Political uncertainty could hit vehicle investment

Political uncertainty could hit vehicle investment Anderson Travel took its first Euro 6 coach in 2014.

The latest briefing from SMMT suggests that potential changes in regulation and austerity cuts could affect order books in 2015/16.

Steve Rooney reports.

Politics is never very far away from the bus industry and manufacturers have raised concerns about the impact of potential legislative changes in the UK on ordering patterns by the major groups.

Speaking at a media briefing by SMMT’s bus and coach section, Volvo Bus’ Adrian Wickens said that whilst the coach market prospects for 2015 looked “steady”, the bus sector was less clear with a number of uncertainties at the moment including the general election result, austerity policies and re-regulation. “My main concern at the moment is that these things that create uncertainty for operators tend to impact on the order book,” said Wickens.

There is no indication of any immediate panic cancellation of orders of course, so these factors are more likely to have an impact towards the end of this year and into 2016. 

The final data for 2014 bus and coach registrations was published earlier this month and showed a small fall in total registrations over 8.5tonnes of 6.6 per cent, with coaches showing a slight rise to counter a fall in bus registrations. Leading the way in the coach sector once again, according to Wickens, was the express sector with operators continuing to see organic growth in passenger volumes. There are also a number of vehicles produced which don’t find their way in to the SMMT data, including the Volvo/Plaxton coaches produced for the MoD, which numbered 63 in 2014, compared to 71 in 2013.

The retail coach market has remained fairly stable, says Wickens, and while operators have been fairly slow to adopt Euro 6 there were increasing signs of its acceptance.

The arrival of Euro 6 has been something of a faltering start for the UK, with the usual derogation procedures allowing Euro 5 vehicles to continue as well as the somewhat controversial use of the National Small Series and IVA procedures enabling manufacturers to continue to provide Euro 5 vehicles long after the January 2014 implementation for Euro 6. Indeed, while the department for transport tells SMMT it is committed to drafting the necessary legislation to amend the National Small Series ‘loophole’, there is no timetable to do this and a draft appears unlikely to emerge this side of the general election, meaning that it could continue well into 2016. Manufacturers who designated specific vehicles as officially derogated from the Euro 6 requirements on the other hand, have until June 2015 to register them.

Hybrid buses continued to be a key factor in the 2014 registrations, accounting for around 40 per cent of double-deck buses last year, with the New Routemaster making up more than half of that total.

Looking across to Ireland, there are signs of recovery with overall registrations rising to 207 in 2014 from 163 in the previous year, although this is still well below the 400-odd that would be expected for timely fleet replacement, and the figures are not comparable to the UK data as it includes vehicles below 8.5tonnes.

It is evident that full hybrids will figure less in 2015 registrations in the UK, with only Scotland continuing with Green Bus funding at present. Indeed the market has responded to the diminishing public grant support for hybrids with the development of so-called micro hybrids which qualify for the lucrative Low Carbon Emission Bus certification, opening the door to enhanced BSOG payments with a much lower price tag.

Looking forward, there is no immediate prospect of yet another Euro standard to work towards. With all previous iterations, there has always been a further stage in sight, but as yet there are no definite plans beyond Euro 6, although the emphasis appears to have switched to carbon reduction rather than further curbs on tailpipe emissions. 

Manufacturers point to the significant improvements that the latest Euro standards have delivered in terms of tackling pollutants and believe the target should now be on implementing Euro 6. “We would urge anyone who is listening to deal with replacing older vehicles rather than looking ahead to new standards,” said Wickens.

The manufacturers’ call for restraint on behalf of legislators following the massive investment that was required to get to Euro 6, is having some impact as the lack of a further standard shows. And with CO2 reduction now the big goal, one of the new initiatives that is being developed to achieve it is VECTO (Vehicle Energy Consumption Calculation Tool). The aim is to produce a tool that can be used by fleet buyers to make direct comparisons of different vehicle’s CO2 production across various operational cycles. 

It sounds simple; an operator will be able to select a model and route characteristics and receive a simulation of the output in terms of CO2 per passenger kilometre for each vehicle. But given the current challenges of comparing fuel consumption for the same bus model under very different route operating conditions, it will be no mean feat to pull off. Nonetheless the European Commission appears determined to refine the VECTO tool, which is being developed by the Technical University of Graz, with a target to go live in 2017/18 for the first area under investigation: long-distance truck routes. Buses and coaches will follow, but it could be up to ten years before it is available to buyers in this sector.

As it stands, the VECTO initiative will be a reporting requirement only; with the onus being on operators to use the data to select the most CO2-efficient vehicles, although there is clearly potential for future legislation to enforce compliance to specific carbon targets; similar to the requirement for manufacturers of passenger cars, and more recently vans, for them to achieve average CO2 ratings across their production.

All the manufacturers are now beginning to investigate how they will integrate into VECTO, but Adrian Wickens points out that the relationship of CO2 to fuel consumption means that operators are already heavily incentivised to opt for the most fuel efficient vehicles as it has a direct impact on the bottom line. When it comes to air quality issues however, there is not a direct relationship with the operator’s bottom line, although the costs do impact on the state with potential increased expenditure in tackling the health impacts.

Air quality is quickly becoming a mainstream concern. Pollution from vehicle exhausts has long been a target of government policy, national and international, but the introduction of targets for urban centres across Europe has given it a new impetus.

Air quality campaigners have claimed that London’s Oxford Street exceeded the hourly limits for NO2 (nitrogen dioxide) for the whole of 2015 by the 4 January this year, with Putney High Street and Brixton Road following shortly after.

Reducing NOx emissions is one of the key gains from adopting the Euro 6 standard, which is why manufacturers are now pointing to the need to replace older Euro-standard vehicles with the latest models. 

With more Low Emission Zones likely around the country and across Europe, and the proposed Ultra Low Emission Zone for London, SMMT is proposing that Euro 6 enables the vehicle to be seen as part of the solution, rather than the problem. SMMT has called for a single Euro standard to be adopted for London’s ULEZ, whereas the current proposals recommend that petrol cars can be Euro 4 and diesel ones Euro 6, and the Euro 5 New Routemasters have been exempted since they are under the ownership and responsibility of TfL.

SMMT is planning a major conference in London next month to brings together stakeholders to discuss commercial vehicles and air quality issues.

Another environmental issue on the agenda for vehicle manufacturers is alternative fuel. New ‘advanced diesel’ fuels are being developed utilising biowaste to reduce overall carbon emissions and there are also initiatives involving the use of existing biodiesels, including a proposal for London’s fleet of municipal and TfL-controlled vehicles (including buses) to run on B20 - 20 per cent biodiesel - by 2020. Stagecoach has conducted a trial at its Plumstead depot and reported no problems with using B20 fuel. The capital is also investigating production facilities for the biodiesel component of B20 using various products including cooking oil and food waste with the intention of it being self-sufficient to supply London’s fleets.