James Davis Blog

Pump vs plug - What’s the outlook for UK van operators?

Over the last few years, electric vehicle technology has come on in leaps and bounds. It’s well documented that challenges around cost new, payload, range, charging infrastructure and availability have affected uptake; specifically compared to the trusty diesel workhorse cousin where and if there is an EV alternative (which today there largely isn’t).

With the introduction of Low and Zero Emission Zones and a £23 million scrappage scheme from Transport for London (TfL) for microbusiness vans and charity minibuses, could we see a turning point in the next five years as the zones roll out across the UK?

Recent articles suggest that OEM pricing between petrol/diesel and electric drivetrains will reach parity around 2024/2025. I would bet the majority of pundits are only considering cars and not CVs. Electric vans are perhaps not as high up the priority list in volume terms for a largely passenger car producing OEM. That’s a real shame as UK vans travel over 70 billion miles per annum in the UK.

Typically it’s the large corporates that buy and benefit from new van technologies. Without the supply and competitive pricing, these potential first life electric vans will struggle to “take off” and create a meaningful supply for second life users. I think it’s a perfect paradox; the daily user operating cycle for a second life van (ie a sole trader/SME/tradesperson) is more suited to electric as the daily mileages are low; unlike many of the first life higher mileage operators. High average annual mileage vans selling to subsequent lower mileage users; it’s always been this way and vans are not used the same way by subsequent owners.

2021 is a definite marker - the London ULEZ expansion to Greater London in that year and the air quality deadline across the UK means we should start to see an increased trend for sole trader and SME van operators upgrading to Euro 6 and electric vans.  

In just 11 years the Government’s Road To Zero is aiming for 40% of all new vans sold to be EV. Today approximately 6,500 of the 4.3m vans on UK roads are EV and around 1,500 per annum have been registered in recent years. Taking recent annual new van registrations we would need to see a 9,500% increase in new EV vans sales to meet this ambitious target.

The average age of vans sold by Manheim at the end of their first life is 5 years. Today less than 10% of the total UK van parc is registered new per annum. If 40% of new registrations in 2030 are EV vans, that’s 140,000; a mere 3% of the total van parc. The disconnect between policy makers and white van men and women are clear to see. 

The detail of TfL’s recently published scrappage scheme is interesting. I was a lone voice suggesting the scrappage scheme should open up to used Euro 6 diesel vans. I’m pleased to see that the TfL scheme includes new and used Euro 6 as well as electric vans; not just outright purchase but surprisingly lease costs too. The small print needs referencing in all cases. Once the microbusiness or charity has initial approval they have a time period to claim the £3,500 scrappage upon providing proof of destruction and purchase of their new compliant van. Up to three vans can be scrapped per business.

It really is good news is that used vans qualify. Right now, in 2019, scrappage and the economic environment is unlikely to move a self-employed tradesperson from their 15 year old £1,500 van to a new van costing 10, 20 or even 30 thousand pounds. Vans, unlike cars, are a working tool and a Euro 5 will do equally as good a job as a new or used Euro 6 in practical terms. If one costs £12.50 more per day to operate inside the ULEZ it is only the fleet size multiplier effect that significantly impacts a business’ bottom line. Right now the operators of pre Euro 4 vans are stumping up the Toxicity Charge so are used to the principle of paying a daily fee.

In the TfL scheme EV vans gain an additional £2,500 contribution to running costs; with the £3,500 that is £6,000 in total. The other notable factor is that the business or charity has to be based in Greater London. Considering the ULEZ doesn’t expand into that area until 2021 this is a fantastic opportunity for early replacement whilst the grant funding is in place. That said I suspect the take up for EV vans in this scheme will be low. The purchase cost, lead time, suitability and user recharging infrastructure all combine to make electric vans a challenging proposition today, especially for smaller businesses. By 2021 the world will no doubt be a different place and many of these obstacles will be on the way to being reduced or eliminated.

In reality I believe small businesses and tradespeople will upgrade to the newest second-hand Euro 6 van possible to futureproof them as best they can. The remainder will keep their old van and reflect the ULEZ charge when pricing for goods and services. Just like the congestion charge, increased pump prices, parking fees and tolls, it becomes an operating cost. 


My prediction

The used UK van market has shown exceptional strength and stability in recent years, and I expect to see these healthy levels of demand continue across the board.

The TfL scheme on face value deserves to be applauded for its flexibility; the major omission is trucks which have no subsidy and are typically kept longer than cars and vans due to their cost new. A TfL car scrappage comes later on with a further pot of money. Likely the only limiting factor will ultimately be the availability of scrappage funds.

Over the next five years, as availability of Euro 6 vans increases in the used market we’ll see increasing numbers of sole traders and SMEs switching into Euro 6 diesel. As for electric vans, I expect these will gradually build market share, but only when the barrier to entry in capital cost terms is overcome; let alone payload and charging infrastructure. It shouldn’t be forgotten that London is pushing for zero emission streets and zones in the coming 5 years; ironic then that even Euro 6 will pick up a penalty charge; Euro 6 offering no protection or solution here.

Removal of the dirtiest and oldest diesel vehicles should be the priority. 30% of vans on UK roads are over 10 years of age. The majority of these aren’t owned by large corporate fleets but typically the small business and sole trader sectors. Over 50% of vans in the UK are not registered in a company name; these are the priority but how often in reality will they operate inside a LEZ?

I believe it will still be a few years before any of these operators have the confidence to switch and invest in a fully electric fleet. It is the large corporate fleets that need to register new EVs in typical large volumes to create a supply of used EV vans for small businesses to buy; I suspect as with used Euro 6 today that demand will outstrip supply.

I’ve contributed to a recently launched Manheim “Clean Air Zone Guide for Van Operators” to provide an overview of the facts and guide them with their options; it’s a real challenge for businesses in the current headwinds.

Download the free guide here.

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