Toyota Motor Europe and TCOPlus: Take TCO to a new level – Johan Verbois, Hans Damen and Bart Vanham

CO2-based taxation is playing a greater role in decision-making among 21st-century fleet managers. Toyota Motor Europe's fleet and remarketing general manager Johan Verbois, and TCOPlus partners Hans Damen and Bart Vanham tackle this issue.

Total cost of ownership (TCO) remains the number-one purchase decision criteria among international fleet managers, with environmental and image-driven factors also playing a role.

Traditional TCO as we know it is made up of elements such as the price of the car, discount level, residual value, insurance fee, fuel consumption and cost, maintenance and repair costs, and current tax conditions. The potential risk of this traditional approach is that it does not take into consideration the implications of actual indirect and direct tax corporate taxation, and benefit in kind taxation for individuals.

In the EU, 19 countries have linked some of these taxes to the CO2 emissions of vehicles, making it necessary to assess the carbon footprint and its taxation impact when calculating the TCO. Understanding these taxes and their effect on the car market is vital for fleet managers looking to make well-informed decisions.

What is your approach when calculating TCO for your clients?

Hans Damen: At TCOPlus, we have developed a solution called GreenCube that goes beyond the traditional TCO approach, taking it to the next level. The primary goal of GreenCube is to show corporates of any size how to establish a CO2-based savings strategy for European car policies. Our suite of tools evaluates a company's fleet data 'as is' and then enables sophisticated real-time 'what if' analysis of CO2 reductions, corporate and benefit in kind tax implications, and the impact on the global carbon footprint.

GreenCube assists international fleet managers that are building their business case for CO2 emission reduction programmes, facilitates change management and roll-out, and can periodically measure the results. Projects involving organisations that manage more than 500 vehicles in five European countries have seen potential annual savings of up to 8.5% on corporate taxation and fuel alone.

The table shows a typical example from the Belgian market, where one vehicle (4) with the same policy, from the same category and using the same parameters is 32% more expensive than another (3).

Typical low-CO2 vehicles are hybrid vehicles, such as the world's most famous hybrid Toyota Prius. Can you explain the role of hybrid technology in your company's strategy?

Johan Verbois: Toyota's vision for the automobile is to strive towards making the ultimate eco-car. On our way there, we will develop the right car for the right place at the right time. This approach is helping us to identify the needs of consumers and provide them with optimal solutions.

"GreenCube assists international fleet managers that are building their business case for CO2 emission reduction programmes, and can save large organisations up to 8.5% a year on corporate taxation and fuel alone."

At the heart of our powertrain map are hybrid and plug-in hybrid vehicles - which are, in our view, the best and most practical way to commercialise eco-cars for the mass market in the short to mid term. We are not just developing green technologies as showcases, but aiming to significantly and sustainably reduce emissions.

In addition to these mainstream vehicles, we are developing fuel cell vehicles for longer distances and commercial use, and pure electric cars to cover urban mobility needs in cities and over short distances.

Hybrid technology is at the core of our future mobility solutions for two reasons. First of all, it is the most practical way to effectively reduce emissions - not tomorrow, but today. Secondly, it is a very flexible technology.

The configuration of our hybrid system allows us to develop, based on this technology, standard hybrid cars, electric vehicles (where we replace the fuel tank with batteries), plug-in hybrids (where we add rechargeable batteries) and fuel cells (where we replace the petrol engine of a hybrid with fuel stacks and a hydrogen tank). Thanks to this approach, while many were continuing to talk about bringing the electric car to the masses, we have sold more than 3.6 million hybrids since 1997, which has reduced CO2 emissions by more than 23 million tons compared with conventional engines.

Besides our Prius and Auris Hybrid, full hybrid technology is now also available in three other Toyota models to be launched in the next few months: Yaris Hybrid, the seven seater Prius+ and Prius Plug-in Hybrid. In the coming years we plan to introduce more hybrid models and, by 2015, Lexus will be almost 100% hybrid in Western Europe.

Adding hybrid vehicles to the company's fleet can be a good way to lower the company's carbon footprint, but is it also cost-effective?

JV: The fact that we already have so many hybrids on the road proves that we don't need to convince people any more about the quiet, relaxing, enjoyable experience of driving a hybrid.

In addition, more and more fleet managers are becoming convinced of the competitive TCO of Toyota and Lexus hybrid vehicles thanks to our strong residual values, low fuel consumption and low breakdown claims - and of course the taxation benefits as a result of the low CO2 emissions.

We acknowledge, however, that the real impact of this advantage is sometimes difficult for international fleet managers to grasp because CO2 tax legislation and benefits differ from country to country. Currently, about 19 EU member states have CO2-based taxation and this number is expected to increase in future.

I believe the GreenCube tool can be beneficial for fleet managers as it incorporates by-country tax advantages, offering them a one-stop-shop in terms of setting their car policies.

European legislation is currently focused on CO2 emissions, whereas in the US and Japan the focus is on nitrogen oxides (NOx) and particulate matter (PM). Do you see this situation changing in the future?

Bart Vanham: Being focused on CO2 emissions is clear and understandable for people, therefore ideal as a policy instrument. The downside is that it has favoured diesel engines that come with the disadvantage of higher PM emissions, which is increasingly becoming an issue in densely populated areas.

We therefore expect that other pollutants will be taken into account via the euro norm or other standards along with, in the long run, the effective use of the vehicle by means of kilometre charging. In the meantime, it would increase efficiency and transparency if countries could harmonise their car taxation approach, at least in terms of tax mechanisms, but not necessarily levels of taxation.

JV: Toyota has always adopted a holistic view of the emissions issue. That's why we believe so strongly in the role of hybrid technology in the future of mobility as it produces low emission levels - not only of carbon dioxide, but also pollutants such as NOx and PM, which are chemicals that damage the ozone and can cause serious respiratory diseases.

It is true that current European public opinion is heavily driven by CO2 emissions because customers are frequently exposed to this information. We prefer not to ignore the dangers of any of these pollutants.

Left to right: TCOPlus partner Bart Vanham and Hans Damen, and Toyota Motor Europe’s fleet and remarketing general manager Johan Verbois.
Table of awareness : TCO, Belgian automobile market (2011)
By 2015, Toyota’s Lexus range will be almost 100% hybrid in Western Europe.