As the VW scandal unfolds, the Australasian Fleet Management Association (AfMA) provides some sobering words about how the controversy will potentially impact Australia’s fleet procurement.
It’s unclear if Volkswagen Group’s self-inflicted catastrophe will impact Australia. If it does, it’s likely to impact a vehicle’s so called fit-for-purpose.
A vehicle’s fit-for-purpose takes into consideration the intended operational purpose (tasks), its ability to meet the operating cost budget, safety rating and the organisation’s environmental goals.
A vehicle’s operational tasks and the environment it operates within account for perhaps 70 per cent of its fit-for-purpose whilst the remaining criteria include elements of whole-of-life cost and environmental impacts.
Whole-of-life cost takes into consideration the vehicle purchase price, its depreciation cost (purchase price less its residual value/resale value), recurring fixed costs and operating costs.
The Volkswagen catastrophe is likely to impact the residual value of the affected vehicles which will increase the depreciation cost.
Further, if the so-called cheat software is removed, it’s likely to decrease engine performance thereby using more fuel and increasing operating costs.
This whole-of-life cost increase will put ongoing pressure on departmental budgets.
In relation to environmental impact, most fleet departments utilise the Green Vehicle Guide produced by The Department of Infrastructure and Regional Development.
The data presented in the Green Vehicle Guide is based on the results of the standardised drive cycle tests specified in the relevant Australian Design Rules (ADR 79/02 or 79/03 or 79/04 for air pollution emissions and ADR 81/02 for CO2 emissions and fuel consumption).
All new light vehicle models, up to 3.5 tonnes, supplied to the Australian market, must be tested to these ADRs. Australian vehicle emission standards largely reflect international standards, developed by the United Nations.
These standards are adopted in Europe and many other countries around the world and are known as the “Euro” standards. This data is supplied by the manufacturer and cross-checked by the Department before publishing on the Green Vehicle Guide.
Motor vehicle fleets generally have a large impact on a department’s Environment and Sustainability Policy and many have chosen to adopt so called greener vehicles as part of their fleet.
Whilst electric and hybrid vehicles have their place, diesel engines have also been adopted.
Diesel’s have much better fuel economy than a standard petrol engine and allow modern cars to get over 1000kms of highway driving off just one tank of fuel. It also emits fewer carbon-dioxide emissions than standard petrol.
There is however a huge catch — diesel engines emit a large amount of nitrogen oxides (NOx) which can cause serious health problems and form air pollution.
The Green Vehicle Guide takes into consideration the pollution rating of diesel vehicles, however these maybe be wrong if the so-called cheat software was used in Australian testing.
Although the potential impact of the VW scandal on Australia is unknown at this point, it’s likely to affect the residual value/resale value of the vehicle at some point in the future, noting the impact is likely to be greater in the short term than the medium to long term.
It may also affect the reputation of diesel vehicles across other manufacturers as well as non-diesel Volkswagen vehicles.
The renowned quality and safety features of Volkswagen vehicles remains unchanged, however the environmental star rating could be lowered, which may impact an organisation’s ability to meet its Environment and Sustainability Policy.
If the so-called cheat software has been utilised and vehicles are recalled, it’s likely to reduce fuel efficiency and engine power, leading to an increase in fuel consumption and ongoing operating costs.
As we’re waiting for clarity from Volkswagen, it’s prudent to analyse your fleet and determine the number of Volkswagen Group vehicles you have, their age, kilometres traveled, existing Green Vehicle Guide rating and the scheduled exit date for these vehicles.
From this information you’ll be able to produce scenarios to estimate the potential impact.
Mace Hartley is executive director of the Australasian Fleet Management Association.
