21, Nov, 2018

Is your organisation ready for the driving revolution?

One hundred years ago, humans embraced a radical new way to get from A to B: the automobile. Speed and street cleanliness created major incentives to shift away from the horse and buggy. And as our speakers at ORIX’s first In Conversation Lunch discussed, we may now be at a similar turning point as the industry begins to consider electric vehicles, car-sharing and autonomous cars.

So what will this mean for your business’ fleet strategy – and for your industry? Electric Vehicle Council CEO Behyad Jafari predicts we’ll have a strong financial incentive to be fully electric by 2025, while Professor Hugh Bradlow forsees a driver-less future by the 2040s. It’s time to start planning strategically for this transition.

“People will abandon car ownership as soon as it becomes unnecessary and undesirable,” explained Professor Bradlow, President of the Australian Academy of Technology and Engineering. “But we can expect a long period of both self-driving and human-driven cars on the road.”

What’s your overall mobility strategy?

“Before you make any decisions about what electric vehicles look like for your business, you need a clear internal strategy for your fleet,” explains Scott Thorpe, General Manager Fleet Business Development at ORIX Australia. “Sustainability is more than a shift away from the internal combustion engine.”

He says organisations are already moving people and products in new ways. “For example, pharmaceuticals used to have lots of sales reps on the road educating their customers about their products. But in the digital age this has changed; with more online presence and less physical presence sales reps no longer play the same role – and fleets are reducing. Other businesses seeking better utilisation rates are already using short-term rental or car share solutions to complement their traditional vehicle strategy.”

A move to an electric vehicle fleet is just an additional lever in a business’ sustainability strategy.

What’s the business case for electric?

“Electric vehicles will reduce the cost of ownership by $1,300 per vehicle per year,” Jafari told guests at the lunch. He expects them to be a more affordable upfront purchase by 2024, as the cost of Lithium Ion batteries come down.

But there are a few barriers to widespread adoption in Australia: battery range and charging anxiety, and access to mainstream, attainable models. Jafari believes the introduction of more affordable electric models such as the Hyundai Ioniq will open up the market.

In 2017, ORIX extended its mini-lease offering to include hybrid vehicles to allow clients to trial before committing fully to a hybrid or PHEV fleet – and thus work towards sustainability goals. “We are also working with several clients on electric vehicle projects, including new product availability, conversion of new commercial vehicles to 100% electric and recharging infrastructure,” notes Thorpe.

“Our clients want to know how far they can travel before recharging, as range anxiety seems to be a major hurdle,” he says. “We know that globally most people charge their cars at home overnight,  however, there will also need to be public recharging infrastructure to support the adoption of electric vehicles in the future.”

When will you stop driving?

Professor Bradlow said we should expect governments to set a sunset date for the use of human-driven cars – at which point internal combustion engine vehicles will need to be retrofitted for autonomy. He suggests that date will be in the 2040s. “Aftermarket kits, such as Cruise Automation and comma.ai, will make it as easy as assembling IKEA,” he said.

He believes this will shift a journey from being an “interruption to facilitation.” If you can work or run meetings from your self-driving ‘office on wheels’, longer commutes may no longer be less desirable – impacting real estate prices as well as productivity.

The shift to this totally connected society could also reduce hospitalisations due to road accidents, and increase demand for home renovations – making better use of redundant garages.

But first, government and regulatory bodies need to consider new policies and legal frameworks to manage the transition. Bradlow suggested this should include new vehicle standards (including cyber security), vehicle data format and sharing standards, financial disincentives to individual car ownership and per kilometre road use pricing “as petrol excise will no longer apply.”

“There are economic and societal forces to change as we reach ‘peak roads’ and ‘peak parking’ – just as there were when we left the horse and buggy behind,” he noted.