New legislation: how it will influence fleet policy
Following a number of game-changing occurrences in 2015, including over-exceeding the Kyoto target, the Paris Climate Summit, ‘Diesel Gate’ and falling oil prices, it was to be expected that governments would be looking at legislative changes that will also impact car use.
So far, most measures that governments have taken are related to the purchase of low-emission vehicles, excise duty on fuel prices and taxation of private usage of company cars. But, numerous cities – like Oslo* – are now also reviewing the possibilities of banning vehicles (or certain ones at least) from their city centers.
Time, we believe, to take a closer look at these developments and see how they will most likely influence your fleet management policy. For this purpose, LeasePlan Consultancy Services looked into initial measures already implemented in EU countries**. We expect these measures are just the beginning of more legislation that will be widely adopted by local authorities within the short future. In this blog, we will be discussing the top-3 measures taken by governments and how they will impact fleets.
Change of excise duty on fuel prices
As from October 2015 onwards, excise duties in Belgium are set to increase on diesel and decrease on petrol. Both measures are to be implemented in a period of 3 years, at the end of which, for example, a full tank (50 l) of diesel will have increased by €7 while petrol will have decreased by €3.90.
By tradition in Belgium, as in France, Germany and Italy (to name but a few), diesel is the preferred fuel for fleets because it’s cheaper. The change in excise duty could impact the economic choice for a petrol or diesel engine. Especially small car segments and fleets with mileages of around 20,000 km per year should look if petrol versions could be a cheaper alternative. But, beware the maximum allowed CO2 thresholds! Make sure your policy is compliant.
Recent research has shown that in Belgium, monthly fuel costs for a medium sized petrol car driving 20,000 km per year are €114, and €100 for a diesel equivalent. The actual impact of the excise duties measure? The gap is now a mere €3.10, compared to €14 as it was.
Change of grants on vehicle purchase
In France, grants for hybrid vehicles have changed. Whereas in 2015, purchasers of hybrid vehicles received a €2,000 grant, this has been replaced by two different grants: hybrid vehicles now get a €750 grant and plug-in vehicles €1,000. Electric vehicles, however, are eligible for a €6,300 grant.
(Plug-in) hybrids and electric cars have a higher purchase price than conventional cars. Hence, governments provide grants to stimulate the up-take of these vehicles. The trend is now for such grants to diminish and only become applicable on zero- or ultra-low emitting cars. Now that grants are being slashed, businesses should review their car allocation budgets to allow for electric and plug-in hybrids. The budgets for conventional cars might not suffice. An exception policy, combined with clear guidelines on who would be eligible for such a car could now be an option. In any case, it doesn’t make sense to allow drivers who have to cover long distances hybrid or electric options as they cannot (yet) cover long distances in electric mode.
Change in benefit-in-kind taxation
Across Europe, it is common practice to tax private company car usage. This is called benefit-in-kind taxation (BIK). To support the Kyoto protocol many governments used the BIK to stimulate the uptake of lower-emission vehicles. Now we see former tax schemes returning, with only zero or (ultra) low emitting vehicles offering tax advantages.
In the Netherlands, for example, the BIK taxation changed as per January 2016. Based on CO2 emissions, the BIK tax for 1-50 g/km is 15%, 51-106 g/km is 20% and 107+ g/km is 25%. For 2017, zero-emission cars will be taxed 4%, whereas cars with an emission of over 51 g/km will be taxed 22% of their catalogue price.
For fleets, this means that employees driving a company car for private purposes will be financially impacted. The employee could opt for a business-use-only option or be more motivated to drive a hybrid or an electric car. For you as fleet manager, it is important to have in place clear guidelines for hybrid and electric cars. Ask yourself: ‘Are such cars fit for purpose and is there a sufficient local infrastructure in place?’ Be sure to allow for – and arrange – charging stations at the office and at home.
Changing excise duty on fuel prices will impact all fleets as it will directly impact fleet costs. Fleets with a car selection list in place are advised to review whether the choices made are still the most economic choices at least once per year. The other two measures will have a more profound impact on benefit fleets and, by extension, to CSR policy. An increased number of drivers may well be interested in zero- or low-emission cars and your company will need to decide whether or not such (more expensive) vehicles will be included in fleet policy.
*Besides Oslo, Milan, Dublin, Paris, Madrid, Brussels and London also have plans for or already have effective restrictions in place for cars in city centres.
**Research conducted in January 2016.