All sides of the PCV industry are undergoing tremendous change which brings about challenges and opportunities as never before. At Asset Alliance Group, we believe we are well placed as a specialist funder of bus and coach vehicles and a leading funder in the zero-emission sector. With over £500m in vehicle purchase and financing behind our business in recent years, our clients are reassured about our independence and funding lines away from bank funding which place security on the asset value and not the business itself.
It goes without saying that the passenger transport sector was probably one of the industries worst hit by the pandemic. Only now is the market showing signs of recovery, although we are still some way off pre-2020 levels of business.
On the back of this, the industry has also been faced with additional challenges of new legislation – PSVAR, regional franchising powers, increased cost of operation and the transition from diesel engines to electric drives, and how these vehicles will be charged.
Where there are challenges, there are also opportunities. 2023 is a critical year and it all points to a need to forward-plan both short and longer term the fleet strategy, whether in bus, coach or minibus and below are some of the trends we see emerging already. That is where taking on independent financial planning to consider investment while protecting cash reserves, cash flow and maximising cost of operations or vehicle ownership can make a difference to confidence and ability to scale up business in the face of these challenges.
London bus operators
London represents around 30% of the UK bus parc. The Mayor of London made the bold statement in 2021 that the TfL bus fleet would be fully zero-emission by 2037, and his aim was to achieve this by 2034. No new diesel or hybrid buses have entered the capital since mid-2020 with new battery-electric buses being the operators’ preferred choice. Ten per cent of TfL’s 8500 bus fleet is now zero-emission.
To achieve the Mayor’s zero-emission target, an annual replacement programme of about 700 buses and around £295m of capital investment is needed. The transition to electric vehicles has also presented London bus operators with the challenge of understanding their new supply chain. With diesel being replaced by electric, enough power needs to be routed to the bus garage for charging infrastructure.
Asset Alliance Group is working with operators to offer structured finance which helps convert a capital expenditure to a manageable operational expenditure in line with contracts.
Provincial bus operators
While London is forging ahead, the provincial and regional UK bus market is seeing varied levels of investment. Many operators are still faced with the challenge of reduced patronage, increased operating costs, and a need to upgrade older buses. It’s encouraging to see sizeable orders for new electric vehicles from some of the larger bus groups. However, for the small and medium-sized enterprise sector operating in rural locations on shorter-term contracts, investing in newer vehicles or technology may not seem to be a commercially viable prospect. At Asset Alliance Group, we can offer flexible funding options to match contract terms.
Coach operators
The coach sector has undoubtedly borne the brunt of COVID-19 and Brexit, notwithstanding the general economic and recessionary pressure. However, there is no doubt that the tourism sector is recovering – as evidenced by a spike in investment in new coaches by the leading touring companies. The low levels of new vehicles purchased during the pandemic now demand operators review their fleet age profiles to meet contractual obligations. There is also a clear move towards local minicoach and minibus operators exploring zero-emission vehicles. Often, the drive behind this are local government grant schemes and Scotland in particular seems to have taken a lead in creating grant support for new PCVs that deliver on an environmental agenda.
In summary
Asset Alliance Group has some of the most experienced business consultants in the industry, as well as specialists in asset finance and coach and bus procurement. If you are looking to prepare options for fleet upgrades and interested in receiving independent advice on cost of ownership in diesel, electric, new and used vehicles, brand residual values and, therefore, overall PCV monthly costs and financial options, then the team at Asset Alliance Group is an excellent place to start.
