What and Where Is Van Nirvana?

What and Where Is Van Nirvana?

The Ion, The Switch and The Warchest: Van Nirvana?

In my opinion there is a total disconnect between policy makers and the world of new and used van and truck operators. In terms of the used marketplace, the key factor – especially with commercial vehicles - is that IF large corporates haven’t bought them new in any volume, there will be very few used examples for SMEs and sole traders to buy.

There is a common misunderstanding with policymakers. They largely believe that vans and trucks are used the same way by subsequent owners. They aren’t. What works for the first life user of an battery electric van, such as returning back to base to charge overnight, may not suit the subsequent owner who lives in a flat and parks in a car park or several streets away.

Recent figures from the SMMT show there are only circa 6500 licenced BEV vans on UK roads - out of a parc of 4.3 million. There are around 900,000 used van transactions per annum. To help put this in context, in the last 2 years, less than 0.1% of vans sold by Manheim in auction have been electric. Yet with the rollout of the first ULEZ in London, demand is ramping up for EV but there is no supply to feed it; I am even hearing anecdotal stories that large corporates are trying to buy used examples too!

A recent study by Boston Consulting Group estimated 20% to 30% of new cars in the USA will be EV or hybrid by 2030. Yet the Government’s Road to Zero report has an ambition for the proportion of annual BEV car registrations to be 50% to 70% by 2030, just 11 years away. For EV vans the UK number is 40% by 2030. From the current total of 1500 BEV vans registered per annum to circa 140,000 based on recent average annual registrations; a mere 9500% increase in 11 years! Consider the average age of first life vans we sell in Manheim is 5 years. That is just 2 lifecycles away. It’s ridiculous. Clearly we can’t move to BEV overnight. Despite OEM production capacity and suitability of BEVs for first life operators, KPMG 2030 recently estimated that over £100 BILLION is required as an investment in the UK charging infrastructure to deliver our Government’s 2030 ambitions. It’s not for the vehicle manufacturers to foot that bill. So where will this money come from?

The 100 Billion Pound question: How does Government ramp up EV van registrations towards the 2030 target?

In the first month of the London ULEZ, 26% of all daily non-compliant journeys attracted the £12.50 daily fee. That's £220,000 EVERY DAY. That's £80.3 MILLION IN A YEAR. Staggering. I suspect a proportion of these non-compliant journeys will become compliant in time, but even today it’s a drop in the ocean of the £100 billion required across the UK to install necessary 2030 EV infrastructure.

TfL say this 26% figure is a success in terms of the reduction in non-compliant journeys. I sincerely hope that van operators are not travelling round the ULEZ with their non-compliant vans in order to avoid the daily fee. For the self-employed single van owner I’d suggest £12.50 isn’t much of a deterrent. I suspect a larger proportion of owners will simply stomach the fee and we will end up paying the ultimate bill as the customer. It’s only the owners of large non-compliant fleets travelling in and out of the zones every day that get hit where it really hurts.

If you ask the policy makers where the money from charging zones is going, they’ll tell you about grand plans, or evidence significant investment, in improved public transport links, cycle paths and pedestrian walkways. But a van driver can’t do his or her job on the bus, a bike or on foot, in cycle lanes or tram extensions.

And why do I focus on vans and not cars?

It is said “If you bought it, a commercial vehicle brought it.” By all means move to get cars off the roads with improved and affordable public transport but don’t attempt to legislate commercial vehicles off the roads. They are being demonised. They are the lifeblood of our economy and the glue in our lives. And vans are busy. According to the DfT in 2017, annual van mileage was 50.5 billion, up 56% from 2008. Over 30% of the 4.3 million vans in the UK are over 10 years of age. And that proportion of vans has increased by 64% in the last decade. The reality is it is these 1.3 million older vans that are the most polluting. Let’s help get these off the roads.

An increasing number of used van operators are in the gig economy, self-employed and not VAT registered. They logically buy and operate older used vans. In terms of scrappage schemes I applaud the flexibility of the one launched by TfL for its inclusion of Euro 6 and EV new and used vans as well as rental/leasing, but this will not help these gig workers in the same way it won’t help the first life corporate buyer; the latter being the buyer of the lion’s share of the 350,000 vans typically registered every year that ultimately feed the used van market.

I believe we need a radical two-pronged approach.

Firstly, forget about pushing the majority of self-employed single van drivers into new Euro 6 or hybrid electric vans. If they saw either as a sound business decision that suited their operation they’d already be in one or have ordered one. It’s a tool to do a job not a green emotional purchase. Instead, I believe we should incentivise these used SME and sole trader operators in urban zones to move to a used Euro 6 diesel. Defer the zero emission zones for commercial vehicles until 2030; even then Government only expects 40% of new vans to be EV. Currently I estimate only 20% of vans on UK roads are Euro 6 but this pool is growing by around 8-10% every year in terms of the total parc. I believe the purchase price should be zero-rated for VAT. I believe a £3000 scrappage scheme should be introduced on all used Euro 6 vans. I believe tax breaks should be offered; extending the capital write down on a used Euro 6 van. This type of approach would I believe focus the minds of SME and sole traders and incentivise them to buy a used Euro 6 van. Think about it. Every penny raised from clean air charging is mandated to be reinvested in improving air quality. It’s a paradox that a scrappage scheme for non-compliant van operators is like a self-crowd-funder; consider non-compliant van operators paying a daily fee that they collectively can then draw down on to contribute to replacing their ageing diesel vans!? Or worse still these vans’ fees pay for upgraded cycle lanes and public transport. As I have said, van operators can’t use these mediums to go about their daily work.

Secondly, and simultaneously, we need to incentivise large corporates to come out of Euro 6 early and move into hybrid and electric. In 5 year’s time it is broadly agreed that technology will have advanced and cost new for PHEVs and BEVs will be closer to the equivalent diesel ICE model. How do we get large corporates to invest now rather than wait? Today the additional cost new of a PHEV/BEV, overall limited model derivative ranges, suitability of derivative plus charging infrastructure combine to deter large corporate fleets. An EV doesn’t suit every operator use, especially in an employee home parking, non-depot based model. Controversially, I’d recommend Government significantly increases the grants available for new PHEV and BEV vans. In the same way I propose for used Euro 6 vans for SMEs and Sole Traders, zero rate the VAT on purchase price of new vans and permit 100% capital write down, or other associated tax breaks. The zero VAT element passes through to the used market as VAT no longer becomes a barrier for entry if you are self-employed and not VAT registered. And I would set the sliding scale grant ceiling for PHEV and EV vans at £6000. And the scale should be the % of cost new not about the technology. Simultaneously, we have to consider and address the first life operators’ charging and operational needs and invest significantly in that as well as the vans themselves. As well as grant support all investment in open charging infrastructure should attract significant tax breaks. Whilst we cannot nationalise our charging networks lets have one standard card for EV charging points in the UK. It’s too complex currently.

Lower EV maintenance and running costs are compelling all things being equal. This of course requires manufacturers to be able to supply broad ranges with sufficient volumes (which today they can’t). It also assumes that a large proportion of infrastructure funding and clean air revenues raised can be released to upgrade depot locations, yards and street charging bays as opposed to cycle lanes or public transport (which it won’t).

So, if I could only have one wish, it is that our policy makers significantly incentivise the large corporate fleets to move to PHEV and EV. This creates a significant demand in the new market and OEMs can then ensure the UK receives the order bank supply rather that see it diverted to more profitable LHD markets in the short term. This then starts to create a volume pipeline for the used market.

 

It could also fuel a change in ownership models as whole life and holding costs for rental and lease businesses are transformed by lower operating costs of PHEV and EVs. And, let’s be honest, the loss to the treasury, whilst no doubt significant, is likely offset by the benefits to society and the NHS in terms of air quality and associated illnesses (Research from the Universities of Oxford and Bath put this at £2.2 billion per annum). I’m no tax expert to judge the true impact, my point is something major needs to change or we will simply miss the Government Road To Zero targets. The £56 billion wage contribution (11% of GDP) that van drivers make to the UK economy should not be underestimated. The Government needs to dig deep in my opinion.

Goalposts are already being moved by London from Euro 6 to zero and ULEV; but what message does this send out to operators of commercial vehicles in the UK when it comes to investment and replacement decisions in the stark absence of BEV and PHEV vans and trucks in any volume?

I hope other local authorities considering their ULEZ’s, CAZ’s and increasingly ZEZ’s do not see this revenue generation mechanism as a vote winning solution to hitting their air quality targets and simply pumping funds into public transport. If DEFRA continue to command authorities to implement schemes, as recently announced in Coventry, local policymakers will soon see the political backlash from the voting public. It becomes a modern day version of the Poll Tax. For the reasons stated earlier I believe no commercial vehicle should be penalised for being Euro 6 until 2030; even then only 40% of new vans sold per annum will comply with zero emissions – if indeed that is believable or achievable (it isn’t).

As more charging zones roll out we will logically reach a tipping point where the monies coming in will plateau then decline. It is at a point prior to this that we must move to a national ICE to BEV/PHEV used scrappage fund. Regardless of where the van operates, combine all Government funding pots, divert all ULEZ and CAZ fees. Whether rural or urban, a used BEV/PHEV at this point is a guarantee of improved air quality in the long term. Only at that point can a sole trader or SME operator turn either to the new or used market and supply and demand will be balanced.

For me this is all about meeting our mandated air quality targets. So let’s say we hit the targets with a series of national ULEZ and CAZ zones. Job Done? Of course not. By 2050 we must be zero emission for all new vehicles. I believe road charging will be the next interim tool applied by authorities to change the habits of road users as we face the evolution of transport with autonomy and usership models changing. With all this brings opportunity, but the investment required by manufacturers, national and local government as well as business (and ultimately us as consumers of products and services moved by commercial vehicles) is astounding. Please don’t punish the commercial vehicle for the job it does making our economy and lives better.

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JD