WLTP, Powertrain, what strategy to apply?
In order to set the overall scope of the Worldwide harmonized Light vehicles Test Procedure (WLTP), let’s summarize the concept and evolution.
In the 1980’s, the NEDC (New European Driving Cycle) was designed in order to measure car emission. Due to evolutions in technology and driving conditions, it became outdated. The United Nations Economic Commission for Europe has therefore developed the new WLTP-protocol. While the old NEDC test determined values based on a theoretical driving profile, the WLTP cycle was developed using real-driving data, gathered from around the world. WLTP therefore better represents everyday driving profiles, however is still measured in a laboratory environment. WLTP was developed with the aim of being used as a global test cycle across different world regions, so pollutant and CO2 emissions as well as fuel consumption values would be comparable worldwide. However, while the WLTP has a common global ‘core’, the European Union and other regions will apply the test in different ways depending on their road traffic laws and needs. Concerning Europe, the transition phase including the full application on country legislation is still ongoing.
“Impact to be considered – market reaction”
Comparing the old versus the new standard, effectively, it is as if you would measure the temperature in Celsius or Fahrenheit. The same “heat” (i.e. C02-emission) are measure in two different ways, where WLTP would equal the Fahrenheit standard resulting in higher effective values. Consequently, fiscal measures, such as C02-related road taxes or benefit-in-kind schemes, will hit more in general. Additionally, governments are expected to adapt their level of taxation even more frequently. From an OEM perspective, the request of the European Commission to have their mix of C02 emissions for new vehicles being set at 95gr C02 in 2020, has also triggered new strategies to avoid severe penalties.
After an initial “wait-and-see” period, fleet operators finally started in 2019 to take counter-measures resulting in the following activities:
- Revisit the OEM market, leverage brands offering the best fit with their future car policy strategy, balancing powertrain vision, mobility solution and technology evolution.
- Revisit the Lessors offering, as according to the brands, models or powertrain selected, residual value will play a major role on the quotation as well as the “more realistic” consumption measured by WLTP. Leasing world and offering is changing quickly, which means companies need to find the right partner offering flexibility, long term best market value, mobility solutions and tools.
- Keep company competitiveness by re-designing the car policy making sure the HR package, which includes fleet, remains attractive, while on the other hand sustain the economic part in managing the TCO accordingly.
- Move (partly) into a mobility approach, including other services being merged to the fleet package. The inclusion of public transport, car sharing programs, incentives for home working are representing some of the most used mobility offerings.
- Act around their CSR (Corporate Social Responsibility) program where environment is one of their main pillars steering their overall green initiatives.
“Recipe to move”
Considering the entire level of complexity impacting fleet responsibles these-days, there is no general “recipe” how to move. However, in order to be successful, it is essential to consider the following items carefully, when moving forward:
- Have all domains involved at early stage, which means HR, Finance/Procurement, Facilities/Fleet, the sponsors and stakeholders….and communicate all project long.
- Understand the ‘As Is’ situation and tick box areas for improvement.
- Evaluate the market offering (OEM and Lessors) with in depth tendering process.
- In parallel draw the Car Policy document which will support and drive the new Fleet & Mobility Strategy
- Listen to the employee by use of a Pulse Survey for instance
- Manage the change and the future implementation
As overall take-away, WLTP will not only generate higher taxation, which needs to be managed, but will continue to imply drastic changes on car policies which results in the need for a permanent review and adjustments process of all different parameters described above, as well as a continuous review of potential key service partners enabling each company to go for flexible and sustainable fleet (and perspective mobility) strategy.