Vincentric recently carried out an exercise in Canada which involved reviewing the economics of running 29 different hybrid models of car compared with their closest petrol‐powered equivalents.

The Bingham Farms, Michigan, USA‐based vehicle ownership cost analyst found that only seven of the hybrids cost less to operate than their petrol rivals.

When the costs to own and operate all 29 were taken into account, the average five‐year bill for ownership was €2,269 (US$2,976) more than that of their all petrol‐powered counterparts.

Hybrids are more expensive to acquire than petrol cars but the fuel savings they offer can help offset the price premium. “With fuel prices decreasing by approximately 33% over the past six months however increased fuel efficiency alone is not always enough to keep them competitive with petrol models,” says Vincentric president, David Wurster.

So is the shrinking price of a barrel of oil sounding the death‐knell for hybrid technology? Not necessarily says Wurster; after all, the exercise revealed that the Lexus CT200h and the Lincoln MKZ hybrid offered savings of over €8,769 (US$11,500) and €3,050 (US$4,000) respectively.

What it does mean, however, is that operators will have to look at the cost of running individual hybrid models a lot more closely in future if they are not to lose out financially.

The tumbling price of fuel is also having an impact on the appeal of diesel, at least in the USA. 

Diesel cost comparison

Vincentric has taken a close look at the cost of running 35 different models of diesel vehicles compared with that of their closest petrol rivals. Just 31% of them – 11 – were identified as having a lower cost of ownership compared with 46% when a similar survey was conducted in November 2013.

“We’ve observed gasoline prices falling more rapidly than diesel prices over the past several months, reducing the fuel economy advantages inherent in many diesel vehicles,” says Wurster.

When the costs to own and operate all 35 were taken into account, the average cost of ownership was €2,100 (US$2,754) more for a diesel compared with its purely‐petrol running mate, up €1,324 (US$1,737) from the previous study.

This is not to say that all diesels should be avoided; far from it. As with hybrids however, the economics of running individual models will have to be scrutinised a lot more closely.

In this context it is worth noting that 10 of the 11 vehicles that cost less to run than their petrol stablemates were luxury models.

Four wore Mercedes‐Benz badges; three were BMWs with Audis making up the balance. Chrysler’s Ram ProMaster diesel was the only non‐luxury vehicle to have lower ownership costs than its nearest petrol equivalent.

Big engines: RVs to rise?

UK‐used vehicle price guide Glass’s suggests that the residual value of cars powered by what are for Europe big‐capacity petrol and diesel engines – i.e. 3.0‐litres or thereabouts – could begin to rise as oil prices shrink.

“In recent years a 3.0‐litre medium‐sized petrol or diesel saloon has lagged some way behind its 1.8‐ or 2.0‐litre equivalents when it comes to retaining its value in the used market,” says head of valuations, Rupert Pontin. “Buyers have viewed them with suspicion.

“But while no‐one could call petrol and diesel prices exactly cheap (at least not in Western Europe) they are certainly falling to a level where some consumers won’t place fuel economy as high on their list of priorities as they have done in recent years,” he believes. “Bigger‐engined cars are suddenly more viable.”

Cautious approach

If that is the case, then sooner or later it will be reflected in contract hire rates. Operators should be careful about throwing caution to the winds and changing their existing policies overnight however, warns Ashley Sowerby, managing director of fleet management software specialist Chevin.

“While we may be going through a period when prices have unexpectedly fallen this will almost certainly be temporary and they will increase again over time,” he warns.

As a consequence fleets still need to keep a tight grip on fuel expenditure, he says. That involves everything from making outstanding fuel consumption a prerequisite of adding a vehicle to a choice list to analysing data recorded through software reporting to see which drivers or vehicles are falling outside fuel consumption targets.

It also involves continuing to encourage drivers to fill up at the cheapest outlets; still a worthwhile exercise in many countries given that falling prices have sparked off competition between retailers over who can offer the cheapest deal in town.

Fuel price awareness

A Canadian Automobile Association (CAA) survey conducted at the start of this year revealed that lower prices were making 43% of drivers more attentive to exactly how much they were paying for fuel compared to just a few months previously. Almost one in four said they were more willing to go out of their way to find cheap fuel.

“Canadians are smart to keep an eye on prices given that we are regularly finding differences of as much as five cents a litre,” says CAA vice president, public affairs, Jeff Walker.

“Fleet managers should ensure they benefit from the price competition that we are seeing,” says Sowerby.

Chevin’s software is used in over 100 countries worldwide, including Haiti. The Haitian National Police recently selected FleetWave, the company’s web‐based fleet management information system, to help it handle the operation and maintenance of its 4,500‐strong fleet and over 40,000 pieces of related equipment.

Sowerby’s warning that fleets should not drop their guard when it comes to keeping a tight grip on fuel costs is reinforced by The Fuel Card Group, which is owned by Republic of Ireland based international sales, marketing, distribution and business support services conglomerate DCC. “Even in the current climate I doubt if any fleets are relaxed about fuel expenditure, or any other item of expenditure for that matter,” says a spokesman.

Even if some fleets are tempted to take advantage of what may turn out to be a temporary decline in fuel prices and turn away from hybrids, battery power and other alternative forms of propulsion, politicians determined to improve air quality, especially in urban areas, intend to keep them on the straight and narrow.

Legal moves

French Prime Minister, Manuel Vals, aims to remove diesel cars from the roads – a shock for a country that is so closely wedded to the fuel and potentially bad news for diesel residuals – with zero‐emission electric vehicles favoured wherever possible.

This year will see France alter its taxation policy so that diesel no longer has an advantage over petrol and introduction a system of stickers that will highlight the most‐polluting vehicles. Red stickers will denote diesel cars that are more than 13 years old.

“In France the diesel engine has long been favoured,” he says. “It was a mistake.”

Mayor of Paris, Anne Hidalgo, wants to ban most diesel cars from the boulevards of the French capital by 2020 and introduce electric light commercials to the city’s car sharing scheme.

On the other side of the Channel, Boris Johnson, her opposite number in London, wants to introduce an Ultra Low Emission Zone by 2020. The Zone’s boundaries will mirror those of the Congestion Charge Zone, with diesel cars that do not meet Euro 6 and petrol cars that do not meet the lower Euro 4 standard penalised.

The stances adopted by Vals, Hidalgo and Johnson will be music to the ears of Nissan executives who have bet the farm (almost) on the success of electric models.

EV registrations rise

Last year saw European registrations of the all‐electric Nissan LEAF rise by a hefty 32% to almost 15,000, giving it just over a quarter of the electric car market and handing it the number one slot for the fourth year running. Renault’s ZOE was number two, with a 20% share and over 11,000 registrations.

While that is encouraging news for both manufacturers – and for Tesla, BMW and Volkswagen, who enjoyed some success with their battery‐powered products – there is no denying that sales of electric cars remain way behind those of conventionallypowered vehicles.

The attitude of pollution‐conscious legislators could go some way to redressing the balance however; no matter what happens to the price of a barrel of oil.

Electric vehicles and plug‐in hybrids are among the alternatives that will continue to be encouraged in Europe, contends Alphabet.

It points out that electricity is still five times cheaper than petrol or diesel on average and that the cost of energy is only one of the factors that impacts on buying decisions. Electric cars and light commercials and hybrids generally benefit from government subsidies along with free charging and free parking in places, not to mention exemption from congestion charges.

Climate compensation

Oil is a finite resource and Alphabet believes that the fall in prices currently being experienced is an anomaly. In its opinion eMobility is the right response now and for the foreseeable future.

Last September saw Alphabet introduce a carbon compensation plan in conjunction with First Climate, which gives fleet customers the option of offsetting their emissions through carbon reduction certificates.

Money raised through their sale is used to fund carbon reduction projects throughout the world at a cost of approximately 1% of fuel outgoings. First

Climate takes care of all the administration.

“Our clients take a long‐term view and the effect of a (temporary) drop in fuel prices on fleet composition as seen from a cost perspective will be limited,” says LeasePlan Corporation chief commercial officer, Nick Salkeld.

“Alphabet contracts normally run for 36 to 48 months,” says a company spokesman. Would anybody care to place a bet on where oil prices are likely to be in 2018?

Hybrid and electric models still have a good story to tell, Salkeld believes, from both the viewpoints of cost control and corporate social responsibility.

“Many of our customers see corporate social responsibility, including running an environmentally‐friendly fleet, as an intrinsic value and one that is here to stay as part of their overall business policy,” he observes.

Like Alphabet, he points to the mixture of local taxes and incentives that are continuing to propel fleets towards zero and low‐emission products. “EU and US regulations that aim to lower CO2 emissions are another important driver,” he says.

So far as the new‐found hostility of certain politicians towards diesel is concerned, while their stance may bring some benefits to hybrid and battery power, Salkeld is not convinced that it is as yet prompting fleets to switch instead to the new generation of fuel‐efficient petrol models. “At the moment we do not see a significant change,” he remarks.

The oil price drop is certainly not prompting Toyota to pull the plug on its Mirai fuel cell car; far from it. After an enthusiastic reception when it was initially launched in Japan last December production is to be ramped up from 700 this year to approximately 2,000 in 2016 and around 3,000 in 2017.

Expect it to break cover in the USA and selected European markets in the coming months.