Clean Air Zones (CAZs) are coming. By spring 2020, three major UK cities will have designated areas where high-polluting vehicles will face a daily penalty charge. James Davis, customer strategy and insight director – commercial vehicles at Cox Automotive, writes.
Over 60 local authorities have been instructed to propose plans to improve air quality. CAZ schemes are front and centre of their options, and could eventually lead to a patchwork of zones across the UK, with different charges for different vehicle types.
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The move is part of a government initiative aimed at improving air quality in urban centres. It is a necessary step for the environment, but bad news for van operators. To help van operators navigate this logistical minefield, Cox Automotive have produced a free guide: Clean Air Zones and the UK Van Operator. Whether you are running one van or 100, I urge you to have a read.
London will be the first to go live with a CAZ when its Ultra Low Emission Zone (ULEZ) launches on 8 April 2019 in the current Congestion Charge Zone. The ULEZ will be in operation 24/7 and is due to be expanded in October 2021. Birmingham City Council has indicated non-compliant vehicles entering its CAZ will face a daily charge from January 2020. Leeds will start charging trucks from a similar timeframe.
The ramifications for van operators are immense. In London and Birmingham, all pre-Euro 6 diesel vans will face a charge. To put that into context, around 80% of ALL vans currently on UK roads are pre-Euro 6. With most businesses running vans for at least five years before changing, decisions made now could impact where vans can operate in the future without incurring a penalty.
Pre-Euro 6 diesel vans entering London’s ULEZ from April will face a penalty charge of £12.50 in addition to the £11.50 Congestion Charge. Transport for London estimates that up to 54,000 daily van journeys into the ULEZ will be in pre-Euro 6 vans in 2019. That is a staggering £220m revenue in the first full year. This, and all revenues from UK-wide emission zones, are be ringfenced and reinvested in achieving clean air targets.
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By GlobalDataMeanwhile, London’s first zero-emission zone (ZEZ) was launched abruptly in Islington and Hackney in July 2018, with more planned this year – all well ahead of schedule. Even if a van operator buys a ULEZ-compliant Euro 6 diesel vehicle, new or used, they will not be able to take it into those streets for at least six hours of the day without incurring a charge. Where is the sense in that when viable battery electric vehicle (BEV) alternatives are not readily available?
Recent news confirms that a London scrappage scheme for vans is seeking additional government funding. Believing SMEs and sole traders will buy new Euro 6 or zero-emission vans through a scrappage scheme shows how policymakers do not appreciate the financial challenges facing small businesses operating vans. Just consider the figures: of the 4.3 million vans on UK roads, 30% are over 10 years of age, 99% are diesel, and four in every five are pre-Euro 6.
I would question whether the 80% of pre-Euro 6 van owners would stretch to buying a brand-new van via scrappage. History shows the last scheme, a decade ago, did not move the needle. Going from a £2,000 used van to a new van costing somewhere north of £20,000 is an entirely different proposition.
Van drivers are already paying the T-charge in Central London, so I would suggest that infrequent van users will stump up the daily charge. Twice a week it is £1,300 per annum; if they use their van every weekday, it is around £3,300. While the latter may cause them to look to change van, I suggest they would still buy a used one.
The first reason I do not believe they will buy new is that business confidence is low in the shadow of Brexit. Outlay for a new van or committing to a funding agreement is counter-intuitive for many small businesses.
Also, large corporates tend to buy the majority of the UK’s new vans while SMEs and sole traders buy used. Large corporates, most of which are in the service industries, typically travel higher average annual mileages; SMEs and sole traders do not.
I also believe policymakers think all vans are used in the same way by subsequent owners. They are not: what suits the first owner may totally be at odds with a subsequent owner’s needs. Put all that together and there is fundamental supply-and-demand imbalance between new and used buyer dynamics.
I do not see a seismic shift from diesel to battery in the new van world. Why would corporates rapidly shift away from buying new diesel vans in the next decade? There is no realistic alternative, as petrol, PHEV and BEV vans are not available in volume or variety. The array of models and configurations, coupled with limited battery ranges and payload implications, will mean OEMs are likely to only configure their best-selling diesel cousin derivatives to BEVs, and in the first instance that means car-derived vans.
BEVs will be used selectively by new van buyers for specific areas and operations such as low-mileage parcel-delivery routes. The biggest issue is the practicality of these vehicles: unlike electric bus fleets, not all vans return to an operating centre to enable charging. Imagine a service engineer living in a flat and on emergency call-out; how and where is their van charged on or off shift?
In my opinion, scrappage will not move SMEs and sole traders who buy used vans into the new market for a BEV unless the incentive is truly epic. Once OEMs have geared up their supply of BEV vans, it would be prudent to significantly subsidise new electric vans with a grant scheme opened up to anyone that buys a new van – especially the large corporates. If first-life corporate van buyers do not switch to electric vans, there will be no supply of used ones for SMEs or sole traders.
Vans are critical to the UK, from putting goods in shops and homes to delivering customer services. Anything that puts more pressure on the already hard-squeezed operator margins can only be a bad thing.
by James Davis
