Alternative fuels and propulsion Fuel represents a significant share of the running costs of a lease car. Due to its fuel-efficient nature and progressively lower CO₂ emission, for many years, the diesel car was the most preferred option. However diesel cars have been losing ground in recent years. Because of the announced equalisation of excise duties on diesel and petrol, the diesel car is gradually losing its price advantage. The increasing awareness of the high emissions of hazardous particulate matter along with the dieselgate scandal in 2015 have not done the image of diesel cars much good. The declining interest in diesel cars is a trend that has been visible for some time in the consumer market, but is now clearly visible with lease cars as well. For instance the share of registrations of new diesel company cars fell from 76.8% to 72.8% (Q1-2016)* and this mainly to the benefit of petrol cars and to a lesser extent to other alternatives such as (plug-in) hybrids, CNG or electric cars. Registrations of new company cars according to type of fuel Q1 2015 Q1 2016 Diesel 76,8 % 72,8 % Petrol 20,1 % 22,4 % Petrol hybrid: Plug in 0,7 % 2,1 % No plug in 1,3 % 1.6 % Diesel hybrid: Plug in 0,1 % 0,0 % No plug in 0,3 % 0,2 % Electric 0,5 % 0,6 % CNG 0,1 % 0,2 % LPG 0 % 0 % TOTAL 100 % 100 % Source: FEBIAC: Annual report 2015
Optimum fuel type Yet the choice of the right fuel or the right propulsion system remains a difficult issue for many fleet managers. When is petrol more profitable than diesel and vice-versa; in other words, where is the fuel tipping point? Are hybrids or electric cars a (better) option? In this advisory document, we are giving you additional information about the fuel tipping point between petrol and diesel, alternative fuels and propulsion systems and we ll give tips about the best way to deal with these different fuel types in your car policy. Fuel tipping point The essence of the fuel tipping point is to determine the mileage at which the choice for one fuel type results in a lower Budgeted Cost of Use (the monthly cost of the car, taking into account the unrecoverable VAT, CO 2 contribution and tax deductibility) than for the other fuel type. It is virtually impossible to talk about a single tipping point. To determine a clear tipping point, one has to namely compare the cars with each other one to one and that is technically impossible. In 2015, following the announced increase in excise duties, a study was once again conducted on the tipping point between petrol and diesel cars. In it, LeasePlan compared the different petrol and diesel models on the basis of engine power as much as possible. As first point that emerged from the study was that compared to previous years, the tipping point had indeed shifted, to the benefit of petrol cars. Second observation was that the tipping point varied between car segments, but even within the same segments, the results between the different makes and models were very divergent. Consequently, in the smaller segments the tipping point is considerably higher than in the higher segments. A possible explanation for this may be that precisely in the smaller segments, increasingly more economic petrol cars are coming on the market. In the segment of supermini city cars, there are petrol models that even with high annual mileage have a lower Budgeted Cost of Use than diesel versions. For employees who don t drive a lot of kilometres (e.g. small 2nd car that was selected within a cafeteria plan), a petrol car is probably to be preferred over the diesel model.
EXAMPLE Renault Clio IV: Renault Clio IV BCU per month 27.399 km 10000 15000 20000 25000 30000 35000 40000 Annual km Petrol Diesel In the higher segments, the diesel car usually continues to dominate, not counting exceptions. According to a study by Roland Berger*, a explanation can be found in the fact that the carmakers continue to invest mainly in the higher segments in the development of more economic and cleaner diesel engines in order to be able to attain the ambitious CO 2 2020 emission standards. Our advice therefore is to consider each case individually and to have your leasing company inform you about the best and most cost-effective solution. Alternatives When we talk about the best and most cost-effective solution, we must not overlook alternatives such as hybrids, electric and CNG vehicles. 1. Hybrids For several years now, the consensus has prevailed within the car industry that there will be a major shift toward hybrid cars in the near future. A hybrid namely combines the best of two worlds: the autonomy of a conventional combustion engine, assisted at low speeds or changing rpms by an emission-free electric motor, which increases the driving comfort and at the same time, helps reduce consumption. The plug-in hybrid combines the hybrid technology with that of the electric car. The battery for the electric motor is charged via the plug socket.
Nearly every carmaker currently has included a (plug-in) hybrid in their range, so there is definitely no shortage of choice. Through the low reported consumption of (plug-in) hybrid, the tax treatment of these cars is very favourable and this higher investment is (partially) compensated. Yet there also a couple of reservations: A hybrid propulsion system performs best in stop & go traffic, but is less suitable for lots of motorway driving. The (adapted) driving behaviour of the driver is also crucial. Unsuitable driving behaviour will lead to much higher fuel consumption and so higher costing for the employer. It is important that with the calculation of the Total Cost of Use, you also take into account the costs for the charging infrastructure and electricity. If you are considering including hybrid cars in your car policy, then also make sure there are clear agreements on the expected maximum fuel consumption, reimbursement of electricity costs, installation and use of charging points. 2. CNG A vehicle that drives on compressed natural gas is referred to as a natural gas vehicle (NGV). By compressing natural gas under high pressure, a clean, safe and above-all inexpensive fuel is created: Compressed Natural Gas of CNG. Vehicles that drive on natural gas have more advantages than disadvantages. Natural gas is a great deal safer than petrol or diesel because the flash point is much higher, which makes the risk of fire much lower. Compressed natural gas is also lighter than air, so with a leak it dissolves immediately. In a wheel-to-well approach, in which the entire production cycle is examined, there is respectively 12% to 27% less CO 2 emission than with diesel and petrol. The engine lasts longer than an engine on fossil fuels, it is 75% quieter and doesn t cause any odour nuisance. As such, a CNG car is not much more expensive than a vehicle running on petrol or diesel, because although the purchase price is 1,500 to 2,000 euro higher, this difference is soon recovered through the low cost of natural gas at the pump. Yet naturally it can t all be positive. A major stumbling block is formed by the still rather limited network of CNG filling stations in Belgium. However it is expected that the number of CNG stations will double by 2018. The range of a full natural gas tank is also limited; it s around 300 to 500 kilometres, significantly less than a conventional vehicle. A CNG car does come with an extra petrol tank as standard equipment, but while the latter increases the range, it is less cost-efficient.
3. Electric cars An electric car is driven by an electric motor that uses electricity originating, for example, from chemical energy that has been stored in batteries or from a fuel cell. An electric car is considerably more expensive to acquire than a similar model running on petrol or diesel. Despite the decline in prices in recent years, this price difference still exists. Also take into account the charging point, both at the employee s home as well as at work. Despite the higher initial costs, we don t want to lose sight of the advantages of an electric car. Tax: Because the cars have no CO 2 emissions, the CO 2 contribution that you as employer have to pay is significantly lower. In addition, electric cars are 120% deductible. Maintenance: Due to fewer moving parts and therefore less wear and tear, the maintenance costs for an electric car are considerably lower. Due to fewer moving parts and therefore less wear and tear, the maintenance costs for an electric car are considerably lower. What is still standing in the way of the real breakthrough of electric cars is the limited operating range and the limited public charging infrastructure in Belgium. The range of an electric car with fully-charged batteries is currently between 120 and 200 kilometres, which is significantly less than a car with a full tank of petrol or diesel. At present, the public network of charging points in Belgium is limited and our country still has a way to go to catch up compared to neighbouring countries.
We advise you to include alternative fuels or propulsion systems in your car policy: Stipulate the type of fuel or propulsion system according to the specific needs: number of kilometres and type of driving. Consider petrol cars in the smaller segments and with low mileage. Investigate the option of hybrid or electric vehicles with a lot of city driving. Update your car policy on a regular basis. Petrol Low mileage Smaller segments (city cars) Short trips Diesel High mileage Motorway driving Long trips Hybrid Urban driving Lots of Stop & Go (braking and accelerating) CNG Low to high mileage Short and / or long trips Electric City driving Short trips Consultancy Services Lower purchase price Lower emission of pollutants Lower fuel consumption Lower CO₂ emission Low fuel consumption when used properly Comfort: less noise, fast acceleration Clean, safe and lowcost fuel Less CO₂ emission Comfort: engine up to 75% quieter No CO₂ emission 120% tax-deductible Lower maintenance costs Higher fuel consumption Higher CO₂ emission Higher purchase price Higher maintenance costs More emission of particulate matter Higher purchase price Extremely high consumption with unsuitable driving behaviour Higher purchase price Limited network of CNG stations Mileage range on CNG is limited Limited operating range High purchase price Want to know more? For detailed information and advice, get in touch with your permanent contact person at LeasePlan. We ll be happy to assist you with the preparation of your car policy. Sources: FEBIAC Annual report 2015 Roland Berger: The future of diesel LeasePlan Belgium Excelsiorlaan 8 I B-1930 Zaventem I Tel: 02-722 62 11 I Fax: 02-722 62 83 I www.leaseplan.be I E-mail: leaseplan@leaseplan.be KBC 435-4107791-18 I ING 310-0217900-27 I FORTIS 230-0991900-95 RPR / RPM Brussel / Bruxelles I btw / tva BE 0424 632 148 It s easier to LeasePlan