28 June 2022

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Businesses running vehicles have had to face a number of challenges already this year. But what will happen in the next six months? We asked senior industry figures to predict H2 2022.

The first six months of 2022 in business motoring and travel has been dramatic, with several major issues to deal with for companies running vehicles.

For a start companies were beginning to get up to speed post-Covid, with research showing 600 million more business miles were driven in the previous 12 months, compared to the year before. But despite getting back to work, many fleets were still struggling with lack of new vehicle stock due to the global shortage of semi-conductors, and also grappling with rising fuel prices despite a cut in Fuel Duty, as the effects of inflation and the war in Ukraine hit.

In the longer term, the move to electric was given a boost by the Government’s announcement of the Electric Vehicle Infrastructure Strategy in the Spring, and so what of the future?

We asked industry experts and business leaders for their thoughts on the second half of 2022, and what they see happening.

Allstar Business Solutions: Lower demand could result in fuel prices dropping

"When inflation rises too high, or a recession becomes more certain then the impact will first be felt by the general public. Unlike businesses, they often have a choice when it comes to fuel consumption – if fuel is too expensive then they can take an alternative such as public transport or walk, whereas a logistics company doesn’t have that option. Lower fuel demand could translate into lower prices for businesses, giving them a measure of relief from skyrocketing prices,” said Paul Holland, MD of UK Fleet, Allstar Business Solutions.

Hopefully the world’s governments will respond to the downturn with some kind of support similar to those that finally beat back the 2008 recession, but it is possible that the UK’s businesses will have a difficult road ahead, underlining the importance of making fuel savings and maximising efficiency.

The Association of Fleet Professionals: getting the basics right and moving to electric

There is quite marked upwards pressure on car and van running costs. Petrol and diesel are the obvious sources and are grabbing all the headlines but a range of other consumables are also increasing in cost, such as tyres, while general SMR is also starting to be affected with labour rates rising. Additionally, the purchase prices of vehicles themselves are getting higher,” said Paul Hollick, Chair of the AFP.

This situation is having two effects. One is that fleet managers are doubling down on fleet management basics to ensure that overall running costs are contained as much as possible. The other is that it is increasing the speed with which fleets are attempting to electrify, given that day-to-day running costs for EVs are lower.

Fleet News: Vehicle shortages will continue to cause problems

The next six months will see the continuation of several major challenges, among them vehicle supply. Due to the shortage of semi-conductors and other components for well-documented reasons, fleets are having to run cars and vans for longer, resulting in some employee disgruntlement but, more crucially, increasing service, maintenance and repair costs, plus MOTs and replacement tyres, as vehicles age beyond a three- or four-year cycle,” said Steve Briers, Fleet News Editor-in-Chief.

Rising SMR is exacerbated by a parts shortage, which is increasing the amount of time vehicles are off-road, something that is made worse by the shortage of rental vehicles as temporary replacements. Many fleets have started to retain vehicles, where possible, that would’ve been de-fleeted to provide cover for any assets that are in for repairs.

The delays have also seen many companies open up their choice lists to more marques, and this has been assisted by the market introduction of electric model offerings from some non-traditional brands which have greater appeal to company car drivers.

CBI: Government action is needed to kick start the economy

We’re expecting the economy to be pretty much stagnant. It won’t take much to tip us into a recession. And even if we don’t, it will feel like one for too many people.” Tony Danker, CBI Director-General, said.

Times are tough for businesses dealing with rising costs. We’ve had weeks of politicking with the country standing on the brink of a summer of gridlock.

Inaction this summer would set in stone a stagnant economy in 2023, with recession a very live concern. We need to act now to install confidence. This can wait no longer.

British Vehicle Rental and Leasing Association: fleets will be extending contracts

In the traditional business leasing sector, costs are rapidly increasing as discounts are eroded and manufacturers raise prices, which means in turn rental costs are rising. Unless something fundamental changes, mobility is going to get a whole lot more expensive, and will continue to do so,” said Toby Poston, Director of Corporate Affairs, BVRLA.

 One of the effects of this is contract extensions, because price inflation has meant company car drivers can no longer afford the badge level they are used to. So they would rather pay a premium and extend their contract than move to a new volume brand car, and this is a new trend that goes beyond the wider extension landscape driven by a lack of supply.

We’ve also been having lots of discussions with BVRLA members where firms are converting traditional company car schemes into salary sacrifice plus cash schemes. It is simpler, spreads the benefit and can give employees more choice."

There is room for optimism…

The pressures of the past few months (and years) will continue, but there are ways to make improvements that limit the impacts:

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