Is the clamour to achieve Euro 6 compliance for operation in London in the short term the right thing to do, or is playing a long game and waiting for the cost of retrofit equipment to reduce a better bet?
With London’s Ultra Low Emission Zone (ULEZ) upon us and the first of many other areas starting to implement Clean Air Zones (CAZs), and Low Emission Zones (LEZs) in Scotland, I have given thought to the debate surrounding Euro 6 vs Euro 5 in coaches.
A lot of propaganda and even scaremongering has circulated. The most common suggestion is that all operators need Euro 6 for London. Is that really the case?
Obviously, those based in the capital and those nearby will be affected far more by the issue in the short-term. However, looking at the ULEZ map for 2019, they can still access Park Lane, Victoria Coach Station, most rail terminals, the Albert Hall and many other attractions with a Euro 5 coach and not be liable for the daily charge.
But the requirement for Euro 6 in coaches and buses will extend to the current LEZ area from October 2020. In addition, many other areas are proposing CAZs and LEZs, with some giving 2020 as the start date – meaning that the issue of Euro 6-compliant vehicles will become a national one.
Let’s take a step back and look at this from outside the box. In London, the ULEZ is quite easy to implement. Infrastructure is already in place for the LEZ and the Congestion Charge. It’s merely a case of changing its parameters.
In other areas, that infrastructure needs to be put in place. In my experience, local authorities (LAs) aren’t the quickest at getting things done, so I believe that hopes for mass implementation in 2020 are optimistic.
A varied industry
Currently, there are only a small number retrofit options that have been approved for coaches. The reasons that such upgrades are taking so long to develop are three-fold.
Firstly, bus operators and LAs cannot apply for funding via an equivalent of the Low Emission Bus Scheme. Secondly, development costs are high. On buses, they can be spread over many customers, but there are few, if any, coach operators who will foot the bill themselves.
Thirdly, there are often hundreds of buses that are identical mechanically. They are far easier to retrofit than coaches. Few coach operators have fleets of identical vehicles, and nor is there a ‘one size fits all’ approach from most manufacturers.
If you were to put three of any type of coach together, you may have a situation when one has a rear toilet, one has a centre toilet and one is a team coach. All are different, and because of the impact of those differences under the floor, they affect the ability to accredit retrofit solutions.
This has influenced the values of Euro 5 coaches. In turn, that has affected balance sheets and left dealers with yards full of stock that they are struggling to sell. Once things settle that will change and those vehicles will once again become attractive… so don’t give them away yet.
Crunch the numbers
We should assume that other than the existing ULEZ and the extension of Euro 6 requirements for large vehicles in London, it’s more likely to be 2021 before much is implemented elsewhere. That’s two years – an eternity in coaching.
A recent article in routeone detailed some suppliers that have retrofit kits for coaches in the latter stages of development. At some point, they will be accredited. When that happens, I predict that the cost of kits will come down, making them more affordable.
What about the numbers? A new coach costs, as a ballpark figure, £250,000. In its first year, it will depreciate by 20%, or £50,000. That’s the equivalent to 500 daily ULEZ charges, so that coach would need to be in the ULEZ every day for almost 18 months to cover the £50,000 depreciation.
A retrofit system in a Euro 5 coach at £18,000 equates to 180 days for that vehicle to ‘pay off’ the upgrade cost. I have had a Category D licence for 29 years. In all that time, I haven’t driven to central London on 180 occasions.
Keep your powder dry
The other option is to send any coach that is Euro 4 or better to London and pay the charge. A lot of operators plan to do that and pass the charge on to hirers. Would you pass your £50,000 first-year depreciation directly on to them, though?
Digressing, but it would be interesting to know what Transport for London is planning to spend the daily charge receipts on. If it was openly publicised that it was being spent on infrastructure for coaches, more pick-up and drop-off points and parking, we’d happily pay it. But where will it go?
With the above in mind, I don’t believe that there is any reason to make hasty decisions. Keep your Euro 4 and Euro 5 vehicles and keep an eye on retrofit costs. If they don’t come down, you can still fit one kit and re-finance the vehicle. Overall, its residual value will increase anyway.
