Page last updated at 23:10 GMT, Wednesday, 25 June 2008 00:10 UK

Emissions drive for company cars

By Gavin Stamp
Business reporter, BBC News, Bedfordshire

Cars arriving back after a spin at the Millbrook Proving Grounds
Driving models is a joy on a summer day but the question of cost remains

When special agent James Bond drove his company car across this 700-acre site in Bedfordshire, the result was spectacular.

It was here, at the Millbrook Proving Ground, where one of the most memorable scenes from Casino Royale was filmed; as Commander Bond's Aston Martin turned a triple somersault.

"It was a real crash," Aston Martin's chief executive Ulrich Bez, who has kept the wreck intact, told the BBC News website in a recent interview. "This, for me, is a piece of art."

In the real world, fleet managers' focus is not on high performance stunts. Instead they seek out low-emission cars that can offer improved fuel economy.

Driving experience

About one in ten cars on UK roads are company cars, though because of the high mileage they clock up they account for 25% of all carbon dioxide emissions from passenger vehicles.

In the UK, the company car is king
Julie Jenner, ACFO

Aware of this, the government is trying to encourage employers with large car fleets to use less polluting vehicles.

Changes to company car taxation introduced in April's Budget were designed to persuade fleet managers - those responsible for managing the vehicle requirements of large companies and public sector bodies - to opt for models with lower emissions.

Rising fuel costs have added impetus to the fleet managers who have flocked to a Company Car in Action event at Millbrook.

They are here to try out a string of cars offering much-reduced emissions, at least when compared with the averages turned out by the more than three million company cars on UK roads today.

Educating drivers

The upshot of the tax changes, the most significant in a decade, is that companies embracing more fuel efficient vehicles will be able to write off more of their costs against tax, thus making potentially very large savings.

Whereas those that do not will find themselves penalised.

Industry experts believe the Millbrook event, which brings together leading manufacturers and fleet managers from the likes of BT, Royal Bank of Scotland and the Ministry of Defence, is a key opportunity to get this message across.

"A lot of it is about educating drivers," says Julie Jenner, who was Nokia's fleet manager for 10 years and now chairs ACFO, the body representing fleet operators.

"How many drivers actually know their vehicle's emissions and what it costs them in tax?"

Not enough stock

The answer is probably very few.

Visitor to the Millbrook show driving a BMW
Average company car emissions are lower than general passenger vehicles

But with research from the British Vehicle Rental and Leasing Association (BVRLA) suggesting firms could save 350 a year per vehicle by choosing models emitting less than 160 grammes per kilometre of CO2, more of them are likely to sit up and take notice.

Changes to buying patterns will take time, Ms Jenner admits, not least because there are simply not enough cars in the lower-emitting categories around at the moment.

"You cannot have a fleet of 500 vehicles and mandate that every single one of them would have to be below (a certain level) because the chances are there aren't enough vehicles in that range to cover all the way from your sales rep to your MD [managing director]."

But according to John Lewis, director-general of the BVRLA - whose members provide nearly two million company cars in the UK - the vehicle range is getting bigger all the time.

There are plenty of mid-range executive cars with sub 160g/km CO2 emissions, and now even premium brands such as Audi, BMW, Mercedes, Lexus and Jaguar have a few models that come in under the threshold.

"We have been surprised at the speed with which manufacturers have risen to the challenge," Mr Lewis says.

"Now it is up to our members to get the message across that choosing an executive company car does not mean driving a gas-guzzler and getting punished by the tax man."

Clean and powerful?

Interest in cars that emit less CO2, yet are powerful, is borne out by the crowded forecourt at Millbrook where people line up to take cars out for spins on its various driving tracks.

These include a twisting alpine circuit, full of hairpin bends and blind corners, and a two-mile high-speed bowl with a 100mph speed limit.

Queues are forming outside the BMW stand where it is showing off several of its newest models incorporating energy-saving technology known as Efficient Dynamics.

Choosing an executive company car does not mean driving a gas-guzzler and getting punished by the tax man
John Lewis, BVRLA

One of these, the 1 Series 118d, boasts emissions of just 119g/km and yet has impressive horsepower and acceleration.

Not all manufacturers have yet found such an apparent winning combination but most are, at least, now trying to square this circle.

"Fuel efficiency is a key requirement these days and all manufacturers are pushing it hard," show director Chris Lester says, while admitting that this is only a recent development.

"It has been a slow progression over the last six months. It has become more front of mind and a more prominent issue."

Necessary perk

Industry research suggests that company car emissions have fallen 6% since 2003 and that their average emission level is now lower than that of passenger cars generally.

But many executive cars are still way above emission thresholds which the government and EU regulators consider reasonable.

It can also surely be no coincidence that it has become a priority issue at a time when not only is the tax regime being overhauled but the cost of diesel has soared.

With about 80% of fleet cars running on diesel, some would argue that firms should now use the soaring cost of fuel to scale back their car use.

Ms Jenner believes this won't happen, with the increase in part-time and home working making a company car even more of a necessity for employers.

Model at the Company Car in Action Show in Bedfordshire
Fleet managers have an enormous range of cars to choose from

"In the UK, the company car is king," she says. "It is one of the main employee benefits and it is a visible benefit.

"Of course you have people taking cash allowances, but in the last year we have seen a real move back into the company car."

British businesses could save more than 2.5bn by switching to greener fleets, the Energy Saving Trust has estimated.

But increased state intervention to achieve this kind of target, as with current efforts to reform general road taxation, has not left everyone happy.

Some employers believe the focus should be on making engines cleaner and the industry more sustainable rather than trying to influence their own commercial decisions.

"The government has got its priorities skewed," says James O'Brien, a director of Cheshire firm Legacy Business Development which is looking to set up a fleet for the first time.

"It is all stick and no carrot."

After piloting some impressive vehicles and following in Bond's skid marks, most people leave Millbrook stirred rather than shaken.

But they will also be uncertain about what they will be driving to work in the future and how much it will cost them.

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