel model. However, annual fuel costs (£1,479.25 and £1,325.72 respectively) are twice that of the electric car (£808.39) mentioned previously.

How do you keep your business moving?

LeasePlan is working closely with suppliers to minimise disruption for customers. However, it is worth taking some extra steps to keep your fleet on track.

  • Plan ahead: Identify any travel needs as soon as possible, especially if they rely on rentals or affect mission-critical vehicles, such as vans. This will allow us to highlight any supply challenges earlier and find another solution if necessary.
  • Consider alternatives: LeasePlan Flexible provides a large selection of in-stock cars and vans, available for weeks or months and with no long-term commitments. This offers fast access to desirable plug-in hybrid and electric vehicles if your business is expanding.
  • Think about whole life costs (WLC): Our free EV Cost per Mile Calculator can help make sense of rising energy costs, with adjustable settings to reflect home, work or public chargepoints for most popular models.
  • Speak to Us: We’re here to help! Your LeasePlan account manager is on hand to listen to your concerns and will help keep your business moving.
  • Tune in: Listen to the latest Fleet Navigator Podcast ‘ What’s next for fleets’ with Fleet Consultants Matthew Walters and Caroline Mansery-Sandall.

REFERENCES:

[1] ACEA. (2022). Passenger car registrations: -2.4% in 2021; -22.8% in December. [online] Available at: https://www.acea.auto/pc-registrations/passenger-car-registrations-2-4-in-2021-22-8-in-december/ [Accessed 8 Feb. 2022].

 

[2] Ford Media Center. (2021). GlobalFoundries, Ford to Address Auto Chip Supply and Meet Growing Demand. [online] Available at: https://media.ford.com/content/fordmedia/fna/us/en/news/2021/11/18/globalfoundries-ford-auto-chip-supply.html [Accessed 8 Feb. 2022].

 

‌[3] GlobalFoundries. (2021). BMW Group Signs Agreement with Inova Semiconductor and GlobalFoundries to Secure Supply. [online] Available at: https://gf.com/press-release/bmw-group-signs-agreement-inova-semiconductor-and-globalfoundries-secure-supply [Accessed 8 Feb. 2022].

 

‌[4] Jin, H. (2022). Automakers, chip firms differ on when semiconductor shortage will abate. [online] 4 Feb. Available at: https://www.reuters.com/business/autos-transportation/automakers-chip-firms-differ-when-semiconductor-shortage-will-abate-2022-02-04/ [Accessed 8 Feb. 2022].

 

[5] AFP. (2022). EV Supply Becoming Major Threat to Fleet Electrification Plans, says AFP. [online] Available at: https://www.theafp.co.uk/ev-supply-becoming-major-threat-to-fleet-electrification-plans-says-afp/ [Accessed 8 Feb. 2022].

 

[6] Baggott, J. (2021). Ford hikes car and van prices for 2022 as it cancels rental company orders to manage supply. [online] Available at: https://cardealermagazine.co.uk/publish/ford-hikes-car-and-van-prices-for-2022-as-it-cancels-rental-company-orders-to-manage-supply/244201 [Accessed 8 Feb. 2022].

 

[7] BVRLA. (2021). Semiconductor shortage: Guidance. [online] Available at: https://www.bvrla.co.uk/consumer-advice/semiconductor-shortage-guidance.html [Accessed 8 Feb. 2022].

[8] OZEV (2021). Support for small businesses, landlords and leaseholders: government charges up the electric vehicle revolution with £50 million boost. [online]. Available at: https://www.gov.uk/government/news/support-for-small-businesses-landlords-and-leaseholders-government-charges-up-the-electric-vehicle-revolution-with-50-million-boost [Accessed 8 Feb. 2022].

[9] Legislation.gov.uk. (2021). The Electric Vehicles (Smart Charge Points) Regulations 2021. [online] Available at: https://www.legislation.gov.uk/uksi/2021/1467/contents/made [Accessed 8 Feb. 2022].

[10] IEA. (2022). Electric cars fend off supply challenges to more than double global sales. [online] Available at: https://www.iea.org/commentaries/electric-cars-fend-off-supply-challenges-to-more-than-double-global-sales [Accessed 8 Feb. 2022].

[11] Desai, P. (2022). Explainer: Costs of nickel and cobalt used in electric vehicle batteries. [online]. Available at: https://www.reuters.com/business/autos-transportation/costs-nickel-cobalt-used-electric-vehicle-batteries-2022-02-03/ [Accessed 8 Feb. 2022].

[12] DigiTimes. (2022). EV lithium battery shortage expected to be worse than chip shortage in 2022. [online] Available at: https://www.digitimes.com/news/a20220110PD212.html [Accessed 8 Feb. 2022].

[13] Tesla Motors. (2021) Q3 2021 Update. [online] Available at https://tesla-cdn.thron.com/delivery/public/document/tesla/c7f38479-c161-4ddb-8e09-31211aa8078d/S1dbei4/WEB/TSLA-Q3-2021-Quarterly-Update [Accessed 8 Feb. 2022].

 

[14] Ford Media Center. (2021). Superior Value From EVs, Commercial Business, Connected Services Is Strategic Focus of Today’s “Delivering Ford+” Capital Markets Day. [online] Available at: https://media.ford.com/content/fordmedia/fna/us/en/news/2021/05/26/capital-markets-day.html [Accessed 8 Feb. 2022].

 

‌[15] Volkswagen Group. (2021) Power Day. [online] Available at: https://www.volkswagenag.com/presence/investorrelation/publications/presentations/2021/03/2021-03-15_PowerDayVWGroup.pdf [Accessed 8 Feb. 2022].

 

[16] BVRLA. (2022). Electric vehicles bring silver lining in face of supply challenges. [online] Available at: https://www.bvrla.co.uk/resource/electric-vehicles-bring-silver-lining.html [Accessed 8 Feb. 2022].

[17] Ofgem. (n.d.). Check if the energy price cap affects you. [online] Available at: https://www.ofgem.gov.uk/information-consumers/energy-advice-households/check-if-energy-price-cap-affects-you [Accessed 8 Feb. 2022].

 

[18] National Grid ESO. (2022). ESO Data Portal: Historic GB Generation Mix – Dataset. [online] Available at: https://data.nationalgrideso.com/carbon-intensity1/historic-generation-mix/r/historic_gb_generation_mix [Accessed 8 Feb. 2022].

 

[19] InstaVolt. (2021). InstaVolt issues statement in response to unprecedented rise in wholesale energy prices. [online] Available at: https://instavolt.co.uk/statement-in-response-to-energy-prices/ [Accessed 8 Feb. 2022].

 

‌[20] Autocar. (2021). UK EV charging firms raise prices as energy crisis bites. [online] Available at: https://www.autocar.co.uk/car-news/business-environment-and-energy/uk-ev-charging-firms-raise-prices-energy-crisis-bites [Accessed 8 Feb. 2022].

 

[21] Ofgem. (n.d.). Price cap to increase by £693 from April. [online] Available at: https://www.ofgem.gov.uk/publications/price-cap-increase-ps693-april [Accessed 8 Feb. 2022].

[22] Department for Business, Energy & Industrial Strategy. (2022). Average unit costs and fixed costs for electricity for UK regions (QEP 2.2.4) [online] Available at: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1043383/table_224.xlsx [Accessed 8 Feb. 2022].

 

[23] The AA. (2019). Latest petrol and diesel price report. [online] Available at: https://www.theaa.com/driving-advice/driving-costs/fuel-prices [Accessed 8 Feb. 2022].

[24] RAC Foundation. (2022). Wholesale v retail fuel prices. [online] Available at: https://www.racfoundation.org/data/wholesale-fuel-prices-v-pump-prices-data. [Accessed 8 Feb. 2022].

[25] Petrol Retailers’ Association (2022). PRA responds to RAC statement on pump prices. [online] Available at: https://www.ukpra.co.uk/en/bulletins/134 [Accessed 8 Feb. 2022].

 

‌[26] HMRC. (2022). Advisory fuel rates. [online] Available at: https://www.gov.uk/guidance/advisory-fuel-rates [Accessed 8 Feb. 2022].

 

Matthew Walters

Matthew Walters

Matthew Walters is Head of Consultancy Services and Customer Value at LeasePlan UK, and has been with LeasePlan for over 14 years.

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