Optimism and enthusiasm for 2025 shackled by tax rises and ZEV Mandate uncertainty.

360 Media Group Ltd is proud to have partnered once again with the BVRLA to produce the Industry Outlook Report – 2025.

Following its publication and the lively debates at the annual Industry Outlook Conference, the @FleetWise team has curated ten key highlights from the report to help the industry shape their strategies for the year ahead.

These findings, while not ranked in any particular order, focus on four critical areas: business conditions, performance, company revenue and economic outlook, and investment outlook.

This year’s report was particularly challenging to compile, coming hot on the heels of the Autumn Budget. The Budget brought much-needed clarity to some issues but also introduced significant cost implications for the fleet industry.

The Zero Emission Vehicle (ZEV) Mandate remains the "elephant in the room," presenting a formidable challenge for the sector to navigate. The BVRLA members are focused on meeting ambitious road transport decarbonisation targets but emphasise the need for greater government support to align with these ambitions.

Dive into the highlights to see how the insights from this year’s report can help inform your 2025 planning.

1. NIC and Tax Increases Impacting Vehicle Orders: Leasing companies predict that the rise in National Insurance Contributions (NICs) and the general trend of tax increases will negatively affect vehicle orders in 2024. Just under half of respondents expect an increase in new vehicle sales.
2. Pent-Up Demand for Leasing: While demand for business contract hire remains strong, there is cautious optimism for personal leasing growth as customers with extended leases or ageing vehicles consider replacements.
3. Economic and Budget Pressures: Businesses and private households are likely to reassess their expenditure before committing to high-cost assets like new vehicles, particularly following recent Budget announcements.
4. Cost Challenges for New Leases: Higher vehicle prices, increased interest rates, and weaker residual values (RVs) have significantly raised the cost of leasing over the past five years. Does this open the door for second-life leasing? A backlog of ageing vehicles are overdue for replacement.

5. Challenges for Rental Firms in Meeting ZEV Mandates: Rental firms face intense pressure from manufacturers to meet ZEV mandate targets of 28% EVs for cars and 16% for vans by 2025. Current demand for EVs among rental customers is minimal. EV rental opportunities are currently limited to replacement vehicles for battery-powered cars and vans under repair, plus a small number of electric light commercial vehicle (eLCV) flexi-hire agreements, falling far short of the ZEV mandate requirements. Barriers include:

• Higher depreciation rates for EVs, leading to higher rental fees and reduced customer interest.
• Prohibitively high costs of installing sufficient charging infrastructure at rental stations.
• Delays in vehicle availability due to recharging requirements after each hire period.

6. Regulatory and Market Uncertainty: Key concerns for 2025 include residual value risk, supply constraints due to the ZEV mandate (as outlined above), rising costs and energy prices. Other challenges include the Court of Appeal’s ruling on motor finance commissions and ongoing confusion around decarbonisation targets.

7. Mixed Outlook for EV Leasing: Benefit-in-Kind tax rates for electric vehicles, confirmed through 2030, are expected to drive demand among company car users and salary sacrifice schemes. However, supply chain challenges and used EV residual value concerns persist.

8. Interest Rates and Borrowing Costs: Most leasing companies believe borrowing costs have peaked, with interest rates expected to decline in 2025, potentially lowering monthly lease rentals and boosting consumer confidence.

9. Optimism for Market Growth: Improving fleet demand and stabilising interest rates are expected to support market recovery in 2025, despite ongoing economic and regulatory challenges.

10. To round off, 64% of end-user fleets prioritise cost reduction as their top strategic goal, while 51% plan to increase electric vehicle (EV) volumes. Overall, fleets are signalling a growing commitment to electrification and sustainability with 66% supporting phasing out internal combustion engine (ICE) cars by 2030 or earlier.

The full BVRLA Industry Outlook Report 2025 is now available online, offering expert insights and commentary to support fleet decision-makers and industry professionals. Click to read the full report

Please tell us what you think about our ten highlights from the report and share this newsletter with your colleagues.

In the next issue we will be publishing more end-user fleet research to understand their strategic priorities, pain points, enablers, and investment priorities for a cleaner, greener fleet.

?