How Leasing Companies Can Benefit by Going Electric
The vehicle leasing sector and its impact on air pollution
Road transportation is a major cause of air pollution, impacting our collective health and well-being. The two main contaminants from internal combustion engine (ICE) vehicles that reduce air quality are nitrogen oxides (NOx) and particulate matter (PM). In the U.S., the transportation sector is responsible for over 50% of total NOx emissions, and 20% of PM emissions.
Road vehicles are also a major cause of global warming, emitting almost a fifth of total greenhouse gases (GHG) in the U.S. It’s been calculated that for every gallon of gas, almost 24 pounds of GHGs are emitted, with 80% coming straight out the tailpipe and the remaining 20% from the extraction, refining and delivery of fuel to the pump.
A recent survey found that approximately a quarter of all new vehicles in the U.S. were registered by leasing companies. This highlights the key role that the leasing industry has in controlling the emissions of these heat-trapping and air contaminating gases and particles. And as the vehicle leasing market in the U.S. is expected to grow at a rate of 4% between the years 2015 and 2019, its influence will continue to increase.
Responsibilities of a Leasing Company
To address this global challenge, many leasing companies now have sustainability goals and action plans to reduce the emissions associated with their fleets.
Arval’s 2015 Corporate Sustainability Report stated their goal to promote the use of eco-friendly vehicles and to reduce the environmental footprint linked to their own operations. They are working to promote electric and hybrid vehicles across their worldwide operation. Talking of their commitment to the environment, Communications and CSR Director, Sandrine Ferré said: “We are constantly striving to reduce our own impact on the environment, especially through the reduction of CO2 emissions and by seeking solutions that can help our clients do the same.”
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In the UK, ALD Automotive was awarded the “Go Ultra Low Business” status as over 10% of its company car fleet is comprised of Ultra Low Emission Vehicles. This is part of the UK government’s initiative to recognize businesses that are making significant steps towards electric vehicles. Meanwhile, Lex Autolease has over 14,000 hybrid and electric vehicles in its UK fleet and plans to rapidly increase this number over the coming years.
General trend towards electric vehicles
It’s becoming clear that the global auto market is making a dramatic shift in the direction of electric vehicles (EVs). To support this, Bloomberg New Energy Finance’s 2017 forecast predicts that electric vehicle sales will surpass ICE sales by 2038 and that by 2040, plug-in vehicles will represent a third of the global auto fleet. They attribute the cause of this uptake to the rapidly falling price of lithium-ion batteries, higher electric vehicle manufacturing capacity, and increasing worldwide consumer demand.
Market trends for electric vehicles in the leasing sector
And this general market trend is also reflected in the car leasing sector. In the European passenger car leasing segment, electric cars are expected to dominate the sector over the coming years. This is driven by several factors that are shifting consumer preference from ICE vehicles to electric, including:
- Increasing consumer environmental awareness
- Restrictive government regulations on emissions of carbon and other air contaminating particles
- Rising gas prices
- Attractive government subsidies for new electric vehicles
This same increase in demand for electric vehicles in the leasing segment is expected to be seen in all regions of the world. IBISWorld, a global business intelligence leader specializing in industry market research reports, identified the two most important key success factors for the fleet car leasing industry as having fuel-efficient vehicles and the ability to accommodate environmental requirements.
Taking a harder line on EV adoption
To meet this growing consumer demand, leasing companies must start to prioritize electric vehicle adoption, and offer a suitable range of EVs in their lease fleets.
But, with such a range of technologies available, it’s important that as leasing companies add electric vehicles to their fleet, they ‘right-size’ them for their requirements. Leasing consumers vehicles that are unsuitable for their travel needs risks degrading the perceived value of the business. This is why leasing companies must have access to comprehensive fleet data to help them make informed purchasing decisions.
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