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Fleet200: government warned to replace contradiction with clarity on diesel tax treatment

The Government must provide a clear vision of the future for diesel instead of sending confusing messages to the industry with contradictory policies, senior fleet managers have warned.

Concerns were raised by members of the Fleet200 Executive Club during its meeting in Leeds.

The Government has said it will look at the tax treatment of diesel vehicles before announcing any changes in its first Autumn Budget later this year.

In the meantime, fleets are guided by government tax policy that is focused on rewarding vehicles with low-CO2 emissions, which are typically diesels. Currently, more than 80% of tax-paying company car drivers use a diesel car.

One fleet manager at the meeting said: “We are at the behest of the Government on this issue. We followed what we thought was the right path based on government policy and we will change based on that as well.”

However, while company car tax encourages diesel vehicles, some government ministers have openly discouraged the use of the fuel and cities including London are targeting the fuel in campaigns to reduce air pollution.

One fleet manager said he had looked at hybrids as an alternative to diesel but could not justify the cost because of advisory fuel rates (AFR), which are based on engine size.

Petrol-hybrid vehicles tend to have larger engine sizes, so while a driver of a diesel with an engine of over 1.6-litres, but less than 2.0-litres, would be reimbursed at 11 pence per mile, an employee in a 1.8-litre petrol-electric hybrid would claim 14ppm, even though both vehicles are equally fuel-efficient.

He said: “I would end up paying a driver 27% more for using a vehicle with exactly the same fuel economy and emissions as the diesel. It doesn’t make sense.”

If the driver opted for a petrol-hybrid with an engine of more than 2.0-litres, the AFR rate would rise to 22 pence per mile, double the diesel rate.

Another senior fleet manager added that hybrids looked “very unattractive” when it came to wholelife costs compared to diesel.

Richard Cox, senior consultant for Fleet200 sponsor Arval said: “This topic is coming up more frequently among fleets and it is not a binary answer. The answer lies in the way a vehicle is used and fleets need a joined up approach, which is not easy when they are getting mixed messages from government.”

Members heard that fleets also needed to be sure that when drivers did switch to technologies such as plug-in hybrids (PHEV), it was for the right reasons.

For example, if a PHEV has a very short electric-only range, then it will be unsuitable for a high mileage driver who would be better off in a diesel.

Although drivers may be encouraged by low company car tax bills, extensive petrol-only mileage would drastically reduce fuel economy compared to expectations.

Members agreed that the key was to analyse total cost of ownership based on the usage of vehicles.

One fleet manager said: “Based on cost, for the moment we will be sticking with diesel.”

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  • David watts - 05/04/2017 17:27

    We should be careful how we generalise about driver profiles and their suitability for a PHEV. A perk driver who commutes in the region of 40 miles each way to work (and is able to re-charge at work) would be on paper a high mileage driver but a significant proportion of their mileage would be done on electric power and so their overall mpg will be very good Therefore you can't just say that PHEVs are unsuitable for all high mileage drivers.

  • next emission scandal right this way - 07/04/2017 13:03

    I'd estimate that 95% of Outlander PHEVs are not the correct vehicle choice for their use and are chosen solely for their low BIK. How many people would usually chose a petrol SUV? But put an electric motor on it to get you 20 miles down the road (or exploit the emission tests, again) and suddenly they are a "green choice"? I don't think so.

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