Fleet continues to underpin the new car market, and its influence is being felt across EV adoption, vehicle supply, pricing and the wider automotive landscape. This episode of Talk Auto explores the fleet trends reshaping both the new and used vehicle market. From company car taxation and salary sacrifice to fleet electrification, electric van uptake, residual values and the future impact of de-fleet volumes.
In this episode of Talk Auto, we discuss:
Guests:
00:00 Holly Mottram: And welcome to the Talk Auto podcast where every month we welcome industry experts to talk about all the latest in automotive. Now for those of you watching this episode, you may recognise a friendly face sitting next to me. Rich, you were on the podcast a couple of months ago. You had a fantastic time and we just had to bring you on to join me on this side of the conversation. How are you feeling?
00:19 Rich Price: Yeah, feeling really good. Holly, it's slightly different being sat on the other side of the sofa, but really looking forward to getting into it with you guys.
00:29 Holly Mottram: Absolutely. And I think, because it's your first episode, we have to let you introduce our fantastic guests and their topic for this episode.
00:35 Rich Price: Yeah, absolutely. So today's episode, we're focusing on fleet and we're looking at how fleet trends are reshaping the wider automotive market. So really excited to get into that. We've got two fantastic guests joining us today. Two Jons, Jon Lawes, Managing Director of Novuna Vehicle Solutions. And we've also got Jon Hilton, who is Director of Relationship Management at Cox Automotive Europe.
00:58 Holly Mottram: Great to have you both with us today. If you could maybe just give us a bit of an intro yourselves, how long you've been in the role and what you do.
01:02 Jon Lawes: Yeah, so, Jon Lawes. I've been in the role at Novuna for over 10 years. I've been in fleet for 30 years, hence the white hair. It's gone from black to grey to white. So, I've absolutely been in the industry a long time and I'm looking forward to having a conversation with you both on some really meaty topics today in fleet.
01:28 Jon Hilton: Yeah, thank you, guys. So, Jon Hilton, as you said, Director of Relationship Management at Cox. I've had that job for a couple of years. I've been with Cox Automotive for seven. And then, prior to joining Cox Automotive, I had 10 years with one of Jon's competitors, actually, in the fleet and leasing industry. I've been around fleet and leasing my entire career, really.
01:48 Rich Price: Everyone just moves around, don't they? Also, it's I've just about forgiven him. Yeah, yeah, yeah. There's no animosity on the
01:52 Jon Hilton: No, no, we've moved on. We've moved on. Fair enough, fair enough.
01:55 Rich Price: Well, just before we take a deep dive into the topic, as Rich said, we're diving into the slightly meaty topic of fleet. And I think it's important to contextualise how important fleets are to our industry. Almost six in every 10 new cars registered today are fleet vehicles, which is an incredible stat when you think about it. So, as fleet sales grow and private, retail sales soften a little bit, I think we'll take this episode to explore how fleets have influenced strategy in the wider automotive market.
02:29 Holly Mottram: Yeah, now we had an episode back in the autumn of 25, and one of the key takeaways to come out of it was the change in company cars and how they are taxed. So I guess this is one for you as we dive straight into it, Jon, with that is how are taxation rates affecting company car drivers?
02:43 Jon Lawes: Well, I mean, firstly, it's massive. I mean, you know, we talk about six in every 10 registrations, but if we talk about EVs, it's eight in every 10. So, without fleet, there isn't an EV market in the UK. It's that important. And the key reason for that is Benefit in Kind, the tax that individuals pay, or employees on salary sacrifice schemes pay, is 4%. Back in the day, before EVs, it was roughly 28% for a diesel car. So there's a significant saving, and that's been the driving force behind why there's been a massive uptake. An individual could be maybe £200, £300 or £400 better off in their pocket through lower tax because they're driving an EV.
03:36 Rich Price: And that's been the main drive behind why EV and company cars have grown over the last few years. Great. And do you think we've seen a change in the attitude from company car drivers because of that? It's obviously affecting the money in their pockets, essentially, Benefit in Kind. But I would say, once you've tried an EV, you don't go back. An EV is a wonderful driving experience. I know there'll be critics of that comment. But once you've tried it, it's smooth.
04:06 Jon Lawes: It's really... ranges are getting better. So I think when people made the shift and they got the initial anxiety over range and how they can charge it, once they've got that into their working or daily personal lives, it's not such a big topic, really. So, once you've tried it, you've got the saving. I don't think people go back. Certainly not up to now. They're not opting out of company car schemes and taking the cash. There's a trend into company car schemes, not the other way around. So it's obviously working.
04:40 Holly Mottram: Yeah, we had Sarah Sloan on the podcast a few months ago and she said, I don't know if you listened to it, but 'bums on seats' is what she said, which is as soon as somebody's tried an EV, they are so, so much more likely to either, even if it's not that they can purchase one, but consider purchasing one or driving one as their staple car. So you're entirely right. I think that seems to be the theme in the industry at the moment.
05:02 Rich Price: I think it's natural, you know, for somebody who hasn't tried an EV, there's so much negative press around it. So, maybe I'll just wait and see. But once you take that leap of faith, and once you've struggled with charging once, you don't do it again. I think you've just... it's just business as usual. So, once you've done it, why not?
05:24 Holly Mottram: Yeah, absolutely, absolutely, and on EVs there, I mean, we've touched on, I mean, I didn't know that eight in 10 of new cars that are fleet cars are EVs, that's fantastic. And I think in June, EVs surpassed, I believe it was 30% of new car registrations. So in your respective fields, what do you think is driving this EV demand and how do you think fleet intertwines with that?
05:49 Jon Hilton: I mean, in the first instance, money talks, right? Taxation policy is what I imagine has driven most people towards an EV in the first instance, because it is just so cheap to drive relatively expensive cars. So, money talks would be the first thing. I think that is what has pushed people towards it and the increase in taxation on diesel vehicles. We saw that shift from petrol to diesel in the early 2010s, and that drove a massive adoption towards diesel. Then we've seen that trend reverse through to EV. So that's the thing that's really kicked it off. Then, to your point, 'bums on seats': once you're in on that journey, you're not really going to go backwards. The driving experience is so much improved when you're in an EV versus a more traditional ICE vehicle, I think.
06:49 Jon Hilton: But I would also say, you know, we don't hear so much about it in the press these days, but there is still a climate emergency. The Earth is getting hotter. So it's actually quite nice to do the right thing. And also, the great benefit about company cars or salary sacrifice is new technology, but the person doesn't have to take the new technology risk. The leasing company does, or the company buying the vehicle. So you can try it as an individual, quite risk-free, really.
07:20 Holly Mottram: Yeah, that's a really interesting take actually and a really good point I think is specifically within the fleet world that yeah, the risk is not on the individual as much as it is the leasing companies. And I think actually before we go on, I think you have a really interesting story about your experience within this.
07:33 Rich Price: I don't know if it's interesting, but I know that personally I went from a diesel car in the role that I do. I do a lot of miles. I have a company car. There was definitely a real anxiety around switching from a diesel vehicle that did 600 miles on one tank of fuel to going to an EV that said it did 320, but actually it might only do 280 at best at the time. December, January, certainly in the winter months, it might even do less. And actually, the feeling of what I would save on company car tax was significant. But you mentioned it as well, Jon, around the fact that that range anxiety, once you get into the vehicle, you realise it's more just about changing a habit and planning ahead and thinking about where am I actually going to be tomorrow to ensure that wherever I am, whether that's at home or a hotel for the evening, I plan to have a charger there.
08:49 Rich Price: And actually, you wake up in the morning, the car is fully charged, and you go about your day and move on. But I think that tax saving is really significant. And I think the role that fleet organisations play in that is absolutely huge. Because, as you said, the consumer or the driver isn't the one taking that risk, are they?
09:08 Jon Hilton: Yeah, but I suppose the other key thing is that, you know, when you would have tried it, the car might have been doing 220 in December or January. It might have been doing 170 because it's cold and the battery doesn't perform so well. That's a bit different from if you're going into an EV today. I mean, most cars, I would say, do 300-plus miles, so in the winter it's maybe 260. And that's a big difference between having a car in the middle of January doing 170 miles to doing 260 or 280 miles. You know, if you think about how many trips you do in a year, not that many trips, on average. If you can charge at home, which is another game-changer, then most of your trips are less than 250 miles round trip. It's a no-brainer.
10:10 Rich Price: Yeah, no, I agree. I think also, it's not just in terms of getting used to the habit of charging when to, as you said, the battery ranges have increased significantly. I'm seeing that as I move into my new company car at the end of September. And actually, it's the same model, but the battery technology has improved significantly. That vehicle will now do 80 more miles on a full charge. And then you start analysing as well what you would have spent on petrol or diesel versus the cost of that. And there is a significant difference, isn't there, too? Especially if you can home charge, or use workplace or depot charging. I mean, public charging is still... even though it's cheaper than it was, it's still quite expensive. So it's harder to make the economics work when you're 100% public charging. But if you can charge at home, which obviously not everyone can, it's not always possible, you could be charging in the middle of the night between 12 and six in the morning. You could be charging for seven or eight pence per kilowatt-hour, and you could be charging your car for £10 or £12.
11:06 Holly Mottram: Yeah. I feel like every time we have an episode, it doesn't matter what the topic is. Everyone always comes on and just raves about EVs for about 10 minutes. And I love it and I completely agree with it, absolutely. I think, as we've said, it's really big in the fleet world at the moment. We know that. It's big for cars, but not commercials, but I think we're going to come onto that in a bit later. So it's a totally different ballgame for commercials. You've almost taken the question out of my mouth for the future, but for now, I think, I guess we know that fleet registrations year to date are, I believe it's somewhere about 650,000 registrations, which is huge. Now, how important is that demand for fleet vehicles in helping OEMs increase their EV volumes and also for bringing new entrant OEMs into the UK as well?
11:59 Jon Hilton: I mean, it's extremely important. The fleet industry is the entry point to the wider market, right? And the fleet industry, in some respects, shows the rest of the market how to do it, and the wider market catches up with the fleet industry. You cannot overstate its importance, really. If you relied on any other markets for that, the cash outlay involved in that new technology is largely prohibitive for a retail customer. So, to Jon's point, you have to take away some of the barriers around that and some of the risks. So, who are the people that can take on the risk? The leasing companies and the lessors of those vehicles. So, yeah, it absolutely is important. And that's when it then cascades through the wider market because your company car driver has a positive experience. They then tell a friend and they tell their partner, or whoever. Then actually, maybe the second vehicle in the household thinks, well, maybe I can see in real terms the cash saving that I'm getting. I can see the improvement it's making. I can see that the range anxiety is just anxiety and doesn't actually result in any real hardship. So then your second vehicle, if you've been slightly traditional in your view, is more likely to become an EV, and then you become a fully EV household. As the demand therefore continues to grow, the infrastructure responds in relation to that demand. If you're a serious hotel or hospitality organisation, you have to have EV charging sufficiently to be a viable option for them to play in the corporate space. So that infrastructure gets invested in and that feeds into the retail industry. So, really, it is the entry point and the starting point for the whole circular nature of it, in my view.
13:57 Jon Lawes: I don't know if you'd agree with that. No, I think it's a big, big factor for new entrants, but there's a lot going on in the new space and it's probably, as I told you, I've worked in this industry for a long time, the most change in OEM territory that I've ever seen. And, you know, some of it's exciting, but some of it is quite frightening as well and what it could lead to. So it's probably a whole different podcast on its own, right? But yes, it's a big thing. And, yeah, there's been a lot of change even in 12 months.
14:34 Holly Mottram: Yeah, absolutely. I think that, you know, when we've talked on the podcast before about those new entrant OEMs, it feels like even from the first episode to this episode, I think that's been 10 or 11 months, it's changed so dramatically. And actually, I thought your point was really interesting, Jon H., about how fleets are setting kind of, not necessarily the standard, but the entry point for a lot of things, whether it's behaviours, but also those new OEMs. So, you know, we see a lot of fleet vehicles being those new entrants, having that exploration. And then we're seeing those attitudes and behaviours trickle down into the retail space as well, which I think is really interesting. Now, how are OEM discounts, ZEV mandate pressures and new entrant brands influencing OEM pricing and EV pricing, do you think, when we look at it from that angle?
15:14 Jon Lawes: Well, firstly, we should talk about the ZEV mandate. 33% of new cars registered in the UK this year currently have to be fully EV. It's running at around 26–27%. There are certain rules around that, and they've been softened in the last 12 months, but they're still quite punitive for OEMs to be able to work to those rules. So, what do OEMs have to do to hit those targets? They have to heavily discount. What you've seen in the last year is significant increases in discounts for new EVs. It's completely night and day. If you compare that to three or four years ago, when there was one, two, three, four per cent discount, it would be quite easy to get 30–40% discount on a new EV today. Now, obviously, it's good for the driver because it becomes a lower lease cost, but not so good for the used car market because if you discount new, it makes used cars less expensive and can then drive down prices. Good for the consumer, you know; heading up a leasing company, residual value risk, not so clever. So for me, that's not so good. But you've got to look at these things over a long period of time. I think if it pushes down prices of EVs, it makes them more affordable. So all parts of our society can have access to zero emissions.
16:48 Jon Hilton: That's a really, really good point. But what I would say about the ZEV mandate, and it's a real... It's coming into consultation. The government are looking at it at the moment; it'll be published in January 2027 and it's probably likely to be softened. Which basically means it won't necessarily mean that all new cars have to be EVs by 2030. It's probably heading towards that. Nothing has been decided, but I think that's what it means. But that's what really makes it so tough. Whether you're an OEM, a dealer, a fleet leasing company – how do you plan? You know, we all work for organisations, they all want medium-term plans. And what have we seen? We've seen a date change from, under the previous government, 2030 to 2035, back to 2030. And now it's probably all up for grabs. How do you run a business, whatever sector you're in, when there's so much change? And how do manufacturers plan new product ranges with that level of uncertainty? It's very tough, especially for OEMs.
17:48 Holly Mottram: Yeah. I mean, we've seen the reaction from some OEMs. Jaguar Land Rover going to a complete EV recently – well, I say recently, probably about a year ago now. It feels like recent news. But, yeah, we've seen OEMs completely change their strategy, making some quite extreme moves to combat the ZEV mandate and the pressures of that. So, absolutely. But they might be all up for grabs again. If you ask any of those OEMs, how would you plan? It forces people into a gambling position where you shouldn't really have to. That's not what it's about.
18:30 Rich Price: You shouldn't be expecting people to take unnecessary, undue risk just by trying, ultimately, to do what is being asked of them as a responsible organisation. You know, it is, and I agree with it, government-led legislation that is leading to the rise in EVs ultimately, coupled with the altruism. But I completely agree with you, the complete flip-flopping in policy just forces organisations to take punts and take gambles. Some people will take a view that it's going to get pushed out; some people will not take a view that it's going to get pushed out. And one organisation will be on the right side of that gamble and another organisation will be on the wrong side. And it's not, it doesn't feel very just, in my opinion. It forces risk where there doesn't need to be risk, on top of all the other pressures involved in running a business.
19:17 Jon Lawes: It's not easy to do. And I guess that also puts slight pressure on, or maybe not slight, maybe real pressure on some of the OEMs, especially the established OEMs, who have a mixed portfolio of both EV, hybrid and purely ICE vehicles as well that have to hit these targets. Whereas actually the new entrants, particularly in that Chinese space, they're leading purely on EVs. So, actually, they're naturally hitting that target because that's all they offer within their range. I think it's tougher for the established OEMs because they have business models that, if they want to change them, it'd be like moving an oil tanker. It'd be a lot tougher. Whereas you have a new entrant, wherever they're from, they can move to that new operating model that much quicker. And that's what we're seeing. But, blimey, haven't we seen a huge amount of new entrants, and haven't they really gained some share? If you look at the market share in the last 12 months, haven't they really mobilised their business in the UK? And then one of the things – why is that? You might say, Jon, why is this happening? One of the key reasons, a little bit political, is that for imports from, say, China, for instance, there are lower tariffs in the UK compared with Europe and the US. So that was probably one of the economic reasons why we're seeing more product in the UK. What we have to say is that this is offering the consumer a very good-quality car at a good, affordable price. So it's actually all thumbs up for the consumer.
20:58 Jon Hilton: Yeah, and better for the fleet companies as well when they're adopting, obviously, those new entrant OEMs into their fleets, you're seeing that price reflected as well. I mean, it's up to us as leasing companies, or whatever leasing company you work for, to give our customers a choice. You know, as most schemes are user-chooser, they choose which car. So our role is to give people good cars, affordable cars, and to create competition. And I think that can only be positive for the consumer.
21:22 Rich Price: It must make life tough for your risk team, though, trying to understand the RV positions of new entrant marques and how that's going to sit in two, three, four years' time. It must make that... it adds an extra dynamic to their considerations.
21:38 Jon Lawes: I mean, absolutely. My risk team do an amazing job, and I'm sure they all do it in the leasing world. But one of the biggest challenges in the risk team is the lack of certainty. So, at the moment, all leasing companies around residual values will be planning around the current rules and what that means for future residual values of diesel vehicles, petrol vehicles and EVs. But if all that changes next January, it's all up for grabs again. So what does that look like? But in the meantime, we would have written a lot of residual value risk in that time. That's part of the... you know, there are ups and downs in the residual value market, and for some of us there'll be some winning situations and some losing ones. That's part of it. We're in the business of taking risk.
22:21 Rich Price: And obviously, with a number of these new entrant OEMs, they have not yet all gone through that cycle of two or three years in the market. So there's a lot of focus from them on the new vehicles, but not really the same focus on what that used market will look like and what their vehicles will be worth at the end. Does that sort of pose a big risk to you?
22:45 Jon Lawes: It does, but probably less of a risk than I first anticipated, because if you look at the level of new dealerships, as I said, very quickly, within three to six months, the number of new dealerships there are for those new entrants around the UK. So they're actually really embracing the UK model and how the vehicles are serviced throughout their life. So I think, in all fairness, they've done that really well. And there have been lots of dealership groups who have onboarded those OEMs and made them part of their brand family. And I think that's a positive thing. So I'm not overly concerned with that. I think the trends will work out for themselves.
23:15 Holly Mottram: You mentioned it earlier, Jon, and you talked about the commercial vehicle element, obviously your business is not just cars, it's commercial vehicle as well. Year to date, only 11 and a half percent of new vans have been registered electric this year when the actual ZEV target is 24%. Why hasn't there been the same rate of adoption in electric commercial vehicles to what we're seeing in car?
23:43 Jon Lawes: I mean, there's a few reasons. It's a bit of a car crash, isn't it? Let's just call it out. It is a bit of a car crash. It's harder for commercial vehicles. I mean, all commercial vehicles are sort of revenue-generating assets for organisations. So the most important thing for those organisations is to make sure those vehicles are available and they're in use, delivering the goods and services for their organisations. And that's the thing they're going to protect the most. So, very vital. If you think about when they're making their decisions, they need to make sure that there's enough vehicles available or the product. Even though there are more products available now, there haven't been as many as there have been for cars. It's way behind the new products for cars. So that's behind. The range tends to be worse than cars. So, if you're trying to build that into your operation, where are they going to charge the vehicles? I know charging is improving, and it's a lot better than it was, but do they charge at the depot? Do the drivers take the vehicles home? When do they charge them at home? Do they want to charge the company vehicle at home? There are so many operational challenges. So it is quite ambitious, there's a mandate for trying to, I suppose, make that business model work within their operations with fully electric. There's lots of organisations doing it, but you kind of have to try and test it, pilot it, understand it – what works, what doesn't work. Yeah, that's kind of the key reason. It's just harder.
25:05 Rich Price: A few years ago, we saw quite a good uptake in that commercial vehicle sector and a number of the big organisations did start to roll out electric commercial vehicles. In that used market, how are you seeing electric vans perform in the wholesale market?
25:22 Jon Hilton: Not too special, to be honest. No, I mean, it's quite... you know, if you think around the large organisations who have ESG targets, we're driving down that agenda. So, once those vehicles are selling, some of the vehicles selling now have got ranges of maybe 100 or 150 miles, not too great. And they tend to be then selling probably to SMEs. And, you know, there's just no way the SME is going to be, unless you're probably working in a city or in more rural areas, it's just not... they're not going to take that risk. They're livelihoods. They're just not going to do it. So it needs a lot more support, a lot more thinking and probably a more gradual transition to fully EV. It's definitely the right answer, but we have to test and learn over a more gradual period. So the targets are way too ambitious, way too soon, especially for commercial vehicles.
26:40 Holly Mottram: It's almost felt as though there was quite a lot – I say quite a lot more consideration for the car market than there was. Well, there's a Benefit in Kind to start off with. You think that's just a significant driver, which has probably been the single biggest thing in cars. What's the similar thing for commercials?
26:54 Jon Lawes: There isn't, apart from ESG targets at large organisations. But once you get beyond the FTSE 250, people are probably a bit less concerned about ESG targets at this moment in time.
27:07 Rich Price: Yeah, absolutely. And I guess, you know, we've touched on it there, but does the commercial vehicle ZEV mandate – you've mentioned that targets are far too ambitious, and there's probably not been enough research – do you think they need to be scaled back, similar to the cars as well?
27:27 Jon Lawes: Yeah, I definitely think they need to be scaled back and probably spread over a longer period. You know, the ambition still needs to be there. We have to go to full net zero. As I mentioned before, we have a climate emergency, but we probably have to do a more gradual transition. So keep the ambition. But I suppose what I would say is, keep the ambition, reset it, but then let's just stick to it. Because that is... and it's not which government, they've both been doing it. So it's about, let's just stick to it, so all organisations can plan to that probably over a slower period.
28:02 Jon Hilton: Yeah. We need some certainty.
28:04 Jon Lawes: Yeah. Certainty back, don't we? What about you, Jon?
28:09 Jon Hilton: I completely agree with Jon L on that. I think when people are given a target and they know that it's real, remarkable things can happen. You can see that all the time when their mind is focused. There's a lot of clever people that work in our industry. There's a lot of clever people in the R&D departments of these OEMs. If there is an ambitious target set, but, to my earlier point, the risk is taken out of: is it going to move? Is it not going to move? I hedge my bets and say that it's going to get pushed out, and therefore I don't divert my resources into that. If there is confidence and clarity, and this is the target, it's aggressive but achievable, and it's here to stay, I genuinely think that pressure will push out the right result. I genuinely do think that. You can see that now. I mean, 15 years ago, we would never be having a conversation about ranges on electric vehicles having 500-mile ranges. It would just have been unthinkable. Another five years of R&D and all the advances in technology in that period will bring, I'm very optimistic about that. But I completely agree with Jon that the inconsistency on that date, whilst probably well-intentioned in the moment, is massively unhelpful because it takes away some of that pressure and therefore other pressures that get thrown at organisations, of which there are many, take the foreground.
29:37 Holly Mottram: Yeah, I think when it obviously... we've mentioned there, when it comes to planning, and I think the automotive industry as a whole is quite good at banding together to achieve a result, right? I mean, the electrification targets that we've seen or the production that we've seen scaled up in the past, I think even just five, three years probably, but five years has been immense because the industry knows that, okay, the goal is there somewhere. So we need to get to that. But, yeah, as you say, this ZEV mandate has been, I guess, useful in pushing what we need to achieve, pushing the limitations of the technology. But it's got people trying EVs, so it's not all bad.
30:08 Jon Lawes: It's got people trying EVs. We're a way ahead, and we've probably had the early technology risk around the prices of our EVs, with no discount to the residual values, around 50% of what they were three years ago. So it's a quite significant reduction. You know, let's note that a new or used EV at this moment in time is really good value for the consumer. So that means all parts of our society, everyone can try, whether you want a new EV or a used EV, they're available to everyone to try.
30:36 Rich Price: Yeah, you said earlier, we talked about the infrastructure growing as well. I heard a stat the other day that apparently there are now more EV chargers than there are petrol pumps in the UK. And actually, it's those kind of things that I think are really important to relieve some of that range anxiety, that fear around actually, is this an inconvenience to me so that we can drive forward and push hitting these targets?
30:57 Jon Hilton: I mean, certainly that's really good, but, you know, it does take you probably an hour to fast-charge a car and three or four minutes to fill your car up. So there's still a long way to go with infrastructure, and there's lots of challenges there with the National Grid and how to sort of charge in certain areas of the UK so it's available to everyone. But there's been a lot of progress made in the last two or three years, but it's still, I suppose, still a work in progress stage.
31:33 Holly Mottram: Absolutely, now we've talked quite in depth I think about the new vehicle markets, whether that's cars or commercial vehicles, but I think it's important to have a look at the used market because ultimately those new vehicles become tomorrow's used stock, right? So what kind of market trends are you seeing in the used vehicle sector at the moment?
31:49 Jon Lawes: Well, what we're seeing sort of year on year is a significant increase in people looking to buy EVs. It's probably a lot more than you think. I think the last year's been, compared to last year, a 40% increase in people looking for EVs. I think geopolitical issues around the world at the moment are forcing that to go even higher, which is obviously a tricky situation. But we're seeing more people interested in EVs, but the supply of EVs is also increasing. That slowed down compared to 12 months ago in terms of the increase. So certainly a lot more people... EVs are really good value.
32:21 Jon Hilton: I completely agree. They are really good value and they're low-cost to maintain compared with a combustion engine. Second-hand EVs are reliable. So I think it's definitely worth looking at. So, yeah, I would say in the last three months, we've seen EVs slightly increase in price, which has been unusual because the last three years have been a bit of a free fall. For sure. But, yeah, I think it's an excellent time for a consumer to buy, or someone to buy, an EV.
32:57 Holly Mottram: Yeah. And I was going to say, and this is probably a question for both of you, but I'll ask you, Jon H. first, but just in your world, obviously, having a heavy focus on wholesale in one area of the business that you look after. What are the current challenges you see in that EV market, particularly around supply? We touched on RV, but also buyer confidence as well.
33:18 Jon Hilton: I guess the main kind of theme of conversations from the buying community of stocks such as John's would be, I guess, concerns over the battery and its state of health. And until relatively recently, it's been hard to get a meaningful read in a way that buyers have confidence in terms of what that battery looks like. In the same way, you don't have mechanical issues with EVs in the same way as you do with combustion vehicles. I'll come back to that in a second. So, but we're quite well, because of those things, we're quite well clued up as an industry in terms of how we report on those instances, and then buyers in turn have an idea of how, if there are issues with those vehicles, how they're going to fix them and they can work out their tolerance for those sort of things quite easily. And they can factor that into their buying decisions. Because of the technology associated with batteries, there's been a degree of blindness, I guess, to some of that, which has encouraged caution, I guess, from a buying community in terms of how they're bidding. Now, battery tests are now fairly commonplace. And they're not too difficult to do. And you can actually see when you go through that there isn't really an issue with battery degradation at all. It's a myth. You do sort of get a little bit of degradation, but not like your mobile phone. It's not like that.
34:39 Jon Hilton: I think, but this is good because as vehicles go through their cycle, society will get to understand what are the real issues and what are myth busters. And I would say, I'm not saying it's for every single vehicle, but certainly the vast majority that we're selling and my other colleagues are selling, it's not an issue. There's an issue people might be worried about, but with the sort of certification you can now get on battery health, I think that's not so much of a problem. It's not just a sound bite when people say there are very little SMR costs on EVs compared with ICE and combustion vehicles. So, as consumers dabble in that space longer and as the vehicle parc grows, they will start to feel that in their pocket positively and they can see that they actually don't need to, when it gets to three years' stock, kind of putting aside money every month for when something goes wrong with the vehicle that they need to kind of fork out for. So I think that the economic case of retail consumers, and therefore the buyers of those vehicles that are then being sold onto the retailers, such as the likes that would buy stock from leasing companies, that will continue to grow. I really do think that the confidence level will continue to grow and grow and grow almost with every passing month, really.
35:59 Rich Price: Okay. And I guess, well this is for you Jon, Jon L. What do current fleet behaviours mean for pipeline forecasting and you supply timing?
36:11 Jon Lawes: Well, you've been to a casino, haven't you? It's a bit like going to a casino. I know it's so hard to do any sort of predicting. There's so much volatility. We've talked about the ZEV mandate, so it is really hard. What we do know – let's talk about what we do know. We do know that the government have laid out Benefit in Kind tax through 2029–30. So today someone pays 4% Benefit in Kind. And in 2029–30, there is a modest increase to 9%. At the same time, we do also know recently that if you're driving the policies, maybe some of your listeners won't know this, but in 2028, plug-in hybrids' Benefit in Kind increases to 18%. So if you're choosing the company car now, it's two years away, part of that lease period, you'd be paying 18% Benefit in Kind tax. And then when you get to 2029–30, a petrol or diesel car is in the 30s, 34%, 36%, something like that. So we do know that for the next sort of four years, if anything changes, but in all fairness, the governments have been pretty... they've laid out the rules on Benefit in Kind tax and they've been pretty stable. So that's probably the big thing. So I think it's here to stay. I think the uptake of electric vehicles in cars won't go at the pace of the ZEV mandate because it's so, so aggressive. But it will still climb every single year. So I think that's really good for the new market. The used market is a lottery. It's really tough. And I suppose there'll be different views. There'll be different views if the ZEV mandate changes next January. I may come back and talk about this topic again – where the changes, what does that now actually mean for OEMs, dealers, leasing companies and consumers?
38:09 Jon Hilton: Yeah, still a lot of uncertainty. You know, it's still a fun market to be in. It's a great market to be in, in fleet; it's a great market to be in, in dealerships and OEMs. We all love it, so if we didn't, we'd have left.
38:33 Jon Lawes: So let's not cry this morning. This actually is a great place. I think the 18% thing, it's about how you frame it as well, because that's still a phenomenal, cheap way of securing an equivalent vehicle. Even at 18%, it's a big jump, certainly, but, yeah, it's 100% higher than 9%.
38:53 Rich Price: To that point, though, obviously some people will be aware of that, some people won't. But is that affecting sort of the life cycles and the decisions of how many people... so, in our organisation, my competitors are doing the same. They'd be advising drivers on behalf of the organisations they work for: when they make their choices, consider what your Benefit in Kind tax would be. So it's our responsibility to give drivers the information so they can make an informed decision. If they want to pay, that's fine, but it probably wouldn't be right for us not to make people aware of it because, obviously, if they're in a leased vehicle for three or four years, the last two years, when the car's three or four years old, they're going to be paying a lot more tax.
39:38 Jon Lawes: So that there is influence in what some companies are doing. They're taking hybrids out of their schemes. Some companies just have EV only. Our organisation comes with our scheme used EVs only.
39:56 Holly Mottram: We've talked a lot there about uncertainty and how kind of volatile some of the decisions coming out of government are at the moment. What do you think the market can do, even with this uncertainty, to prepare for this eventuality and mitigate the risks?
40:09 Jon Lawes: Yeah, well, I suppose I would say probably run two or three scenarios. I thought you were just going to say 'run'. So I would be planning for the ZEV mandate staying the same – I think that's unlikely – and then different scenarios around the ZEV mandate. I think the extreme scenario would be if it were scrapped. That's a possibility but probably not likely, and I think it would be kind of watered down in terms of the percentages. So I would be planning for those different scenarios on the ZEV mandate, and then you plan around the new and used car market accordingly. So that's probably, if there was one thing I'd be doing, and we are doing in our own organisation, what does that mean for those two or three different scenarios?
40:57 Jon Hilton: And, Jon, I usually think in terms of how the industry works together to mitigate those risks. Is there any insight you can give to that? A lot of it is just around clarity of message and selling the virtues of electric vehicles, right? You know, irrespective of policy and irrespective of kind of this target or that target, I think it would be hard to disagree with the fact that it is advantageous to take an EV vehicle on lease versus taking a combustion vehicle. It is cheaper to fuel and it is cheaper to run. So, irrespective of policy, those three things don't really change. So, as a collective industry, whether that's on Jon's side of it or my side of it from the remarketing side, there is work we can do to continue to sell the virtues of electric vehicles irrespective of policy, because I think sometimes we can get a bit distracted by some of the policy stuff in terms of some of the messaging. Yes, the Benefit in Kind rates may change, yes, as I've mentioned, they've changed, but it is still undisputably better, it's better for the environment and it's better for your pocket.
41:50 Jon Lawes: Some of that stuff is really relevant. Obviously, we spent a long time talking about it today, but it is also a nicer ride as well. Cleaner technology as well. It's a much smoother transition driving electric, more comfortable. So I think that there is more that we can do to kind of put a positive spin on that, and we can control that as an industry. And some of the legislation, that can be lobbied for and there can be influence and all that kind of stuff. But fundamentally, that's outside of our direct control. What is within our control is the messaging. And let's be honest, electric vehicles are not going to go anywhere. If we sat here in 10 years' time, there'll be more electric vehicles on the road than there are today. So there is, we can continue to put a positive spin on that. I think that's a truthful spin.
42:54 Rich Price: Very, very insightful. And I think, almost to round things up, we are getting a new Prime Minister. That is one certainty. We do know that.
43:02 Holly Mottram: is one certainty. We do, as of today.
43:05 Rich Price: Yeah. So if you had the opportunity to sit down with them, what would you ask of them? What would you say to them?
43:10 Jon Lawes: Firstly, that was a really great question. Very topical for the moment, so very good. So I think my single ask to them would be, you know, for all parts of our industry, please, over the next nine months, outline a clear roadmap to net zero and whatever that looks like, in whatever shape or form, and then stick to it. Please, please stick to it. Because I think whether you're a car manufacturer, commercial vehicle manufacturer, dealer, fleet leasing company or consumer, you can just take one risk away. And there's so many other risks in operating businesses. If you can get more certainty around that, I think actually the industry will thrive. It will really, really thrive. Otherwise, you're just knee-jerking every few minutes and that's not good for long-term innovation, not great for organisations. And, quite frankly, the more successful fleet businesses are, OEMs and dealers, the more Corporation Tax they pay to the government. So it does go straight back into the government.
44:12 Rich Price: Just to elaborate on that, what do you think the industry needs most from the government? Is it tax certainty, charging infrastructure, support for used EVs? What is your view on that, Jon?
44:19 Jon Lawes: Well, as a leader in a leasing company, I'd say the number one, please have some support for used EVs. It's been a tricky time the last three or four years. But we've had some gains with ICE vehicles in the same sort of period. So it's not all disastrous. It's winners and losers, like I said before. So I think stick to the taxation roadmap through 2029–30. I think that's fair. And I would say it's really around, you know, the ZEV mandate, really understanding what that is, but just really stick to it. It probably does need slowing down on commercial vehicles for sure. Probably a bit more debate on cars, but then set it out, stick to it and do it for a longer period of time. Because I think that was... and it's not about one government or the other. They've both been at it. So I think that's what we need. The organisation definitely needs. And if you think of, you know, we invest millions, billions in car production, new vehicle designs, and they're all operating in that environment. I feel really sorry for them, so it would be great to get some more certainty.
45:29 Jon Hilton: Yeah, at the risk of sounding unoriginal, I don't want to dilute Jon's point. I completely agree. I've done well today because I've gone first on most questions. I'm sorry about that, Jon.
45:39 Jon Lawes: That's okay. I agree with Jon. It's going to be my new catchphrase.
45:44 Jon Hilton: But no, I don't want to dilute Jon's point. I completely agree. And we've talked about it a lot over the course of today. Clarity is that if you were forcing me to choose one thing, and I would like probably a longer chat with him, yeah, clarity. Allow people who have to set medium-term plans, long-term plans that require upfront capital investment and sign-off, allow them the confidence that that policy is there to stay and therefore those CapEx considerations, those investment decisions they're having to make today, within the next 12 months, are based on a sound case, effectively, and take out this need for this kind of gamble of will it happen or won't it happen? Because it just creates undue pressure where there doesn't need to be pressure.
46:43 Holly Mottram: Absolutely. I think there's been some really interesting insights, actually, and it's been really good to talk to you both. Thank you so much for being on. Have you enjoyed it, at least?
46:52 Jon Lawes: I have enjoyed it. I mean, I say thank you for having me. I've enjoyed the conversation today and a new experience for me. So yeah, my first time on a podcast. So thank you very much for having me.
47:04 Rich Price: Well, delightful to have you both on. Thank you so much.
47:08 Jon Hilton: Thank you. Cheers.
47:14 Holly Mottram: Thank you for watching this episode of Talk Auto. As ever, there's an email in our show notes if you'd like to get in touch or recommend a topic. Follow us from wherever you get your podcasts from, and you can also watch us on YouTube at the Cox Automotive Europe channel. And thank you for listening and see you next month for another episode of Talk Auto.