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Industry outlook

12th February 2025

Let’s be honest. 2024 was a tough year for our industry, and there will be many who’ll be hoping that a new year means a new start.

The good news is that many of the regulatory issues – the things currently causing most difficulties within our industry – can be sorted, or at least eased somewhat. But of course, there are some other challenges ahead that might cause some problems of their own.

It’s a good idea, then, to take stock – to look at where we are, and how we got here – and then examine some of the things we can expect to see in the year to come. To review 2024, and preview 2025.

 

2024: A look back

Regulation blues

The big issues in 2024 came from regulation. In January 2024, the then-government introduced their ZEV [zero emission vehicle] Mandate, which dictates what proportion of a fleet’s vehicles must be ‘zero emission’ by certain key dates.

It was obviously designed with good intentions – steering us towards Net Zero – but the one-size-fits-all approach that the government adopted ignores the realities that exist in a diverse industry like ours: while there’s strong demand for electric vehicles [EVs] in the leasing sector, rental companies report that there’s little call for EVs from their customers.

And even the leasing sector is having grave difficulties re-selling EVs after they’ve been returned. We’ll talk more about resale values in a moment, but it’s already a huge problem and one that the ZEV Mandate – as it’s presently conceived – will make much, much worse.

Everyone supports the ideas behind the Mandate but there is huge frustration about the methods used to achieve it, and it cast a shadow over the whole industry in 2024.

Slipping dates

It didn’t help that the previous government kept changing its own rules.

In 2020, the government announced plans to ban the sales of new Internal Combustion Engine [ICE] cars from 2030. The industry drew its plans accordingly.

But in late 2023, it was announced the target was being reframed: now the crucial date was 2035, upending much of the preparation that the industry had already made and introducing an uncertainty that has made forward-planning far harder.

  • Salary sacrifices and GAP insurance 

    Salary sacrifice schemes have traditionally been a very popular offer: an employer voluntarily foregoes part of their salary in exchange for a high-quality vehicle, while their employer benefits from a lower wages bill and commensurately reduced National Insurance Contribution

    Sucessive administrations have all recognised this is an excellent way to promote EV use, with tax regulation structured to make them as attractive as possible. (They’re no longer completely exempt – they’ve been classed as a Benefit In Kind since April 2024 – but the rates are, and will remain, much lower than those for ICEs).

    The rules have worked just as they were meant to: fleets that use Salary Sacrifice are running at, or close to, 100% EVs. The trouble is, this success has brought problems elsewhere, exacerbating an already difficult issue: residual values and depreciation.

  • Resale woes

    Disposal of used vehicles has always been a crucial revenue stream for companies. But that’s become much harder for EVs because resale values simply don’t hold up. ‘Supply’ – the number of used vehicles – far out-strips ‘demand’: bluntly, not enough people want to buy them.

    It’s been made worse by the previous-government’s actions. By relaxing the 2030 deadline, they took some of the urgency from the transition to EVs – meaning people weren’t in such a rush to buy one. And the ZEV Mandate means companies will have more EVs to be disposed of.

    This is pretty fundamental stuff. It’s not going too far to suggest that it threatens the stability of the industry itself, unless the government agrees to help.

2025: A look forward

The big issues

There are reasons to be optimistic about some of the issues that caused such difficulties in 2024.

The new Labour government, elected in July 2024, has brought clarity about when sales of new ICE vehicles will be banned: it has reverted to 2030, although the industry is pressing for a relaxation on the rules for vans and other LCVs: no-one thinks 2030 is a realistic target, especially when the charging network still falls short of what’s required.

While we’re still waiting for concrete action to help resales, the government has listened to the industry over the ZEV Mandate. A fast-track has been launched, scheduled to report in March. It’s hoped this will resolve – or at lease ease – the issues.  

The economy

The new government has had a rocky start. Their October budget was criticised by the business community for its tax rises and, especially, the rises in National Insurance Contributions. Many organisations will be looking carefully at their financial plans, with consequences for how they invest in their fleets.

There’s no reason to panic yet: in particular, the government are pressing ahead with their ambitious building programme, and that should be a direct benefit for leasing and rental companies – a lot of LCVs get used in building projects, after all.

However, the government are at the mercy of events. It shouldn’t be forgotten that President Trump has proposed some aggressive economic that might oblige the UK government to re-think its plans. We should be prepared for turbulence. 

  • The court appeal

    Finally, one of the big stories of 2025 will come from the Court of Appeal.

    It’s a question of commissions and transparency: should car dealers have disclosed  they were receiving commissions from banks when helping their customers to arrange financing to buy a car?

    A test case in 2023 ruled that they should – for properly informed consent to be given, a customer needed to be told “all material facts” that might influence their judgement, including how the commission was calculated.

    That judgement is being appealed. But it will have a huge impact on the industry if it is upheld. Obviously, it would add further layers of compliance, as rules get tightened still further to protect customers, with the extra expenditure that would entail. 

    More ominously, it could – depending on how the verdict is interpreted by the regulators – lead to historic compensation claims, conceivably billions of pounds worth.

    The hearing is scheduled for April, with Judgement to follow.

    We wait to see what happens.

     

  • Other dates

    Here are some of the events and dates that fleet managers should be aware of in the year to come:

    • 01/01/25 ZEV Mandate

    As mentioned above, the ZEV Mandate becomes more demanding every year. This year, 28% of new cars sold are required to be zero emission vehicles; 16% of LCVs.

    • 01/04/25 Vehicle Excise Duty

    New rates come into force, including EVs for the first time. Make sure you’re aware of the changes!

    • 06/04/25 BIK

    New Benefits In Kind rates come into force: note that EVs are no longer exempt. Again, check to see how these will affect you.

    • 06/04/25 Van and Car benefit charges increase

    Drivers of ICE vans and cars should note that the rates are going up. They remain at 0 for EVs.

    • 25/12/25

    EVs are no longer exempt from London’s congestion charge. Happy Christmas!

Conclusion

It’s been a rocky few years for our industry, what with COVID, war and – of course – the big switch to EVs and all the attendant disruption. It would be nice to proclaim things have calmed down but on the available evidence, we’re still in for a bit more disruption – but as always, as trusted partners we can continue to weather the storm together. 

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