Council caution fuels municipal hire boom
Budgetary constraints, recycling targets and emissions legislation mean local authorities are favouring hiring over buying when it comes to their fleets. Mike Gerber reportsNotice how municipal vehicle hire firms' liveries are appearing more frequently on Britain's streets just now, on anything from RCVs to street sweepers? "Certainly demand is outstripping supply at the moment," confirms Russell Markstein, development director of Riverside Truck Rental, who has noticed an increase in orders since the local government elections of 2006.
Local government politics has always played a large role within the municipal vehicle hire market. The capital outlay required for just a standard RCV to a normal specification can be £130,000, so renewing your fleet requires a sense of political timing that may not coincide with your aging vehicles. When councils are waiting for new fleet to arrive, the hire companies are poised to deliver.
Simon Potter, acting hire manager at West Midlands-based WCR Vehicles, says: "We can fill the gap in between a new fleet coming in or a council tender starting. Some companies have three-day minimum hire. Ours is just one day, so if there is a breakdown they can call us."
It isn't just budgetary constraints that drive demand. "Councils have got to meet these recycling targets and are realising that they are not just pie in the sky," says Potter. "These will take over from the door domestic collections, and they are looking for vehicles that are multi-purpose."
Diversion targets are driving demand
All hire companies are benefiting from the demands of the Landfill Directive, states Mark Werrell, national sales manager of Lincoln-based TransLinc. "Over the past 12 months we have provided more refuse collection, or vehicles doing green waste or segregated, than we have done historically. From that perspective there have been more opportunities."
TransLinc is also putting out more kerbside vehicles, as more local authorities review the methods to improve the segregation of waste to maximise recycling targets. This, believes Werrell, is a growth area: "We will continue to see some increases in terms of volumes in the market."
Norman Bowes, area sales manager for Woodend Municipal & Highway Vehicle Hire, pinpoints another reason why authorities are hiring as recycling climbs higher and higher up the political agenda - uncertainty.
"One reason for the increase in demand are the new recycling rounds coming on. People are not sure what vehicles they want, so they look to hiring rather than buying," he says.
But is hiring an all-round better option than outright ownership? WCR's Simon Potter weighs it up. "I think it depends on the local authority. I can see the benefits of both. Local authorities have private contractors doing their waste management, and if you're a big concern like Biffa, they tend to have their own fleet. If you've got your own fleet you've got total control leasing vehicles or hiring vehicles.
"Obviously the hire company are going to take responsibility for the tyres and breakdowns and getting replacement vehicles to you. If someone hires a vehicle and it breaks down, we have to get a new vehicle to them for the next day. If it's their own vehicle they're a bit stuck, aren't they? If I was a local authority I'd have 50/50," he reasons.
TransLinc has tried to be one step ahead of breakdowns. "Although now standard on all vehicles, at the beginning of the year we began fitting LED lights," Werrell says. "That reduces downtime because if there is a bulb out in the morning on a standard vehicle, it stops the vehicle going out onto the road as it is breaking the law if one of its lights aren't working. With LEDs you only have to replace the unit if 50% go out. It also prevents people having to work at heights as you are less frequently going to have to climb up onto a gantry to get to the lights. This helps us in terms of the maintenance impact because we pick up the maintenance."
Emissions laws spark waiting game
Vehicle emissions legislation has also had an impact on the hire market. New emissions requirements came into force in London this year and the whole of Greater London will become a low emission zone (LEZ) in February 2008. The LEZ is a specified area within which the most polluting diesel engine trucks will be required to meet specified Euro emissions targets or pay a charge.
Riverside's vehicles are less than four years old and are all Euro 4 compliant. They have benefited as demand has increased from London authorities. As from 4 February 2008, only the newer vehicles can go into London. But Euro 5 awaits. Thus the local authority fleet manager has to decide whether to refresh the fleet with Euro 4 technology or wait until Euro 5 becomes mainstream.
It's not just London, as Werrell notes: "Local authorities as a whole have hung on until Euro 4 and now Euro 5 has become viable from manufacturers. Production has been slow coming through and lead times have been extended. As much as authorities try and put realistic timescales on things, because of the process they have to go through to acquire the vehicles, and with the extended lead times, we've seen a backlog. So I think that's why this year local authorities are hanging off making decisions."
So, a busy time for those in the hiring market, but what about the future? "Obviously from our point of view it depends on how the authorities want to acquire the vehicles," says Werrell. "If they go for outright purchase there is no opportunity for us there. But more and more authorities are struggling with capital, and these are pretty capital-intensive vehicles."
Low uptake for digital tachographs
One possible growth area could be councils hiring vehicles equipped with digital tachographs. Manufacturers have responded to legislation by fitting all new vehicles with them. But, Maurice Telford, director of PTH Municipal Vehicle Hire, has found low council take-up. Drivers have not been trained, and thus do not have the card licence to operate them.
Robin Mackonochie, head of communications at the British Vehicle Rental & Leasing Association, believes digital tachographs are not high on local authorities' list of priorities, and many are unaware of their importance.
"We're very keen to get drivers out there with cards. On the hire side, the change cycle for vehicles is much faster than virtually anywhere else, and therefore they have lots more Euro 4 vehicles. But more importantly they've got lots more digital tachograph vehicles. It is a concern to them to make sure that as many drivers as possible have cards so that they can drive these vehicles. At £38 a card, it's not a horrendous situation, but it's also making sure that the local authority is actually aware of this issue. It is as much an information issue as a budgetary one," he says.
Telford sounds a cautionary note, observing that hiring rates still dictate the market and are being driven down by the bigger companies who can afford to do so.
Riverside's Markstein agrees that the market is volatile with fluctuations in pricing: "Initially, rates were much lower as some of the less established companies tried to get a foothold in the market. These rates were unsustainable, and they have now returned to a more realistic level."
Norman Bowes from Woodend predicts that rates will eventually level off, but in the meantime newcomers will enter the marketplace: "There's room for few more yet," he surmises.