Power by the hour: The new model for vehicles?

One of the bigger challenges of buying vehicles that are not powered by diesel is that, at the moment, the initial purchase price is higher than a diesel equivalent.

Whether it’s a van, truck, coach or bus, the conundrum is the same. Governments can only do so much and the electric vehicle grant scheme is of course welcome.

The bus industry has also enjoyed new vehicle subsidies (the Green Bus Funds) in England and Scotland, but not initially, Wales.

The outcome of the devolved Welsh Government’s policy – not to have a GBF – is that not one new hybrid or electric bus was bought. That’s now changed as the most-recent GBF included Wales.

The GBF figures speak for themselves: Since 2008 England has seen 1,800 ‘low emission buses’ and Scotland 500, as a result of the policy.

Yet the truck industry has seen no support at all.

Indeed, even the simplest support which would have an immediate impact – reducing the duty on HVO – has been ducked so far.

Now, with the increasing clamour from customers – be they retailers and their customers, or other companies in the supply chain – the truck industry needs to be seen to be green, even when we accept that Euro 6d is already incredibly clean.

But the purchase price remains a stumbling block, added to which there is the perceived risk of ‘which technology to choose’. How can that risk be shared?

Experience in the bus industry has shown that the early hybrid vehicles’ batteries needed replacement after 5-7 years, at great cost, and in some cases the result has been retro-conversion to straight-diesel.

It’s understandable that operators and leasing companies take a risk-averse view.

The same is true in the car market, which has already moved from the outright purchase model to leasing – witness the rise of PCPs.

“The purchase price remains a stumbling block, added to which there is the perceived risk of ‘which technology to choose’. How can that risk be shared?”

Now, it’s moved a step further with this week’s announcement that Volvo has introduced a car subscription service in the UK, intended to provide an attractive alternative to leasing or outright purchase, for a single monthly payment.

The monthly subscription covers the car and everything else needed apart from fuel, with the option of adding insurance.

From £559 a month, ‘Care by Volvo’ isn’t as cheap as a PCP, but is different, especially for those who want access to a different-sized vehicle.

Government incentives for EVs have recently been totally revised for the crucial fleet car sector, which last year accounted for 53% of the 2.3m new car registrations.

A pivotal player in accelerating EV adoption, the tax changes mean that EVs attract no benefit-in-kind (BIK) tax in the current year (2020-2021) and just 1% next year (2021-2022), compared with up to 37% for the most polluting cars.

The other fallback is daily or other short-term rent, also not cheap. This has been available in the commercial vehicle sector for a long time.

Volta’s Truck-as-a-Service “to revolutionise the finance and servicing of fleets”

Another alternative, initially pioneered with North American railroads, is ‘power by the hour’ hire of diesel locomotives. You only pay when the unit is actually being used.

It saw new-build high horsepower locomotives from the main builders (General Motors’s EMD and General Electric) hitting the rails.

In this case the risk is with the manufacturer and uptime counts. For those worried about the reliability of new technology, servicing, or residuals this is a good route.

A variant of this – such as R&M contracts – has proved to be good business (especially for Scania), particularly as modern vehicles require the attention of technicians and laptops – meaning that in-house maintenance isn’t the solution it once was for operators.

Meanwhile, Volta Trucks is offering its zero-emission 16T delivery vehicle on a ‘truck-as-a-service’ plan, which starts with as little as one-month packages. It’s proving very popular, we hear.

Will full ‘power by the hour’ come to the UK commercial vehicle market?

There are plenty of new vehicle manufacturer entrants wishing to set themselves apart and get products in the hands of operators, so we think there’s every possibility…

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