BVRLA Leasing Broker Contents
- Generative AI and Brokers
- Economics and the Business Outlook
- Looking Ahead with the Leasing Broker Panel
- A Rapidly Changing Industry
- Event Pictures
IT was a packed agenda for the BVRLA Leasing Broker Conference with plenty of good content on offer for the packed audience of leasing brokers, funders and industry suppliers.
Headline Sponsor of the event was QV Systems, and CEO Daniel Layne addressed conference attendees at the start of the day with a message about constant change.
“Looking into the future generative AI is not going away, which is interesting to think what might be on offer with generative AI and the connected car,” said Daniel. “We’ll see EVs getting better on a huge scale. But the one constant is that change is not going to stop. We’re all ready for the change – all of us, OEMs, funders and brokers.”
Taking part in the Generative AI panel (above) were right to left:
- Donna Kelly -Nationwide Vehicle Contracts,
- William Richmond-Coggan – Freeths,
- Lethabo Motsoaledi – Voyc,
- Dr Richard Whittall – Salford University,
- Jason Gill – Webfleet;
- Rob Pilkington, Ebbon Group
There was a brilliant panel discussion on generative AI with the panellists offering different views on how it can be used effectively.
Nationwide’s Donna Kelly said the broker went to the University of Salford to see if AI could help with customer retention by looking at historical data and current trends.
“So it looks at what people had last time, looks at what is trending now, which allows us to provide recommendations to customers along with actual stock availability. This frees up consultants and speeds up our processes,” said Donna.
She added that AI was good at looking at complex data and identifying patterns to help your business understand the data better. “Learning about it and how to use it ethically and legally is the way forward.”
William Richmond-Coggan from Freeths said it was vital that humans were in the loop, partly through regulatory control, but partly because humans need to sense-check the output of AI.
“One of the big consultancy firms uses AI to provide transcripts for meetings; humans resolve the transcript and take out errors, but it reduces the time taken to do this from what was three hours to half an hour.”
Other takeaways included the environmental impact consideration of AI because of the huge amount of electricity it uses and to start with a problem and consider whether AI is the solution; and if AI is the answer, then to start small, test the data and see if it works before building on the experience to go to phase two.
Economics and the business outlook under Labour
The Sunday Times Economic Editor, David Smith, delivered an engaging report – if fire alarm interrupted – overview of the outlook under the new Labour government and how worried should we be about the Budget.
David, pictured above, covered four areas:
- How bad was economic inheritance?
- What will be in Budget on 30 October?
- How far and fast will interest rates fall?
- What might this mean for you?
Economic inheritance
David explained that the Covid pandemic made the financial crash of of 2007-08 less significant than the first lockdown of 2020. “Recently we have seen growth picking up a bit. On that basis the economic inheritance was pretty good. Inflation has got over its surge – it’s easy to forget how nasty things were two years ago – so it’s reasonably good news; there’s good reasons to think inflation will come down to 2% and stay there.
“So what is Labour talking about? It’s the fiscal inheritance, the black hole in public finances of £22bn.”
David said that with Jeremy Hunt cutting NI twice when there was no room to do it, the resulting increase in debt was going to be inevitable.
“We are heading for a big borrowing overshoot – debt is equal to 100% of GDP. So there is more of a fiscal problem than an economic problem.”
“We’ve seen some tax going up – Corporation Tax, for example – but the biggest tax is stealth tax. Usually income tax rates go up in line with inflation. That’s why it’s the highest since the 1940s. The question is whether they will go up even more?”
He went on to say that the Chancellor will want a “decent chunk of revenue so those with the broadest shoulders will take the hit”, suggesting areas such as Capital gains tax, Carried Interest for private equity, plus Inheritance Tax and Pension Tax Relief were the likely targets.
The 30 October Budget
David then turned to the Budget, saying that it was sowing the most enormous uncertainty which was having an effect on consumer and business confidence. “It’s a big event and it’s casting a pall over the economy,” he said.
Interest rates
On the interest rate increases from the end of 2021 to October 2023, David explained that the BoE was rushing to catch up.But with resilience to higher interest rates settling in and house prices climbing back up on the back of some interest rates cuts, he expected the settled level of interest rates to be around 3 to 3.5%. “So more rate cuts are to come,” and “We are now in a more normal time for interest rates.”
However, David went on to say that GDP over the last 16 years had cumulatively gone up by 5% “which is tiny. In the previous 16 years it was 45.8% – what we need is better GDP. We desperately need stronger growth on a sustained basis.”
Looking to the G7, he said that Germany has always been able to manufacture its way out of problems in the past but the “biggest question is if it can do that again with a GDP of 0.2%”.
Looking at America David added: “There is big uncertainty of Harris v Trump. Harris comes with uncertainties and is untested, whereas a Trump trade war will be significant. We have to hope for the best in the States.”
What about the automotive sector?
Logically David expected to see the emergency 5p cut in Fuel Duty, announced in 2022, reversed along with the indexing of fuel prices. “We’ll have to see if Rachel Reeves can take on the fuel lobby.”
Turning to the future David said we need to see road pricing “at some stage”, while the UK as a car producing nation was much smaller than it was previously and was failing to draw in private buyers to EVs.
“We have to hope there are not too many shocks for the sector ahead of us,” he added.
Looking ahead with the Leasing Broker panel
Chair Rod Lloyd (right) questions the Leasing Broker Look Ahead panel. From right to left:
- David Robertson – Leasys
- Toby Poston – BVRLA
- Luke Mears – VIP Gateway
- Laura Muir – Fleet Alliance
- Lee Jones – Fleet Procure
- Paul Harrison – Leasing.com
Talking about confidence in the broker sector, Luke Mears explained that VIP Gateway was finding consumers wanted more in terms of speed and answers, particularly around electrification. “It’s a case of understanding and responding to those uncertainties.”
Laura Muir from Fleet Alliance said consumers were definitely wanting more for their money, but from an SME perspective the move into salsac was growing – “I think we’re seeing PCH customers going into salary sacrifice,” Laura added.
This sense of market buoyancy was supported by Lee Jones of Fleet Procure. “It feels very buoyant at the moment,” he said. “In an uncertain economy, leasing is the least risky method available.”
David Robertson of Leasys added that over the last 12 months the volatility in rentals had led to consumer nervousness about getting the best deal, but Leasing.com’s Paul Harrison said that despite this, nervousness. consumer confidence was definitely building. “Inflation is reducing, the base rate looks set for a cut, so consumers are picking up on this – enquiry demand is significantly up on last year. Sure enquiries are not sales but demand is up and it’s price led.”
Adding further insight, the BVRLA’s Toby Poston added that economic indicators were going in the right direction. “The new government is a bit jittery, and is perhaps overegging the doom.”
Next Rod Lloyd asked what is driving the market?
Lee Jones said that “most big businesses were driving people back to the office which required transport again – and leasing is quick, easy and cheap to get. September was a boom month – up 30% or 40% with offers there in the market.”
While David said that shorter term leasing was in demand as customers watched the fast moving pace of battery technology changes.
Finally, Rod asked about what customers were asking for in the market.
Laura Muir said that ESG was a key asking point and helping customers to transition to decarbonisation policies.
Meanwhile Luke Mears said that consumers going for EV was a longer process. “They need reassurance – there’s so much negative comment on social media about the products we are selling!”
Toby added that growth in the used leasing model was key. “It reduces risk and provides EV access to a wider customer base.”
“I’d echo what Luke was saying about EVs,” added Paul Harrison. “What we can bring is accurate content to the market with consumer advice – it’s part of our role to cut through the fake news. Used cars are an interesting and emerging sector in the market.”
There’s no question that the pace of change is ferocious in the automotive sector. And to give some perspective on what’s happening, Owen Edwards from Grant Thornton provided a fascinating overview of what’s happening (above).
First off, Owen tackled the changing battery technology and the creation of a cheaper vehicle to generate growth in the EV market.
With demand for EVs falling behind predicted expectations, there remains a surfeit of raw materials, Owen told delegates, which was driving down prices.
Meanwhile changes in the chemistry of EV batteries was making them more efficient with many OEMS working on solid state batteries for the future, not to mention 20-30% cheaper.
“By 2025-2030, there will be batteries with a range of over 600 miles on a single charge – a distance that will cover most long EV journeys in the UK,” Owen explained.
Helping make these batteries more efficient was new technology for the battery casings, which were reducing weight and therefore helping extend range. “One impact of these extended battery ranges is that charging infrastructure will also need to be altered to accommodate these improvements in charge mileage,” added Owen.
Finally one casting was taking out massive costs, currently practised by Tesla and Geely, for example. “Musk says he’s taken 40% out of factory floor space which means he can take 50% out of cost,” added Owen.
Defining car software
Next on the agenda was software designed cars – see photograph of Owen’s slide above.
“This is relatively new,” said Owen. “Software designed cars means the decoupling of software from the vehicle. Software defines the customer experience – which means you can tailor it how you want and improve the customer experience..
“What’s more it’s built on a simple, efficient and stable hardware platform which can reduce the wiring loom, the third costliest part of a car, which makes the car lighter – and is another factor in extending battery range.”
By 2030 50% plus new cars will have this tech added Owen, but that will add extra cost – but there might be a knock on to the RVs of those cars lacking this technology.
“And when it comes to the sales of software updates, who will take the revenue and commission? That’s something for the future.”
Chinese brands
The final part of Owen’s presentation tackled the issue of the massively lower costs to build of Chinese cars – “Even after the EU tariff they can make 5% margin,” said Owen. “And to get round tariffs, the Chinese OEMs are building in Europe, but they will still be cheaper because of falling costs and the amount of expenditure the Chinese OEMs have managed to take out from the build costs.
“Fundamentally, change is coming and it’s for the good,” added Owen. “There will be rationalisation of brands in the future – and the European OEMs are very worried by the Chinese.”
Photos: BVRLA & Ralph Morton
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Ralph Morton is the leading journalist in the leasing broker sector and editor of Broker News, the website which provides information and news for BVRLA-registered leasing brokers. He also writes extensively on the fleet and leasing market in both the UK and Europe.
