COMPANY VEHICLES Green Machines – Driving change in the corporate vehicle market

Henry Ford once famously said that customers could have car in any colour – as long as it was black. When it comes to buying or leasing company vehicles are savvy corporate customers turning to green as the new colour du jour?
New Zealand is renowned for its care for the environment. We market ourselves as clean and green nation, and rising world oil prices make fuel-efficient cars no brainer. So, logically, our corporates should be switching on fast to vehicles that minimise their environmental impact. To what extent is there some truth behind the myth?
Barry Nicholson, national manager sales & customer services at Custom Fleet (NZ), says there is definitely greater interest amongst New Zealand organisations in ensuring minimisation of their environmental impact. Some local companies, he notes, have already developed, or are in the throes of developing, sustainability focus in line with our nation’s clean, green image. And while there is also what he calls “small move” to more fuel-efficient vehicles, this has been dictated by the limited stock numbers available.
His views are echoed by Charles Willmer, managing director of LeasePlan, who reckons New Zealand corporates are on the cusp of understanding and appreciating the role that they can play when it comes to “greening” their fleets. It’s been rapid shift, he says. Five years ago the number of organisations knowing – or truly caring – about the environmental impact of their vehicles would have been minimal. Fast forward to two years ago, he says, and small subsection – say five percent – of customers were actively “green”. Nowadays, that number is closer to 20 percent, he says, and growing rapidly.
“You could say that they’re trying to get marketing edge,” he muses. “But, if so, what’s wrong with that?”
Nothing at all, in the eyes of Ben Unger, CEO of Cardlink, who together with the company’s FleetSmart business development manager Christopher Young, believes we are seeing the emergence of green vehicles as corporate competitive edge. “Plus, it’s nice thing to do,” as Unger says.
In Young’s view, the green, environmentally friendly aspect behind the change is piggybacking on demand for greater fuel efficiency.
Over at Honda New Zealand, marketing manager Graeme Meyer agrees that when it comes to their corporate fleet, companies tend to vote with their wallet. So the fact that particular vehicle may emit fewer noxious fumes is nice to know but makes no difference to the bottom line. The prospect of greater fuel efficiency, on the other hand, is, not surprisingly, key driver of change.
Nicholson reports “noticeable shift” away from 4WDs (with the exception of the Ford Territory) and large six or eight cylinder vehicles to more fuel-efficient four-cylinder vehicles. “This appears,” he says, “to be mainly driven by the cost of petrol and the need to minimise costs.
“This has been especially noticeable in the past 12 months as the cost of fuel has steadily climbed. There is definite shift within our own fleet of leased vehicles where we see the smaller, more fuel-efficient vehicles increasing as percentage of our total fleet, whilst the larger vehicles percentages are decreasing.
“It has been interesting to note,” he says, “the complete absence of some of the larger 4WD vehicles from our fleet in the past six months.”
In many regards, New Zealand is simply falling into line with widespread changes sweeping other countries.
Overseas demand is driving increased production of hybrids. Manufacturers in the United States and Japan, in particular, are focusing considerable dollops of time and dollars on what they see as the new future for their business.
Across the Tasman, the traditional six-cylinder market holds its ground as the benefits of employee satisfaction, comfort for long drives and the discounts offered on these products continue to outweigh fuel savings.
Nicholson says that while some companies have dedicated portion of their fleet to hybrid vehicles this still represents very small proportion of the total Australian market.
Over in Europe, the shift to smaller vehicles has already begun, predominantly due to fuel costs, space considerations and an infuriating inability to find decent parking. Diesel is also gaining prevalence in Europe with manufacturers catering to this demand by developing better technology.
Here in New Zealand when it comes to the new environmentally-friendly hybrid vehicles, Nicholson says the number in his company’s fleet has increased in the first six months of this financial year (October 2005 to March 2006) to almost double the total for the full 2004/05 financial year. Having said that, it is important to note that numbers still remain small.
“The main reasons behind the slow movement are, firstly, the lack of choice currently on the market (only two at present, though number are in design and production); secondly, the lack of stock available to our market; and, thirdly, the cost of these vehicles which – even when converted to monthly lease rate – makes them an unattractive investment for most companies, even when comparing the cost of the vehicle with the savings that could be made in fuel and other costs.”
It is, however, important not to over-emphasise the size of the demand for more environmentally friendly vehicles in New Zealand. While the market may be growing, it is still relatively small slice of the total pie. Nicholson attributes this in part to the high cost of the vehicles in relation to the fuel savings made through their use. There are also, he says, some stock issues.
In Unger’s view, it is still early days. Cardlink has some 12,000 vehicles under management and its customers cross the spectrum from those who truly care about their environmental impact, to those who want to be seen to care, through to others who do not focus on environmental concerns at all.
Familiarity may be sticking point. “People want what they know,” says Unger, “and it’s part of our job to understand what the psychology [behind their decisions] is.”
Take rural customers, for example, for whom safety is key consideration when selecting vehicle. Or public bodies such as councils, for whom the need to be seen to care is paramount.
Misconceptions also abound. There is the mistaken perception, says Unger, that diesel is dirty, which is not always the case. Nor is it true, he says, that hybrid cars are always cheaper to run.
Graeme Meyer sees evidence of long-ingrained sense of corporate pecking order when it comes to selecting company vehicle. For long time, he says, people have equated certain type of vehicle with the status of specific job.
Those who believe that V6 vehicle is part of their salary package, for example, are reluctant to downsize to another vehicle if their report staff do not follow suit. The need remains to reposition smaller, more fuel efficient and more environmentally friendly vehicles in the minds of some corporate consumers.
What is to come? Over the next five to 10 years expect to see continuing trend towards more fuel-efficient vehicles. “With new technology being developed and existing technology becoming more cost effective,” says Nicholson, “we believe that the use of the ‘hybrid’ style of vehicle should increase.
“This is very much dependent on the cost of such vehicles falling into line with other vehicles, or the cost of fuel increasing to point that these options become more viable. The likelihood is that there may be some further legislation introduced encouraging companies to take on sustainability focus.”
If this occurs, fuel efficiency will be key factor and Custom Fleet says it will move to assist clients to achieve their requirements.
Expect, too, the mushrooming debate around climate change to help push the issue of “greener” vehicles up corporate agendas. Here as well, much of the impetus will come from overseas. As Meyer points out, New Zealand is long skinny series of islands from which much of the mo