Carbon cutsTesco has settough targets for

its largedelivery fleetPage 3FINANCIAL TIMES SPECIAL REPORT | Friday October 21 2011

www.ft.com/fleet­management­2011 |twitter.com/ftreports

Inside this issueCompany cars

Salarysacrificeschemesare helpingreverse ashift by UKcompaniesaway from

offering cars Page 2

Telematics The high­techspy in the cab is proving anally instead of an enemyPage 2

Trucks US fleet operatorsare still spooked by theeconomy, despite goodreasons to replace vehiclesPage 3

Electric vehiclesThe positives are starting tooutweigh the negatives inelectric cars and vansPage 3

Car campusGeneral Electric gives tasteof power to the peoplePage 3

London OlympicsBMW hasstill to showthat it cango thedistance innext year’sgamesPage 4

Guest column Peter Cookeon how to create flexibilityin fleets Page 4

4.1

3.6

3.5

2.8

More on FT.ComInteractive graphic

Detailedinformationand dataon fleetsales in theUK and therest of theworld.

A timeline of trends inthe main markets, details ofthe most popular fleet cars,and the effects of carbontax legislation are alsofeatured.

www.ft.com/fleet­graphic

W hen the 2008 fi-nancial meltdownpushed the auto-mobile industry

into its worst crisis in recentmemory, fleet and commercialvehicles were among the firstcasualties.

The collapse of credit marketswreaked havoc on leasing, thesector’s lifeblood. Businesseslooking to conserve cash werein no mood to invest in theirfleets anyway, so kept more oftheir company cars and truckson the road for longer.

The effect was perhaps stark-est in heavy trucks, where man-ufacturers saw orders fromfrightened customers dry upvirtually overnight, meaningthey had vehicles ready to go,painted with customers’ logos,sitting unclaimed on their lots.

Three years later, the euro-zone crisis and market turmoilon both sides of the Atlantic areprompting an unsettling senseof déjà vu among car and truck-makers and leasing companies.

But this time round, the fleetbusiness remains a relativebright spot for a nervous worldmotor industry – and in manycountries, including the UK, the

main segment that is supportingthe car market. Companies thatdeferred renewing their fleetsduring the crisis are now doingso en masse.

Of all the world’s regions, theturnround is most marked inEurope. The fleet sector hasrecovered robustly, especiallyrelative to the tepid retail mar-ket.

While passenger car sales inthe European Union fell by 2 percent in the first half of this year,sales of light commercial vehi-cles surged by more than 9 percent, according to the regionalindustry group Acea.

In Germany, fleet sales haverisen from about 37 per cent ofthe car market in 2009 to about58 per cent in the year to date,according to Jato Dynamics, theautomotive research group.

In recession-hit Spain, theshare has risen from 34 per centtwo years ago to 54 per cent inthe year to date, Jato says.

“In Europe, the importanceof fleet is continuing to growand grow,” says Gareth Hession,the group’s vice-president forresearch.

In the UK, where many econo-mists expect a return to reces-sion, fleet sales rose by 7 percent in September, even as salesto retail customers fell by 8 percent.

Fleet and business cars nowaccount for 52 per cent of theUK passenger car market,according to the Society ofMotor Manufacturers and Trad-ers, which also reported a 9 per

cent rise in truck and van saleslast month.

LeasePlan, one of the indus-try’s largest leasing companies,says that even its business inGreece – at the heart of theeurozone crisis – is profitableand growing.

“Our market saw growth dur-ing the crisis,” says VahidDaemi, the company’s chiefexecutive. “Despite all the diffi-culties we hear, the signs arestill positive – but you don’tknow whether it’s going toturn.”

Sales of commercial vehiclesare also holding up in the US,

despite a spate of recent badnews about the economy.

Apart from business fleets’natural replacement cycles,tougher regulations on carbondioxide emissions are also stim-ulating the market in thesegloomy times.

Central and local govern-ments are offering tax rebatesor other sweeteners for earlyadopters of low-emission cars,whether “clean” diesel vehiclesor a new wave of electric andplug-in hybrid cars.

Alongside the carrot of theseincentives, businesses that donot begin creating greener fleets

now face the stick of highertaxes, or opprobrium fromshareholders or clients who careabout their sustainability cre-dentials.

According to Bart Vanham,a fleet specialist with theconsultancy PwC, 19 countriesin Europe have some kindof car taxes linked to CO2emissions, and 12 EU countrieshave incentives for electricvehicles.

“Going green pays off becauseof taxes,” he comments.

According to GE Capital, new

Bright spotfor nervousautomotiveindustryFleet sales are rising asa proportion of overallsales, as economicuncertainty keepsretail customers away,writes John Reed

Cars on the line: fleet and business sales now account for 52 per cent of the UK car market, a rising trend echoed around the world Getty Images

Continued on Page 2

FLEET MANAGEMENT

‘Despite all thedifficulties we hear of,the signs are stillpositive – but youdon’t know whetherit’s going to turn’

2 ★ FINANCIAL TIMES FRIDAY OCTOBER 21 2011

Fleet Management

company cars acrossEurope’s main marketsreduced their CO2 emissionsby 7 per cent between 2008and 2010.

Company fleets, espe-cially those with short andpredictable routes, are logi-cal first adopters of a newcrop of plug-in hybrid andelectric cars.

Companies involved inbuilding infrastructure forelectric cars, including Gen-eral Electric in the US andEDF in France, are amongthose lodging some of thebiggest early orders forthem.

But some fleet managersare not convinced, and saythe cost-benefit calculationsfor plug-in cars do not addup yet.

Tesco, the UK’s largestsupermarket chain, hascommitted itself to an ambi-tious halving of its vehicles’CO2 by 2012 to meet corpo-rate social responsibilitygoals and cut costs. How-ever, as its fleet chief toldthe FT, most of that reduc-tion will come from manag-ing its fleet more effec-tively, driver training, andmeasures to cut fuel use.

The company has testedelectric and gas-poweredvehicles, but found themwanting in range and pay-load.

As worries grow over theeurozone crisis, it is anopen question whether thefleet industry’s good timeswill keep rolling.

LeasePlan’s Mr Daemipredicts more consolidation,as banks that own fleet

management companiesconsider whether to down-size their portfolios. Reces-sion, he adds, could affectsecond-hand car prices andlead to a rise in bad debtamong customers.

“That could affect thefleet market – and it’s aconcern,” he says.

Even if the sector is hit ina new downturn, analystssay that it is likely to con-

The bright spot for a nervous global automotive industryContributorsJohn ReedMotor IndustryCorrespondent

Bernard SimonNorth America MotorIndustry Correspondent

Rose JacobsCompany Reporter

Rohit JaggiCommissioning Editor

Steven BirdDesigner

Andy MearsPicture Editor

For advertising, contact:Tom Shepherd, phone+44 (0)20 7873 3392tom.shepherd@ft.com

All FT Reports are availableon www.ft.com/reports

Continued from Page 1

One recent Wednesday, an engi-neer working for the refrigera-tor repair company Servicelinemade a swooping right turn inSurrey, south-east England, at47mph. The radius of the curvemeant he should have beengoing closer to 35mph. He didsomething similar a few min-utes later, this time at a slower37mph – but again too fast forthe road.

These were but two of the doz-ens of driving “events” the engi-neer racked up that day, asmeasured by a device in his vanand logged at Serviceline’s head-quarters in Stevenage, Hertford-shire.

“Tim” – not the engineer’sreal name – “has not had thegreatest of days,” admittedKevin Sheehan, group IT andcommunications developmentmanager, reviewing the reportthat evening.

Serviceline has long had akeen interest in what its 100-plus engineers get up to as they

criss-cross Britain, respondingto distress calls from restau-rants and other businesseswhose refrigeration systemshave failed.

The walk-in units can carrythousands of pounds’ worth offood, meaning clients are oftenanxious, if not panicked, whenchecking in with the company’sdispatchers to see if help is onthe way.

But the GPS and map-ping systems Service-line employs toanswer those ques-tions do much more,too. The technology,by satellite naviga-tion specialist Tom-Tom, allows jobtracking, messagingbetween head officeand vehicle, and theseparate logging ofprivate and workmodes for the vehi-cles – an importantdistinction in the eyesof the taxman.

Moreover, they are part of apush by both carmakers andafter-market product developersto record more effectively how acar is being driven, includingwhether speed limits are beingobserved and how aggressivelya driver corners or brakes.

While the system that Service-

line uses does not account for avehicle’s make, newer modelsdo, allowing easier like-for-likecomparisons and standard-set-ting.

The appeal for fleet managersis mainly the savings on petrolor diesel: “Driver behaviour isthe key element in reducing fueluse,” says Geoffrey Finlay, exec-utive chairman of Lysanda, thecompany that provides TomTom

with software to give a “green”score to the way a vehicle isbeing operated. He estimatesthese sorts of in-car telematicshave the potential to reduce fueluse by 20 per cent.

The devices offer other cost-savings, too, most particularlythrough lower insurance premi-ums. That is partly due to

underwriters counting on usingthe reams of data on offer tofend off dangerous drivingcharges or health claims such aswhiplash; but the data-crunch-ing feeds more than defensiveactions.

Robin Harbage, a director atTowers Watson, an insuranceconsultancy, and a 30-yearinsurance veteran, says thetelematics revolution trumps

other developments inthe way auto insur-ance is sold. “Every-thing up to nowloosely correlatedwith driving behav-iour. This is drivingbehaviour,” he says.

Analysts at BCCResearch say thatwhile the net marketvalue of the industry– including both con-sumer and fleet sys-tems – fell slightly in2009 amid the global

recession, it has sincerecovered and is forecast togrow 20 per cent a year for thenext five years, surpassing$40bn by 2016. That surge willbe led by companies that pro-vide services rather than hard-ware, predicts BCC.

The market is highly frag-mented, says BCC, but the glo-bal leader in services for fleet

systems is Qualcomm, with esti-mated revenues from such prod-ucts of $435m. It is followed byGE Capital and Volvo.

In terms of demand, SouthAfrica is a world leaderbecause early adoptionwas spurred by secu-rity concerns, andBrazil is growingquickly.

Carmakers havetaken note, withM e r c e d e s - B e n zdeveloping a prod-uct called Fleet-Board and Ford’shybrid Fusionbeing one exam-ple of cars thattell drivers withcoloured lightsor graphicswhen theirdriving isdeemed eco-friendly.

“The UK isleading theway on this,whereas GPSwas pickedup fastest in[cont inen -t a l ]E u r o p e , ”says BartV a n h a m ,who works

with PwC in Belgium. He haswatched telematics catch onfirst among trucking firms (20-25per cent penetration, TomTomestimates) and now, moreslowly, move to light commer-

cial vehicles suchas Service-line’s fleet(15 percent pene-tration).

The nextwave willbe compa-nies’ “perkcars”, hep r e d i c t s(just 1 percent penetra-tion), wheremanaging thefeedback todrivers them-selves ratherthan their man-agers is key.While a baddriver can pushup the cost ofcare for a car by15 per cent, hesays, managers ofthose cars willnevertheless hesi-tate to tell off peo-

ple who are likely to be theirbosses for bad driving. They willprefer to leave it up to chirpyicons and automated messagessent to the executive’s iPhone.

There is real hope that atleast some will respond. AmongServiceline’s drivers, whilemany were wary of the systemwhen it was first introduced,particularly to the extent itinfringed on their privacy, oth-ers have been keen to learnfrom the record-keeping.

It helps, says Mr Sheehan,that one of the first times thedata were used, it got an engi-neer out of a jam: someone hadcalled to complain about hisdriving, but when the team inStevenage looked at his log tocheck speed limits and braking,they found he hadn’t been any-where near the location cited.

Giles Margerison, head of UKsales for TomTom, says fleetmanagers need to emphasisethat sort of positive usage inorder to get drivers to “buy in”.

All the more frustrating, then,that the one measurement hiscompany has yet to perfect is apositive one showing when peo-ple are driving safely, smartlyand efficiently.

Spy in the cab is proving an ally instead of an enemyTelematicsIt is taking time butdrivers are warming toreal­time monitoring,writes Rose Jacobs

Company cars arestaging a comeback– albeit in a formu n r e c o g n i s a b l e

from the employer-financed,large-engined executivesaloons and wagons of yes-terday.

Companies, after cuttingback car benefits or offeringcash in lieu of a car inrecent years, are bringingemployees back into fleetcars. Government regula-tors are playing a role inthe shift by incentivisingthe move by fleets into low-emission cars.

In the UK, a growingnumber of companies areopting to offer employeescars under salary sacrificeschemes. These allowemployees to buy cars outof their pre-tax earnings, ata big discount to the nor-mal retail price.

Because Britain treatslow-CO2 cars bought undersalary sacrifice favourablyunder tax rules for benefitsin kind, the corporate fleetas a whole is becomingcleaner than ever.

“Everyone is moving backinto company cars – and it’sgood for green cars,” saysHarvey Perkins, a partnerwith KPMG.

As recently as five yearsago, the company car was adying breed in Britain, asmore companies offeredemployees cash instead.

However, cars were stillbeing given as a perk to topstaff and to sales represent-atives who needed to travelto carry out their job.

But changing legislationand the UK’s adoption ofprogressive CO2-based tax-ation of cars means thatcompanies are now movingaway from offering cash inlieu of a car.

A new law on corporatemanslaughter passed in2007 now holds companiesliable if employees drivingon business have accidentsin their own cars.

So employers are makingit easier for a broader range

of staff to buy vehicles,including through salarysacrifice schemes.

Cars bought under suchschemes are up to 40 percent cheaper than if anemployee paid to lease,maintain and insure thesame vehicle privately.

The cars are new andsuch schemes include main-tenance, giving employersmore peace of mind whentheir employees drive themon business.

David Raistrick, UK andSwitzerland manufacturingleader for Deloitte, the con-sultancy, estimates thatcompany cars deliveredunder salary sacrifice couldrepresent up to 10 per centof UK fleet sales, or about100,000 of the 2m cars or soregistered in the UK everyyear.

“Employers are asking‘What can we do for ourworkforce?’” Mr Raistricksays. “The value of a car inemotional terms far exceedswhat it costs.”

According to Deloitte, sal-ary sacrifice schemesshould not cost an employeranything beyond set-upcosts, if they are put inplace correctly.

For employees, however,who pay tax on the benefit,there is a powerful incen-tive to choose a more fuel-efficient car.

According to KPMG, arival consultancy, a 40 percent taxpayer who opts totake a Volkswagen Golfwith a list price of £18,000as a company car will payan after-tax cost of lessthan £3,900 per year includ-ing maintenance under asalary sacrifice scheme.

This is as much as £1,300less than the employeewould have paid to leasethe car privately. Mean-while the employer, accord-ing to KPMG, could savealmost £700 by providingthe employee with the carinstead of paying the sacri-ficed salary.

According to GE Capital’sCompany Car Trends sur-vey published in June,which polled 300 fleetdecision-makers, the per-centage of companies offer-ing a cash payment insteadof a company car has fallenfrom 36 per cent to 25 percent in the last two years.

According to GE, the newduty-of-care legislation oncompany cars made fleetmanagers realise the cashoption was often moreexpensive than normal com-pany car provision.

Employees, it said, werereturning to company carsthis year for a number ofreasons, including the serv-ice and insurance coveravailable on them.

The recession has playeda role too, as fluctuations inthe residual value of carsmade running a vehiclepotentially more of a per-sonal financial risk to thedriver, GE found.

Companies are still mak-ing premium cars availablefor their top executives,although they too are beingoffered a choice of morefuel-efficient cars.

Fleet managers are alsoadopting creative ideas inan effort to cut their carbonemissions, whether for sus-tainability or cost reasons.

Balfour Beatty, the con-struction and engineeringfirm, keeps a fleet of eightsmall Mercedes-Benz Smartcars as pool vehicles at itshead office in Derby, whichemploys 300 people, accord-ing to Steve Farmer, whomanages the fleet.

Other companies areincreasing their use of dailyrentals, including carsharing schemes, toimprove their fleets’ operat-ing flexibility and to cutcosts.

To bolster its sustainabil-ity credentials and cutcosts, Balfour Beatty hasthis year introduced a 140g/km emissions cap on itscompany car list (althoughit allows 170g/km on seven-seat MPVs in order to avoiddiscriminating against itsemployees with large fami-lies).

“It’s about picking theright vehicles,” Mr Farmersays. The group’s companycar list now includes thenew Nissan electric Leaf foremployees who want it.

Legislation andadvisers re­openthe driver’s doorCompany carsSalary sacrificeschemes are risingin popularity,says John Reed

The schemesshould not costan employeranything beyondset­up costs

Fleet marketsRanking of top 10 company car marketsCars on the road, 2010 (millions)

Total fleet sizeAcross top 10 markets (millions)

China

Germany

Japan

France

UK

Russia

US

Brazil

Italy

2005 2006 2007 2008 2009 2010 (est)

3031

3233

34

36

Spain

10.2

4.6

4.1

3.6

3.5

2.8

2.7

1.7

1.7

1.1

3%4%

3%2%

6%

Fleet proportions, 2010Fleet sales as % of total car registrations, 2010

UK Germany China France Japan US Italy Brazil Spain Russia

4034

27 27

19 18 1611 10 8

Sources: GE Capital; Datamonitor; Society of Motor Manufacturers and Traders; Acea; Havas Digital

UK BMW 3 Series

Germany VW Passat Italy Fiat Bravo

France Citreon C4 Picasso

Spain VW Passat

US Ford Fusion

Top-selling company cars by country

World fleet rankingsChina moves to fore

China, which in 2009 surpassed theUS as the world’s largest vehiclemarket, is now the world’s largestmarket for company cars as well –by a substantial margin.

Data tallying company cars on theroad from the world’s top 10 fleetmarkets show more than 10m suchcars in China, with Germany adistant second place, with just under5m company cars. The numbersaccount for only a modest part ofthe overall car numbers in theirrespective markets, because mostfleet vehicles stay on the road forjust two or three years.

The number of company cars inthe US in 2010 – just under 2.7m –looks especially modest, given theprodigious size of the overall US carmarket.

That may be because companycars are offered less frequently asan employee benefit than in Europe– and because the passenger cardata presented here do not includethe sport utility vehicles and smalltrucks many American businessdrivers use.

Total fleet size Taxincentives spur sales

The world company car market fellafter the crash of Lehman Brothersin 2008, which hit credit markets,business confidence and cars’residual values, putting many fleetdeals oPn ice.

Fleet managers decided to keepcars on the road longer than theyotherwise would, affecting theindustry into 2009, when sales grewa mere 2 per cent. But now themarket is reviving, thanks to pent­updemand from fleets that postponedrenewing during the crisis.

Tougher tax regimes aimed atcutting cars’ carbon dioxideemissions are acting as a furtherspur for fleet renewals. In Europe,where the regulatory push to cutCO2 is strongest, company carsreduced their CO2 emissions bymore than 1.28m metric tonnes in2010 compared with 2008,according to GE Capital’s analysis ofdata from 11 countries.

In France, Italy, Germany and theUK alone, company cars cut theircarbon emissions by more than 1mtonnes, GE says.

Fleet proportionsLocal regulation is key

The proportion of the car marketclaimed by fleets across leadingcountries shows big discrepancies –a function of both market maturityand local regulation.

Fleet cars accounted for nearlyhalf the overall market in the UKlast year, but a scant 8 per cent inRussia. The UK market, the largestin Europe, was also the first tomove heavily into leasing, accordingto GE Capital.

Companies can recover 50 percent of the value added tax theypay on company cars, and 100 percent of the VAT on vans; littlewonder, then, that cars are a widelyoffered employee perk.

In France, companies can recover100 per cent of the tax they pay onvans and commercial vehicles, butnothing on cars, making for asmaller fleet market.

The fleet market is also a functionof the penetration of bigcorporations in a given economy – ameasure on which the UK scoreshigh, but Russia, Spain and Italylower.

Top cars Locally builtcars lead the league

Think global, buy local? One mightreach that conclusion, based on alist of the top­selling company carsin some of the biggest fleetmarkets, compiled for the FT by GECapital.

American cars account for the topfive company cars in the US, andFrench cars top the tables in France.Italy’s best­selling company car is aFiat Bravo, its fourth best­seller thePanda.

Not so in the UK or Spain, whichlack locally owned national championcarmakers, and where German­builtcars account for each country’s fivetop­selling models.

Some competing carmakers mightsay the league tables point toprotectionism; without doubt, thereis a tendency among many fleetmanagers, notably in France, toorder locally built cars.

But it is unclear whether this hasto do with patriotism or practicality:fleet managers can count on adense retail network in their localcarmaker’s backyard when the carsneed repair or maintenance.

Systems such as those from from TomTom (far left) andMercedes­Benz’s FleetBoard can offer big fuel savings

tinue to claim a command-ing share of an overall carmarket that has been trans-formed by the economiccrisis.

“The rising importance offleet is not short-term,”says Jato’s Mr Hession.“Manufacturers have highlevels of production, andthey need to find a place foroutput. So they need fleet tokeep factories open.”

FINANCIAL TIMES FRIDAY OCTOBER 21 2011 ★ 3

like the shortages will be sustainedfor two to three years”, Mr Perry says.

In particular, he cites the impact onproductivity of another set of FMCSAproposals, known as hours-of-servicerules, that would tighten limits ondrivers’ working hours.

The most contentious provisionwould require drivers to complete allwork-related duties within 13 hoursinstead of the current 14, curtailingthe time they can spend behind thewheel. The final rules are expectedsoon.

For the time being, fleet owners notonly have a string of incentives to buynew vehicles, but also the where-withal. According to Mr Vieth, freightrates are still climbing and corporateprofits are buoyant.

Mr Stowers adds: “We advise ourcustomers to understand what theoptimum replacement time is for eachclass of vehicle, and we encouragethem to stick to it regardless of theeconomic situation.” The only excep-tion would be unusually low usage.

Truck owners have access to agrowing array of electronic and wire-less monitoring devices to improveefficiency and hold down costs.

Telematics technology has tradition-ally been used mostly to streamlinedelivery schedules and track driverperformance, but is now increasinglyused to prevent breakdowns and partsfailures. Consolidation among hard-ware and software suppliers is helping

accelerate the introduction of moresophisticated but also more stream-lined systems.

Mr Stowers predicts that truckmak-ers will increasingly incorporatetelematics devices into vehicles.

It is by no means certain, however,that fleet owners will heed advice tokeep buying vehicles in the face of asoftening economy.

Mr Stowers estimates that the aver-age cost of a rig has climbed from$75,000 to $110,000 in the past sevenyears, mainly because of tougher die-sel emissions standards that tookeffect in 2007 and this year.

According to Mr Fiorelli at Gulf-eagle, “it costs money to go green.Most companies are still most con-cerned about red and black.”

ACT has twice in recent months cutits estimate of North American pro-duction of big Class 8 rigs in 2012. Inearly October, it projected output ofabout 290,000 units, up from 251,000this year and still well above the 2009trough of 118,400 units.

But the latest estimate is 12 per centlower than its forecast earlier thisyear. If the economy continues tosputter, fleet owners’ fear of slowingfreight volumes – and consequentlylower rates and shrinking profits – islikely to trump advice from outsidersto keep buying new trucks.

Fleet Management

The economy is heading south.New trucks are in short sup-ply, and so are drivers to oper-ate them. Costs have risen

steeply. Could this possibly be a goodtime for US fleet owners to replacetheir vehicles?

Until recently, the answer for manyhas been no. The average age of theUS heavy truck fleet has lengthenedfrom six years before the last reces-sion to 6.7 years now, according toIndiana-based ACT Research, anindustry consultancy.

“It’s as old as it’s ever been,” saysKenny Vieth, ACT’s president, notingthat the average masks the realitythat the oldest vehicles on the roadare now about 18 months longer inthe tooth than they were four yearsago.

Noel Perry, principal of TransportFundamentals, a Pennsylvania-basedconsultancy, explains that “eventhough the marketplace is pretty goodright now, [fleet owners] are stillbeing bombarded by news of howpoorly the economy is doing. They’reshy about expanding.”

Nonetheless, some have begun toreconsider. “Everything together justmakes it a better time to purchaseright now,” says Joe Fiorelli, safetymanager at Gulfeagle Supply, a dis-tributor of roofing and building prod-ucts based in Tampa, Florida, whichoperates a 300-unit fleet. Gulfeaglerecently bought 23 new trucks.

One reason for the change of heartis that an ageing fleet creates a seriesof problems for truck operators.

Older vehicles invariably meanhigher maintenance costs. Accordingto Rob Stowers, senior vice-presidentin the truck division of PHH Arval, afleet-management consultancy, “con-trolling expenses is the biggest causeof loss of sleep” among PHH custom-ers.

Bottlenecks at some critical partsmakers have disrupted truckmakers’production, causing long deliverydelays. Paccar, the Seattle-basedmaker of Kenworth and Peterbilttrucks, has singled out tyres and chas-sis components among those in shortsupply. Used-truck prices have risensharply.

Speaking in early October, Mr Fior-elli said he doubted that he couldorder a new truck and take deliverybefore the end of the year.

According to Mr Stowers, “if youwait for [a truck] to break and thentry to replace it, you’re hard-pressedto find a replacement vehicle”.

On another front, the US FederalMotor Carrier Safety Administration(FMCSA) implemented strict newrules last December that requireheightened awareness of drivers’ per-formance and the condition of vehi-cles.

Under the new rules, drivers andcarriers accumulate points – and ulti-

mately penalties – for infractions, bigand small. Missing marker lights havebeen one of the main violations.National-security laws have puttrucks carrying hazardous materialsunder especially heavy scrutiny.

According to Mr Vieth, “from aliability standpoint, you’d probablybe better served to have youngertrucks than older trucks”. He citesanecdotal evidence suggesting thata growing number of drivers are

insisting they be assigned to newervehicles.

On the plus side, Mr Stowers saysthat the new regulations have helpedimprove driver behaviour, offsettingthe extra administrative burden.

Keeping drivers happy has becomea high priority for fleet owners. Truckdrivers are in short supply because offactors including new FMCSA regula-tions and youngsters’ reluctance tomake truck-driving a career. “It looks

Skittish US operators begin to buy againTrucksIn spite of good reasons toplace orders, operators arespooked by the economy,writes Bernard Simon

Tesco The supermarket chain puts its vehicles and drivers on drastic ‘F Plan’ dietTesco, Britain’s largest retailerand one of the world’s largestsupermarket chains, has afleet of vehicles commensuratewith its size, writes JohnReed.

In the UK, it operates 1,600tractor units and 2,800 homedelivery vans. Tesco says itsBritish secondary distributionalone covers the same mileageevery year as 377 round tripsto the moon. On a daily basis,the fleet’s mileage would circlethe earth 20 times, thecompany boasts.

But Tesco – like most otherbig companies in all sectors –is aiming for superlatives ofanother kind, as it seeks tocut costs and to reduce theenvironmental footprint of itsfleet.

The company says that itscarbon reduction initiativeshave saved 83m miles worthof trips. As part of itscorporate social responsibilitygoals, Tesco aims to becarbon­neutral by 2050, andto cut its carbon emissions onits deliveries 50 per cent by

the 2012­13 financial year,compared with 2006­7.

Alex Laffey, Tesco’s networkdevelopment director, says thecompany’s focus on stringentenvironmental goals is nogimmick – although he is alsoclear in stating that cuttingCO2 also helps the bottomline. “Reducing carbon reducescost,” he says.

Like other big fleet operatorscommitted to cutting CO2,Tesco has tested alternativevehicles. For its home­shopping fleet, it has doneroad trials on electric andgas­powered vehicles. Incommercial vehicles, it hastested dual­fuel vehicles thatswitch between diesel andcompressed natural gas(CNG).

However, in the case of gas­powered vehicles the companyhas struggled with the lack ofsupply infrastructure. Itconsidered putting in gasstations at its distributioncentres, but concluded thatthe cost of installation was toohigh.

For electric vehicles, it hasgrappled with range,infrastructure, andperformance issues.

“The challenge we’ve got isthat you’re always trading offpayload for the privilege ofusing these technologies,” saysMr Laffey.

“We’ve got a lot of work todo to make these [vehicles]sustainable and cost­effective.”

Tesco’s progress in movingtoward its CO2­reductiontarget, he says, comes downto reducing the amount ofdiesel it uses.

Tesco refers to its carboncommitment internally as the“F Plan”, shorthand for itspush for fuller pallets, fullertrucks, fewer miles, andgreater fuel economy.

For example, the companyhas boosted its use of double­deck trailers, carrying 80 percent more than a conventionalsingle­deck trailer at just a 20per cent higher cost. Tesconow runs more than 600 ofthem, the largest fleet in theUK, it says.

The company has shiftedmore of its goods to trains,running three a day, six days aweek. It aims to increase thenumber to 10 by the end ofthe financial year.

Tesco is also investingheavily in technology thatprovides the exact weight andsize of every product, sovehicles can be filled moreaccurately.

In a further attempt to cutfuel consumption, it isrelocating depots to theoptimum location for thestores in their region.

Overseas, where Tescooperates in 14 countries, itsinternational businesses arealso leveraging the group’sscale and skills to cut costs.

In Thailand, for example, thechain is rolling out a transportmanagement system that itexpects will save 8,600 tonnesof CO2 in 2011­12.

The fleet, like many of itscompetitors, is also focusingon human factors by lookingat driver behaviour.

The company uses

Mercedes­Benz’s FleetBoardsystem to score drivers onhow well they are performingin terms of fuel consumption,and to highlight fuel­wastingpractices such as revving theengine at lights.

Additional driver training hasalso increased efficiency by8 per cent in miles per gallonterms, the company says.

“Our drivers are veryprofessional and proud of whatthey do,” Mr Laffey says.

But the company alsoexpects its effect on theenvironment to be influencedby other factors,– such as itsrivals. It is also braced for aneconomic slowdown.“Conditions are tough and ourcustomers are telling usthey’re finding it tough too,”the company says.

So saving every drop ofdiesel is vital.

And on that count, Tescolooks to be motoring along: MrLaffey says the company is“on track” to meet its carboncommitment by the end of thefinancial year.

Stacking the odds: gas­powered and electric vehicles still have to prove themselves, but for now the key to ambitious carbon­cutting targets is reducing diesel use ‘We advise our customersto understand theoptimum replacementtime for each vehicle, andto stick to it regardless ofthe economic situation’

After years of small pilotprogrammes – accompaniedby a large amount of hype –electric and plug-in hybridvehicles are finally enteringcompany fleets.

Vehicle manufacturerssee fleet operators, whichtend to lodge larger ordersand take a longer view onrunning costs than retailbuyers, as core customersfor their new-generationbattery-powered vehicles.

Many fleet managers, inturn, want plug-in cars andvans in their line-up –whether to test the newtechnology, cut costs andcarbon dioxide, or just fea-ture pictures of them intheir corporate sustainabil-ity reports.

Regulators around theworld are easing the path ofelectronic vehicles (EVs) tomarket by offering a rangeof subsidies to early adop-ters, such as the UK’s £5,000plug-in car grant orFrance’s top €5,000 bonus.

Companies are anticipat-ing a further boost to vehi-cle electrification from citygovernments implementinglow-emission zones.

But fleet managers aretough customers, not leastduring an economic down-turn. So automakers arefine-tuning their pitches,increasingly touting EVs asvalue propositions, not justshowpieces for corporatewindow-dressing.

“Until now, lots of peoplebought electric vehicles forpresentational reasons, andmade a big song and dance

about them,” says AndyHeiron, head of Renault’sEV programme in the UK.“Now, we are getting verybusiness-oriented questionsabout payloads or fittingthem out with racking,motivated by a genuinedesire to get them intofleets.”

Renault has movedaggressively into EVs,along with its partner Nis-san. In mid-October,Renault began takingorders in the UK for a bat-tery-powered version of itsKangoo small delivery van.

The French manufacturerplans to sell the van inthree versions, rangingfrom about £17,000 to justunder £19,000, excludingVAT, a price in line withcomparable diesel vehicles,it says. To cut the van’scost, Renault will lease itsbattery to customers, begin-ning at a starting pricebased on a four-year con-tract of £60 a month.

Renault says it has signedletters of intent with poten-tial customers includingTransport for London, theleisure group Center Parcs,and Morrison Construction,a civil engineering group.

Steve Farmer, manager of

the fleet division at BalfourBeatty, the constructionand engineering group,describes the vehicle as a“great van” which, in addi-tion to zero tailpipe emis-sions, has a 600kg payload.

“Our customer base isvery sophisticated and verysensitive around what itscontractors and supplychain are doing to protectthe environment,” says MrFarmer. “The ultimateambition is to get as closeto zero [emissions] acrossthe fleet by 2020 as we can.”

Ford Motor is marketingan electric version of itssimilar-sized Transit Con-nect van. Azure Dynamics,Ford’s partner, which fitsthe vans with motors, bat-teries and electronics, isselling it for just under£40,000, batteries included.

While the price is steepfor a vehicle of its size,Azure Dynamics is toutingits low running costs. “Thisvehicle will cost £2 a nightto charge”, says Gary Whit-tam, the company’s salesand marketing director forEurope.

Mr Whittam divides buy-ers of the van into threegroups: “The first custom-ers are those who have a

‘green’ ethos from themanaging director down,with a commitment toreduce their carbonimpact,” he says.

A second group, he says,is concerned about risingfuel prices. “A third groupof people don’t have a greenbone in their body,” hesays, but if they want tooperate the vehicle in thecentre of Rome or Oslo agreen vehicle will be better.About 300 electric TransitConnects have been soldaround Europe, he says.

General Motors, whichwill launch the Opel/Vaux-hall electric Ampera carnext year – a Europeanisedversion of its US ChevroletVolt – is counting on fleetcustomers, including thepublic sector, to outnumberretail buyers three to one.

“It’s almost like a newsegment,” says Ian Allen,launch manager for the car.He expects about 3,000 to3,500 units of the US-builtcar to hit the UK in 2012,rising to 5,000 in subse-quent years.

The utility companies –which are also moving intoEV recharging – will beamong the biggest earlycustomers for the cars.EDF, the France-headquar-tered power group, hastested plug-in cars made byRenault, Toyota, PSA Peu-geot Citroën and BMW, andplans to buy 2,500 cars for

its fleet by 2014-5 undera mass 50,000-vehicletender led by theFrench post office.“We have a roleto play in theelectric mobilitybusiness,” says

Igor Czerny, headof EDF’s electricmobility division.

“We think the trend is irre-versible – that’s why it’s acorporate project.”

However, sceptics say thenumbers on electric carsstill do not add up.

“If you look at the run-ning cost compared with anefficient diesel, even withthe government grant overthree years, the cost-benefitcase isn’t there yet,” saysDavid Brennan, UK manag-ing director of LeasePlan,the vehicle and fleet man-agement provider.

Some analysts say earlyadopters are using electricvehicles more for image rea-sons. “There are companieswho know they are runningEVs at a far higher costthan conventional ones, butthe fact that they put theirlogos on the side of the carsmakes it clear what theyare doing it for,” saysGareth Hession, vice-presi-dent for research with JatoDynamics, the automotiveresearch group.

But Balfour Beatty’s MrFarmer, for one, insists thathis choice is pragmatic. Hepoints out that EVs, beingmechanically simpler thanconventional ones, will becheaper to maintain. “Thereisn’t a whole lot that can gowrong,” he says.

Mr Czerny says total costof ownership of an EV anda conventional vehicle arethe same, and points toother factors that could fuela growing willingness tochoose an EV.

“It’s quiet and it’s easy touse,” he says. “When youhave started with this kindof vehicle, you don’t wantto go back.”

Positives start to outstrip negativesElectric vehiclesUtility is replacingimage as the mainreason to buy,says John Reed

Kangoo: leased batteriesmean a low van price

Car campus Bringing electric power to the people

General Electric’s fleet management arm isconverting part of its campus in EdenPrairie, a suburb of Minneapolis, into atangible demonstration of the industrial andfinancial conglomerate’s faith in electricvehicles, writes Bernard Simon.

If all goes to plan, the site will betransformed by next spring into a half­miledriving course and a two­storey building,including 12 garages. One car port will beequipped with solar panels to show thatelectric cars can be entirely powered byclean and renewable energy.

GE plans to invite up to five corporatecustomers to the centre each week todiscover for themselves the joys – andperhaps also sorrows – of plug­in vehiclessuch as the Chevrolet Volt, with its petrol­engined range extender, and all­electricmodels as the Nissan Leaf, Coda and thebattery version of Ford Motor’s TransitConnect light delivery van.

“We’re really focusing on electric vehicles.We’re very excited”, says Deb Frodl, chiefstrategy officer at GE Capital Fleet Services.”It’s so important that people touch thetechnology and really experience it.”

GE is something of an exception, asindividual and fleet buyers have so far beenslow to embrace the new technology. Arecent Deloitte survey concluded that thecurrent crop of electric vehicles would meetthe expectations of no more than 2­4 percent of consumers worldwide in terms ofrange, cost and recharging time.

Even so, GE’s opinion is not to be takenlightly. It operates a 30,000­vehicle fleet ofits own, and provides fleet­managementservices for 1.5m cars and trucks owned byother companies. It has sufficient clout forsome carmakers to have agreed to donatevehicles to the new “customer experienceand learning centre” in return for exposureto GE customers.

The conglomerate pledged last Novemberto buy 25,000 electric vehicles by 2015 forits own fleet and for its customers. Thatfigure is more than double the Chevy Volt’stotal sales target for this year.

GE, whose fuel costs ballooned by 20 percent in 2010, expects that electric vehicleswill make up half its own fleet by 2015. MsFrodl estimates that the average fleetdriver, travelling more than 20,000 miles ayear, can save about $1,300 in a plug­inhybrid using a 50­50 combination ofgasoline and electricity. The savings couldrise to $2,000 a year in an all­electricvehicle.

By early October, GE had taken deliveryof 110 Volts, and expects to have several

hundred more on the road by the end ofthe year. Employees who have driven them“absolutely love the vehicle”, says Ms Frodl.“They love the technology.”

While both the Volt and the Leaf areplug­in electric cars, the Leaf is poweredentirely by a battery with a range of about100 miles before it needs recharging. TheVolt runs on battery power alone for 40 orso miles. After that, a small petrol engineruns simply as an generator to charge thebattery, giving a total range before refuellingof about 340 miles.

For fleet and individual customers alike,“range anxiety” is one of the biggestobstacles to widespread acceptance ofelectric cars, especially given the initialscarcity of battery recharging stations.

GE has so far ordered only Volts for itsUS sales force, who each typically driveabout 85 miles a day. Ms Frodl says: “Wedecided that the Volt was presently thebest fit for GE and our drivers.”

GE offers fleet customers a turnkeyelectric­vehicle service that includes buyingthe cars, installing the necessary recharginginfrastructure and collecting data on driverand vehicle performance.

Other GE divisions supply much of thisequipment. For example, GE sells a battery­charging unit, known as the Wattstation; ithas so far installed 600 in the US and 150in Europe. Other GE products include circuitprotection equipment and transformers. Notsurprisingly, these items will also be ondisplay at the Minneapolis centre to helpdrum up new business.

Much of the data supplied to fleetcustomers comes from OnStar, a GeneralMotors vehicle information service that isstandard equipment in the Volt.

Employees are encouraged to drive fleetvehicles as carefully as their family car byallowing them to buy the company car aftera set period. GE sells 10­20 per cent of itsused fleet cars to its own employees.

Clean machines: GE shows the way

MORE ON FT.COMRead FT car columnistRohit Jaggi’s reviews of theChevrolet Volt andNissan Leaf in his column onSeptember 28www.ft.com/wealth

4 ★ FINANCIAL TIMES FRIDAY OCTOBER 21 2011

Fleet Management

BMW is gearing upfor the sponsorshipdeal of a car-maker’s dreams:

providing the transportfleet for the London 2012Olympic Games.

The German carmakerwill provide a diverse rangeof vehicles to ferry athletes,International Olympic Com-mittee members, media,and medical staff aroundvenues next summer at theworld’s largest sportingevent.

Over the past decade,BMW has embraced envi-ronmental responsibility asa core value, cutting itscars’ carbon dioxide emis-sions more aggressivelythan any other big manu-facturer.

Last year, it launched asub-brand devoted to “sus-tainability” that is due tolaunch two cars: one all-electric, and one plug-inhybrid.

That helped BMW eclipseNissan’s bid to meet theIOC’s demanding brief tosupply transport for whatare being billed as thegreenest-ever OlympicGames.

While BMW is bestknown for its high-torqueexecutive saloons, the 2012event will allow it to show-case its lower-emission carsand two-wheelers.

The fleet will include elec-tric, diesel and hybrid cars,motorcycles, bicycles, and abrand-new product: thePedelec, an electric-assistedbicycle that can fold to fitin the boot of a car – or betaken on public transport.

“What the Olympics givesus on the world stage is agreat chance to showcasewhat the group is doing onsustainability,” says TimAbbott, managing directorof BMW in the UK.

But if sponsoring the Lon-don 2012 Olympics soundslike a dream, the logistics oforganising a city that suf-fers severe transport con-gestion even on normaldays could prove a night-mare.

On one day alone –August 2, the middle Satur-day of the Games – about240,000 people are expectedto be travelling throughLondon. That is about twoand a half times thenumber who travel onmatch days to WembleyStadium, when some Lon-doners avoid driving orpublic transport.

Transport planners saythey are counting on asmany as a third of London-ers changing their travelpatterns in order for theGames to go smoothly.

But if the congestionturns to chaos, could therebe a negative effect on forBMW’s brand image?

There has already beenconsiderable criticism ofthe prospect of traffic lanesreserved for official BMWvehicles, with other vehi-cles forced to wait in longerhold-ups than usual.

BMW refers questions

about the logistics of thefleet to the organising com-mittee of the Londongames, which says it isworking through details ofthe use of the fleet duringthe games.

“Our priority at themoment is recruiting enthu-siastic and knowledgeablevolunteer drivers and devel-oping appropriate plans fortraining them,” it says.

“We are also working ondetailed plans for facilitiesto look after our driversand supervisors during theGames, as well as mainte-nance facilities for thevehicles.”

BMW’s Olympic line-upwill have as its workhorsethe new 3 Series diesel –nearly 2,000 of them. WithCO2 emissions of just under109g/km, the car sits wellwithin the IOC’s criteria ofa fleet average of 120g/km.

To get to sites outsideLondon – Weymouth forsailing, Manchester for foot-

ball – Olympians will needvehicles suited for longerhauls on the motorway, ajob ideally suited for diesel-engined vehicles.

However, bigger cars withample boot space, to movearound dignitaries or mediawith lots of equipment, willalso be needed. So the fleet

will include 750 larger FSeries cars too.

For shorter hauls, BMWwill also deploy 200 electricvehicles: 160 plug-in ver-sions of its 1 Series and 440electric Minis. With a rangeof about 100 miles, the cars,it says, will mostly be usedwithin London.

The Games’ organisingcommittee has also taken

delivery of the first 100 ofabout 400 bicycles, whichBMW says will be used inplaces such as Dorney Lakeoutside Windsor, whererowing events will be held.

In addition, motorcycleswill be used at marathonrunning races and cycleroad events around London,and some may also beadapted for use by medicalteams.

“No glove fits all solu-tions,” Ian Robertson,BMW’s head of sales andmarketing, said in July.

If the carmaker has con-cerns about a brand back-lash from testy Londoners,it is not sharing them.

It says it will make sureall the drivers the Games’organising committeerecruits are well trained inhow the vehicles work.

“Most Londoners say thisis great for the city,” MrAbbott says. “It’s aboutdelivering a seamlessGames to the world.”

Do you need to take thecar to the office on theoff-chance you may need itduring the day – or mighta car club save you thechore?

The end of taking thecar to work – whether aprivate or company-provided vehicle – couldhave several benefits.

They include lesscongestion and lesspressure on parking. Thecompany would benefit byavoiding expensive assetsoccupying expensiveparking space and burningcompany fuel.

Given an ideal scenario,the absolute number ofcars provided andsupported by companiesmay decline over time.

The catalyst for suchchange could be thegrowth of the car club andshort-term hire car. Wheresuch schemes areavailable, companies areenthusiasticallysubscribing to them andsavings are being reported.

In the UK, SurreyCounty Council has linkedwith Streetcar and reporteda 26 per cent reduction incost per mile driven by thelocal authority. Elsewhere,Arup, the constructionconsultants, joined a carclub and slashed the costof pool cars from £17,000 to£5,000 in the first year.

Car club schemes dohave a downside. There isa high start-up cost:vehicles need to be parked,maintained and fuelled.

Users have to berecruited and a criticalmass of regular customersis needed for schemes tobe viable. Equallyimportant, there need to beacceptable alternativemeans for employees to getto and from work.

Not every urban localityis suitable for car clubtype operations. Daily

rental companies and taxioperators may not beenamoured with such newcompetition.

The factor critical to thesuccess of car clubs maywell be the associatedtechnology systems anduse of smartphonetechnology to give accessto the vehicles in thescheme – not only in termsof identifying location andavailability of cars, butalso giving the schememember access to thevehicle and securing itafter use.

The technology isbecoming increasinglysophisticated and moreuser-friendly.

Car-club-style schemesprincipally offer small, low-emission or electric carssuitable for urban use.Thus operators may use

Smart cars, Minis or smallBMWs.

Short-term rentalschemes are being testedin a number of cities inEurope, North Americaand East Asia.

A car-sharing model inMunich, Germany, hasbeen developed betweenBMW and Sixt, the vehiclerental company. DriveNow,was launched in April andis expected to be launchedsoon in Berlin.

If successful, it may berolled out internationally.The scheme offersexclusively BMW productsand users have greatflexibility in hire and dropoff. BMW i Ventures, aBMW sub-brand, allowsusers to find vehicles viathe internet, a smartphoneapp or at the roadside – noadvance booking is needed.

Another scheme wasrecently launched in Parisbased on specially built

electric cars. The Autolibscheme is a programmefinanced by localauthorities, but with thevehicles provided byFrench conglomerateBolloré, which has spent$1.5bn over the past 15years developing thebatteries for the cars.

Paris and some of thesurrounding communeshave provided more than$267m to create theinfrastructure, such asparking spaces and,recharging points. Thedesignated parking spaceswill occupy the equivalentof 12.5km in an alreadyparking-poor city.

The operator pays thelocal authority €750 perparking space but takes allthe revenue. About 80,000regular subscribers a yearwill be needed to covercosts. The Paris scheme isplanned to rise to 3,000rental units by 2013.

Subscriptions generallywork with a base monthlyor annual fee and then afee per half hour, hour orday.

Are such schemes goodvalue for money? For theproviders they are high-risk and potentially high-reward, The can generate anew source of revenuefrom vehicle operationrather than provision.

Such innovative schemesmay offer differentfacilities and modusoperandi to start with, butover time a preferredmodel may emerge.

The next challenge willbe whether such servicesare better implementedwith a single scheme percity, rather than a numberof rivals.

Corporate and individualconsumers will decide theirfate, but such schemescould just be the future ofat least part of thebusiness car fleet.

Peter Cooke is Professor ofAutomotive Management atthe University ofBuckingham

The case for car clubsand short­term hireGuest ColumnPETER COOKE

BMW hasto show itcan go thedistanceLondon OlympicsA dream deal couldstill turn intoa nightmare,writes John Reed

Two­way bet: however well local sports stars perform in the games, BMW will get exposure

‘Technologyis critical tothe successof car clubs’ ­Peter Cooke

‘This is a chance toshowcase what thegroup is doing onsustainability’