Alfonso Martinez, UK Managing Director at ALD Automotive | LeasePlan (soon to be Ayvens)
As 2023 draws to a close, Alfonso Martinez, the UK Managing Director at ALD Automotive | LeasePlan, takes a retrospective look at the year that was and provides insights into what the automotive industry can anticipate in 2024.
A Year of Challenges and Promise
The automotive industry in 2023 faced a myriad of challenges, navigating a complex landscape marked by economic shifts, regulatory demands, and political uncertainties.
The ‘hangover’ of Brexit, a global pandemic, and the war in Ukraine that disrupted the supply chain led to a rise in new vehicle prices due to supply constraints and parts unavailability, impacting servicing and repairs. Despite the setbacks caused by the cost-of-living crisis, higher interest rates, and stubborn inflation, the year also showed significant promise for the future.
Here are our defining moments and updates for 2023 before we look ahead to the new year.
1. The Government's Decision to Delay the 2030 Sale of New Petrol & Diesel Vehicle Deadline
Back in September, Prime Minister Rishi Sunak announced that the ban on the sale of internal combustion engine (ICE) vehicles would be pushed back from 2030 to 2035 in line with the rest of Europe.
Despite the delay in the ban on selling new non-hybrid cars and vans, the government has still demonstrated a commitment to the Zero Emission Vehicle (ZEV) Mandate which sets ambitious targets for 2030. From 2024, manufacturers will face penalties for non-compliance, pushing them to prioritise EV production to meet the mandated goals.
2. Fleet Electrification has been Supercharged
The transformation of fleets from ICE to EV has been a standout feature in 2023. Awareness campaigns, an increased number of models available, and an improved public charging network have all helped. In fact, research shows that 6 in 10 business drivers expressed interest in buying electric vehicles, and 35% of everyday drivers have plans to purchase an EV by 2035.
UK-wide, SMMT reported the sale of 286,846 new electric cars and 17289 vans showcasing a 27.5% and 15% change from last year respectively. Our customers especially have responded positively to the transition, with larger fleets leading the way towards net zero. One of the critical drivers for EV adoption has been EV salary sacrifice, benefiting from a highly favourable tax environment with low benefits-in-kind tax rates (BIK).
Globally, as Ayvens, we reached a significant milestone in November, with 500,000 electric vehicles on fleet – creating the world’s largest multi-brand electric vehicle fleet. We are proud to have reached this milestone, putting us in a great position to insure the vehicles, manage repairs and off-road time, and make fleet managers' jobs as easy as possible.
3. China’s Role in the Global EV Market
The first half of 2023 saw Mainland China’s EV market secure 55% of global EV sales, with 3.4 million units. EV manufacturers like BYD have been key players in China’s growth.
Our research for World EV Day research also revealed that 9 in 10 businesses say brand isn’t a priority when choosing a vehicle. Instead, it found that price or value for money was the priority characteristic for fleet drivers (36%), closely followed by reliability (33%) and fuel efficiency (31%). This is especially true for electric vehicles, where new and exciting brands challenge conventional norms and bring innovative solutions to UK drivers.
Chinese manufacturers have the advantage of a localised supply chain, which will take time to match in Europe. Even though gigafactories are under construction, this is only one element in the supply chain. European manufacturers will likely be shipping battery packs worldwide: a costly, potentially dangerous, and very slow cargo. We’ve also witnessed critical innovations like the Blade Battery developed in China. The battery developed by them will enable manufacturers to offer cheaper and more durable packs.
Ultimately, cheaper EVs will make the transition for drivers and fleets more affordable, which is a positive. In turn, it pushes European manufacturers to compete (as they already have), but this time on price.
4. Challenges in the Insurance Market
Annual insurance premiums increased by 19% year on year in the third quarter of 2023 due to cost pressures, inflation and regulation changes. It has affected most drivers, but those in the age brackets of 25-39 and 65 and above have faced the brunt of the rising costs. The Association of British Insurers highlighted a study that showed for every £1 that motorists received, they paid £1.10 in claims and operating costs.
Over the last few years, leasing companies have also faced challenges working with multiple insurers to serve their EV-driving customers cost-effectively. We've observed this issue at LeasePlan Insurance and following the success of delivering insurance in other markets, we are currently preparing for a launch of the service in the UK next year following regulatory approval.
The lack of accurate data and risk profiling is a challenge for many insurers, which can lead to inflated, conservative prices or not insuring EVs altogether. Leveraging our knowledge from insuring EVs in mature markets across Europe, we will bring extensive experience to better understand and price the risks associated with EVs.
5. Investment Boosts to Drive EV Growth
Despite the setbacks caused by delaying the ban on petrol and diesel vehicles, the automotive sector has witnessed noteworthy investment coming its way. During the Autumn Statement, Chancellor Jeremy Hunt announced £4.5 billion for the manufacturing sector and £2 billion for the automotive industry, building on the 2023 investment wins like £600 million to build the next generation of electric MINIs.
That’s not all. Jaguar Land Rover announced in July that it would choose the UK as the site for its gigafactory to produce 40 gigawatts of battery power in a year. While Nissan announced a £2 billion plan to build three new EVs at its Sunderland factory.
6. Infrastructure Development Gains Momentum
Alongside investments in manufacturing, the UK government has committed funds to develop the necessary infrastructure to support the growing EV market. This includes the expansion of the public charging network, ensuring that drivers have convenient access to charging stations with seamless payment options aligned to the 2023 Public Charge Point Regulations and concerns about range anxiety.
There’s still a significant way to go with the UK’s charging network, but the path set out to net zero is seemingly on track with a 46% increase in chargepoints since November 2022 (ZapMap). Despite the number of chargepoints increasing by 46% since November 2022, there is still a significant way to go with the UK's charging network. The Autumn Statement included proposed reforms to the National Planning Policy Framework to streamline further installations - a step in the right direction. As electric vehicles reach a wider audience (including those who can't plug in at home), this network must continue towards its target of 300,000 units by 2030.
Looking at the Road Ahead in 2024
As 2024 approaches, the focus remains on driving cost efficiencies and reducing total fleet costs. At ALD Automotive | LeasePlan, we are exploring multi-cycle asset management with second/third-life leasing opportunities, subscription models, and flexible leasing solutions to meet the needs of cost-conscious customers seeking mobility solutions.
The EV landscape is gearing up to be an exciting one as the industry advances consumer and commercial mobility. EV adoption will continue to grow with improvements to charging infrastructure and investments, alongside the ZEV mandate, which stands to double the market share of electric vans next year. We also expect the prices of EVs to fall in the European market, signalling positive news for drivers and fleets as battery costs start to decrease.
The digitalisation of the driver journey is also on the rise, with increased customer demand for convenience and a seamless end-to-end solution. While advanced telematics data will continue to enhance driver safety, help fleet managers streamline operations, and improve costs. Those transitioning to electric fleets will have a helping hand from telematics to optimise their drivers’ routes, aligning with available chargepoints and the best routes to travel.
Despite uncertainties, including a potential general election, the fleet sector must remain alert. Working with reliable and trustworthy leasing partners will be paramount to a stable year where fleet managers and businesses can continue down the road to electrification. We’re confident that we’ll see a sustained effort towards net zero, and we will be here to support our customers throughout that journey.