FEATURE

Commercial Vehicle Hire 2022 - What is in store for the next 12 months…..

The seemingly never-ending series of world events that have been presented over the past few years have changed many people’s views on what is best practice for their business. What previously seemed a prudent investment to enhance a business may now suddenly appear to be risk-taking of the highest calibre. What can be learned from the recent turbulent times is that for a company to survive and adapt it must be highly flexible and have both the ability, and the willingness to change - and to do so very quickly.

When it comes to a company acquiring new equipment, especially vehicles, it is always a daunting task with the final decision swaying for and against in the increasingly unpredictable business climate. Could this now be the time to make the move and make owning the vehicles someone else’s problem, allowing you to focus fully on the core activity of the company. Fleet Transport spoke to a number of companies within the vehicle hire, leasing and contract rental sector. It is interesting that overall the companies are finding strong demand from their customers and a positive willingness to move forward. One of the key benefits of not owning a vehicle became apparent during the recent pandemic when the nation as a whole was working from home. National Truck & Van Rental’s van hire and leasing services, with three main branches (Dublin & Cork) ensure fleet operators have fast access to the highest quality vans on the local market. As part of their services, National Truck & Van Rental provides all maintenance and repair on the hired vehicle, and completes scheduled tyre replacements. The company also completes scheduled computerised service to help ensure vehicles retain peak performance year-round. They also offer free vehicle replacement in the event of a breakdown!

Morgan McAndrew of Fleet Options explained that during the almost two-year period, business was relatively buoyant, and hire and rental companies worked together to help each other out and ensure customers were looked after. He continued to say that great effort was invested by companies like Fleet Options to make alternative arrangements and deal with sometimes unusual situations. One example Morgan cited arose because people were not travelling they wished to return vehicles to reduce their liability for Benefit in Kind (BIK). Other businesses realised a sudden increase in demand due to the new world of home deliveries which overnight became the norm. Another new norm Morgan and everyone else we spoke to is working

around, is that of sourcing vehicles. Morgan sees the difficulties of sourcing vehicles being the most important issue on the horizon for the sector and one which he believes could continue through to next year and even into 2024. There are two principal factors hampering this positive demand. One is recent, and due to the difficult and troubling situation in Ukraine and the effects it is having on the economies of Europe; this is of course apart from the humanitarian crisis the war has generated. The other difficulty has been with us for a longer period, and that difficulty is

the supply of vehicles due to shortages on many fronts with components. This has now been exacerbated by the same conflict as many OEMs sourced vehicle components from that region through subsidiaries and joint ventures. In this sector, there is the impending roll-out of the electric vehicle (EV) and companies must now seriously look at the whole world of EVs and how it may impact their business. It is readily accepted that at the moment they are too expensive and too restrictive. Nevertheless, can we predict what will come to pass over the next five years with two important aspects of this technology in particular? One is how the technology may improve, and the other is how the price of diesel may fluctuate. We then need to consider what residual value could be placed on a diesel-powered van or light

commercial in five years. Which of course is followed by who would want to invest in that type of second-hand vehicle in say 2027/8 as we approach the proposed ban on sales of new diesels in 2030. Morgan McAndrew believes that there is room here for the Department of Finance to incentivise the uptake with a VAT reclaim scheme for companies making the move to EVs, especially considering the BIK on a new EV. This would help to alleviate the cost over the term of a deal and this greater uptake would automatically generate a used EV market for the general public to source vehicles from - so promoting the transition to electric motoring.

Johnson & Perrott is one of the oldest and most experienced companies serving the rental sector. The Cork headquartered company recently acquired National Truck & Van Rental. Allison Sheridan from J&P would concur with most of the people said that sourcing vehicles is an issue and one that is mainly out of the control of the hirer’s hands. Allison finds there is a notable increase in the move away from petrol and diesel units. This is particularly noticeable with plug-in hybrid electric vehicle (PHEV) models. Allison also alludes to the fact that Johnson & Perrott is catering for the customers who want the full electric experience, and they already have several demonstrators out on trial with customers who want to be seen as early adopters.

One of the leading challenges for fleet operators is continually maintaining their fleet vehicles while reducing maintenance costs. With the cost of vehicle repair and replacement rising and the risk of downtime to fleet businesses higher than ever, it’s critical to work with a van hire contract specialist. It’s why many of the leading fleet operators are now turning to National

Truck & Van Rental. “National Truck & Van Rental are a vital partner in our success story. They provide a professional, reliable service at a competitive prices.” - said one Dublin based leading fleet operator. There is no doubt a greater moral pressure being placed on businesses to conform and to state what measures they are taking to reduce their carbon footprint. This will become increasingly important for the large high profile companies in for example the retail sector and especially for those that operate solely in city centres. Nevertheless, this may not all be as easy as it seems. Yes, the hire companies can provide the vehicles, but what about the rest of the package. Colin O’Brien of Go-Rentals in Naas highlights the other issues that come with EVs. He feels that there is some degree of window dressing going on with certain businesses. Colin noted that while people are getting more serious about EVs, there is a serious lack of infrastructure to support the roll-out. He added, that the major shift cannot happen that quickly due to this lack of infrastructure. Interestingly, Colin also noted what is now an accepted shortage of good quality pre-owned vehicles on the market, and this has to some extent increased demand across the contract rental and hire fleets. He is finding greater demand in some market segments than others. Noting that at Go-Rentals while busy, they are comfortably stocked with the smaller car-derived van. The whole area of vehicle hire and contract rental will most certainly become more pertinent to the transport industry and will raise some difficult issues over the next few years. Not just for the vehicle users but also for those providing the rental or hire units. Companies will have to make a significant investment in vehicles to satisfy a demand that will no doubt arrive - but may be slow in coming. For example, as is becoming the norm in many EU countries government departments must now wherever possible purchase electric vehicles only or have good solid reasons for not doing so. Many have strict policies to eliminate all ICE- combustion powered vehicles well before 2030. If this were to become more widespread in Ireland and there are already some examples, one being An Post - the landscape will begin to change very quickly. As mentioned previously by Colin O’Brien the landscape concerning the rollout of a widely available charging infrastructure must also change quickly to cope with a transition to EVs. However, this is a separate topic and one for

another day. What is currently happening was expressed by Mark Donnelly of Dan Ryan Truck Rental. Mark believes there is a genuine trend toward EVs although he is keen to qualify that it remains within the 100-150 km city delivery cycle. His customers share the opinion that the range distance is just not there yet. Mark notes that many customers have tried different brands of EV from Dan Ryan Truck Rental only to discover that EVs did not suit their work, and while they were enthusiastic to make the move to electric. At this stage, the vehicles are just not a viable option, yet because the vehicle was not purchased outright the companies involved could return and replace it with diesel. In keeping with others, Mark cites the difficulties in sourcing vehicles which is a manufacturing and supply chain issue though at Dan Ryan it has planned well ahead and can ensure all customer

orders are filled. Mark also notes that an increased number of people looking to the contract sector to provide vehicles, due to the ease of upgrading the fleet, maintenance and compliance packages and overall administration as being some of the reasons for the shift. These features of contract hire or rental can greatly reduce overheads and stress regarding repairs and maintenance and thereby ensure regulatory compliance. There is no need for workshop staff who are becoming increasingly difficult to find and importantly significant reductions in record-keeping for roadworthiness checks. It is certainly in the best interests of the hirer to ensure that the units are properly maintained as they will be charged with moving them to their next home, and a full-service book makes that task all the easier.

Although with EVs the required level of maintenance is reduced compared to an equivalent diesel.

Nevertheless, the potential cost of issues concerning a replacement battery would encourage any operator to opt for the hire option. These are significant issues for the hirer to be concerned about and issues that companies like Fleetplan are experts at solving. They can work out the best deal from any vehicle manufacturer for any prospective customer. If one OEM cannot meet the orders due to supply chain difficulties Fleetplan can opt for another provider which can. In addition, it can order ahead and this has served well over the recent difficult periods and has helped to ensure customer’s needs were met. On the topic of EVs, Fleetplan’s Jarlath Kelly stated that there is considerable and growing interest in the move to electric. Interestingly Fleetplan has placed a significant number of vehicles with customers and these are to date working well. This is helped by Fleetplan understanding what exactly their customer’s demands are - and matching the right vehicle to the task. Jarlath also commented that some companies have used contract hire to try other fuel alternatives and Fleetplan has assisted some operators to make the move to Compressed Natural Gas (CNG). While CNG may require an investment in equipment and facilities the benefits can deliver significantly lower costs and improved efficiencies depending on operating cycles. Other operators are investigating Bio-diesel and under the safety umbrella of a contract hire agreement, this can be facilitated with relative ease.

An operator which transports primarily in the food ingredients sector spoke of an ongoing dilemma. Being very busy, he needs more trailers and would like to buy them. Unfortunately, lead-in times for new equipment are extremely long and while he would prefer to buy outright the trailers are required now. However, the original argument to buy, valid a few months ago has since been moved more towards the back burner and will remain there unless a rate increase from his customers can be achieved.

He is now looking at the possibility of a contract rental deal similar to the one in place with most of the company’s trucks. This agreement on the trucks has performed very well and was a good decision ten years ago. This operator’s work is to be fair relatively steady and has been

for over two decades. If there are appreciable benefits, surely there must be equal benefits for those whose workflow is more volatile, especially in the light to medium weight sector. It may seem that there is no downside to long-term contract rental. This is of course not the case as there are always two sides to a debate. The downside is of course that at the end of the agreed term - ‘there is nothing to show for it.’ Although the argument of having nothing to show for it - would appear to be losing its value.

Text & Photos: Paul White - paul@fleet.ie