With good RVs and excellent
green credentials, Antonio Fabrizio discovers it is no surprise
that some lessors and lessees are muscling-in on the liquefied
petroleum gas vehicle market.
The decision by a UK leasing company
to start providing liquefied petroleum gas (LPG)-converted vehicles
has shown that there is still some interest in a market that many
consider a “dead-end”, largely because there are more appealing
alternatives being developed by car manufacturers.
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Despite this lack of support, combined with
the limited size of the LPG market in the UK – it includes only
around 155,000 vehicles running out of a total number of close to
30 million – some still insist that LPG vehicles’ main advantage is
not properly recognised.
They are available “here and now”, and still
represent the best alternative to polluting petrol vehicles, they
say.
But is this reasoning enough to convince the
UK market which, so far, has been reluctant to introduce LPG
vehicles on a wider scale?
Cheshire-based Square 1 Leasing recently
launched LPG Fleet Solutions specifically to target companies that
look at LPG as a greener and cheaper solution.
Square 1 Leasing’s manager, Andrew Poole, said
that his company is looking at it simply as “a niche market we
decided to get into to sell our finance packages”.
He said: “The clear advantage is the green
credential [LPG vehicles produce on average 20 percent less CO2
than petrol vehicles], which particularly applies to places like
London, where you can get congestion charge exemption if you use
alternative fuels.”
LPG Fleet Solutions recently received an
inquiry from a 400-fleet company which has a series of contracts
with the NHS and the Ministry of Defence, he said.
“This company is required to show its green
credentials, and is looking at the option of converting to LPG some
if not all of its vehicles over a period of time,” Poole added.
Growth area or stagnant
market?
The introduction of LPG vehicles was
widely encouraged by the UK government around a decade ago, and
power shift grants were made available at that time.
The grants finished in 2005, and many
attribute this to a government change of position, following the
little interest in LPG from manufacturers.
But for Mike Chapman, head of the trade
association for the UK LPG industry, there has been no government
U-turn.
“Those grants were mainly there to kickstart
the industry and would have finished anyway. The government
continues to support LPG having guaranteed lower fuel duty for the
next five years,” Chapman said.
Chapman himself sees LPG vehicles as the
“bridge to the future” because, in his opinion, the technology
represents “the most widely available alternative fuel”; until,
that is, when hydrogen vehicles will become both economically
viable, and their production is achievable from a renewable
source.
But fleet management expert Colin Tourick
disagrees, saying that LPG is no longer a growth area.
“This is simply not the way that the
development has gone” in terms of alternative fuel solutions, he
said.
First, Tourick said, vehicle makers have put
their efforts into diesel engines, making them less polluting –
with the current models emitting even less carbon dioxide than LPG
vehicles. The second reason which, according to Tourick, has held
back the wider development of LPGs vehicles, is that manufacturers
are more focused today on electric and hybrid technology.
He said that petrol-electric [or hybrid]
vehicles produce “fantastic savings per mile”, and have the
advantage that “one doesn’t need to recharge the vehicle, because
it basically recharges itself” through the kinetic energy produced
and stored when the car runs on petrol.
For Tourick, this would explain the greater
interest from some manufacturers like Toyota and Honda which, he
believes, will soon result in an increase in the number of hybrid
company cars on UK roads.
Chapman, however, is keen to push forward the
agenda of the industry he represents, and thinks that there are
several reasons why LPG is still attractive, even when compared to
diesel and hybrids, although he believes it can actually co-exist
with cleaner fuels.
He said: “If one takes purely the tail pipe,
then diesel is marginally cleaner than LPG. But this doesn’t take
account of the production side, which makes LPG much cleaner.”
Chapman stressed that diesel vehicles also
emit a lot more particulates and nitrogen oxide – chemical
compounds that are particularly damaging for human health and
environment – although newer diesel vehicles perform much better,
at least in terms of particulates.
As far as hybrid technology is concerned, for
Chapman the problem with it is that models are very expensive and
there is a very limited choice of vehicles currently available.
Furthermore, there is not a hybrid alternative
in the case of vans.
Limited success
Although only 15 out of 100 LPG
vehicles are vans, for Poole the light commercial vehicle market
has actually a lot of potential.
He said: “The majority of vans are
four-cylinder vans and are quite easy to convert, whereas in the
case of cars you have all sorts of engines.”
He said that his company mainly started the
LPG business because a client wanted to “look at their fleet of
vans and wanted us to come up with some ideas”.
The company therefore took the opportunity to
test the LPG market, learned a few things about it and then decided
to stay.
So far, the highest number of requests it has
received – a moderate success, according to Poole – has been about
the leasing of vans, minibuses and refrigerated vehicles. The
company is also looking at the possibility of providing LPG vans to
railway maintenance companies.
Larger lessors and non-specialised contract
hire companies, however, have so far been less enthusiastic about
LPG.
Marcus Puddy, head of Consultancy Services at
Lloyds TSB Autolease, believes there is “limited future” for LPG
vehicles, “because most manufacturers have stopped producing
them”.
He highlighted that there is also a
significant cost in converting the vehicles [the conversion itself
costs between €1,600 and €2,200].
Puddy said: “Someone has to pay for that
conversion, and unless the company has the appetite to undertake it
and then reap the benefits over the next three years with the
reduction in LPG costs, I don’t think there are really benefits at
the moment.”
Lex, too, which at present is linking up with
Lloyds TSB Autolease after their parent companies merged, has so
far seen a limited development for LPG vehicles.
“If one takes purely the tail pipe, then
diesel is marginally cleaner than LPG. But this doesn’t take
account of the production side, which makes LPG much cleaner”
Chris Chandler, associate director at Lex
in-house consultancy Lex Momentum, said that LPG vehicles represent
less than 0.5 percent of Lex’s fleet, with the majority of clients
looking at fleets of 70 vehicles or less.
He said: “As far as Lex is concerned, we
basically try and be as flexible as possible, moving with the
market and providing what our clients want from us. But on that
basis, LPG is very much a small player for us.”
Chandler explained that Lex has got a lot more
hybrids, exceeding 1 percent of its fleet, although over 80 percent
of its vehicles are diesel.
He said: “Our clients are getting very focused
on the environment, reducing emissions and costs. But we are not so
much seeing our clients striving for alternative fuels as we are
seeing them looking for the best breed of current technologies like
ultra-low emission diesel.”
Mike Waters, director of market insight at
Arval, also pointed to the limited re-fuelling network as one of
the reasons behind the limited LPG success.
“Generally the market decides which
technologies are to be successful and LPG is not one that has been
widely adopted,” he said.
“This lack of demand has seen the
manufacturers concentrate on other areas so improvements haven’t
come and residual values have fallen.”
However, for Chapman, in terms of residual
values, LPG vehicles carry at least two benefits.
He said: “Looking at vans, a significant
impact on RVs is the congestion charge exemption in London, which
adds a significant premium to LPG vehicles.
“This makes RVs strong as vans are concerned.
On cars, these are generally smaller vehicles than petrol vehicles,
so the RVs will be as strong as any other vehicle basically,
provided the conversion is properly undertaken and authorised.”
Also, compared to other alternative fuels, the
vehicle leasing industry has a lot of experience in setting up LPG
vehicles’ RVs, while it has almost no experience in setting up
values for hybrids.
This, however, has not represented a drawback
for hybrids because, as Tourick highlighted, “their volumes started
off relatively low, so leasing companies had the opportunity to see
these cars come back to see how well they are accepted in the used
car market”.
An uncertain future
Ultimately, whether or not hybrids
and electric vehicles will take over, there is still an enormous
amount of uncertainty around the ‘fuel of the future’, which does
not rule out LPG.
As Chapman himself pointed out, there might
well be room for various types of fuel, so long as they are
environmentally friendly – until when, in the not-too-distant
future, companies will have hydrogen vehicles, with the only
emission coming out of them being vapour.
LPG worldwide
Compared with the relatively low
interest seen in the UK, LPG vehicles have been more in demand in
several other countries.
While Korea remains the world’s largest
market, with over 2.5 million LPG vehicles circulating on its
roads, continental Europe has also seen a very successful LPG
market development.
In Poland, 10 percent of the country’s
vehicles – equivalent of 2 million assets – run on LPG.
In Italy there are over 1 million LPG
vehicles, and Germany, too, is well on target to reach 1 million
LPG vehicles by 2015, while France and the Netherlands have around
300,000 LPG vehicles each.
