In a world of changing mobility, the corporate fleet has shown remarkable resilience. While some day-to-day drivers are moving away from traditional vehicle ownership, business transport remains an area where control comes first. By 2021, forecasts predict that only 37% of new car registrations will come from the private market, while the corporate channel drives the other 63%. Accordingly, the business of fleet management has developed into a multi-billion euro industry in Europe.
For firms that specialise in the provision of vehicles, these fleets are a prime opportunity, to the extent that many OEMs have entered, or re-entered the multi-brand fleet management market, or expanded their operations, to take advantage.
Capitalising on this moment will require a new approach from fleet providers. The trends that are driving growth in the industry, such as the move towards Mobility-as-a-service (MaaS), enhanced data integration and the rise of fleet software, are also changing the way fleets are built, managed and leveraged within a business. This, in turn, changes the role of the fleet manager, and the tools they need to effectively administer their vehicles.
In this dynamic environment, auto finance providers will need to extend the service they provide to act as mobility partners, providing long term value for customers while effectively integrating with other solutions.
In this whitepaper we’ll examine how the market is evolving, the ways technology is impacting the role of fleet managers, and how auto finance firms can adapt their service offerings to suit the new era.
Moving in a new direction
The way we move around the world is changing. After decades of being the default mode of travel for modern society the role of the car is being re-examined. The key drivers for this are sustainability, safety and efficiency. Governments, businesses and private individuals are realising that a vehicle in every driveway just isn’t sustainable, especially when the typical car spends 90% of its lifetime parked.
In the place of private vehicles come shared systems. This is a trend already visible in the public transport sphere. The more reliable and accessible shared transport is, the less people need their own full time solution. For example, Greater London has an average of 0.8 cars per household thanks to 402km of rails connecting the city underground. In Greater Manchester, however, there are 1.3 cars per household, due to only 93km of urban rail.
The new fleet
While the public looks to shared mobility to get where they need to go, businesses are increasingly choosing to create their own systems in order to optimise efficiency, maintain control and incentivise employees. Today, nearly two out of three new cars are sold to the corporate channel. The majority are registered as part of corporate car pools or corporate fleets, also known as “true fleet”.
As businesses increase their investment in fleets, there is also a shift towards increased flexibility, with more companies buying full-service leasing contracts instead of vehicles to reduce their fixed assets and offset risk.
Opportunities in growth
The global fleet management market is expected to reach $34,629 million by 2022, from $7,755 million in 2015, growing at a rate of 24.5% from 2016 to 2022.
This boom is especially strong in Europe, where tax structures incentivise the provision of company cars as benefits in kind, making it the largest market for fleet management globally and also the most advanced. Meanwhile, the UK fleet sector has seen a 42% increase in volumes over the past decade.
However, while fleets remain an essential business asset, the makeup and management of those fleets is evolving rapidly.
The Changing Face of Modern Fleets
One of the key drivers of the shift away from privately owned transport is the concept of mobility-asa-service (MaaS).
Just as we’ve seen on-demand digital services transform sectors like entertainment, with Netflix and Spotify displacing DVD and record collections worldwide, so too are flexible transportation options changing mobility. This can be seen in the explosive growth of ride-hailing giants Uber and Lyft or the car-sharing model pioneered by ZipCar.
In this new world, vehicles change from static assets to become flexible tools that can be deployed strategically to fulfill specific needs.
Advantages of flexible fleets
The idea of accessing a transport solution only when you need it has enormous potential for fleet managers, both in terms of service and of efficiency. Moving from a ‘one-vehicle-one driver’ model to a ‘one-vehicle-many-drivers’ approach offers a range of benefits, including:
Improved flexibility for employees
Transport provision can be built around when employees need it, finding the best option for them in the moment, rather than being tied to a long term allocation.
Putting idle vehicles to use
Sharing vehicles allows managers to minimise idle time and maximise usage per vehicle, enabling smaller, more efficient fleets that can lower the total cost of mobility by up to 30%.
Reducing carbon footprint
A single shared vehicle can replace up to 15 private vehicles on the road, lowering congestion and emissions across your fleet and within your network.
Accelerating with technology
Cars are becoming ever more connected – according to Berg Insight, there will be 159 million telematics units installed across the globe by 2020 – providing an ever greater range of data points around how we move. Fleet managers can now monitor multiple real-time vehicle statistics, such as who’s driving, where they’re going, at what speed, and how efficiently they’re using the vehicle.
Alongside the shift in strategy that comes with MaaS will also be a change in the way data and metrics are used to assess performance and value. Whereas traditional metrics largely focused on maintaining the vehicle itself, via maintenance, accident rates, fuel usage and parts, new metrics will need to focus on optimising the role of each vehicle as part of a holistic fleet. These include KPIs such as journey success rates, timings, attendance rates and annual cost.
The 5G Journey
While we are still in the early stages of rollout, it is certain that 5G will likely be a major tech revolution for the automobile and fleet management industry. The increased speed and bandwidth of 5G networks allow many more devices to connect at once, bringing more smart devices online and pushing the potential of the Internet of Things (IoT).
This is especially relevant to the field of transport data and telemetrics. The 5G network will enable the streaming of aggregate data at a millisecond level, expanding the utility of data for technology developers, car manufacturers and fleet managers themselves. With a wider scope for value provision, we will likely see an increase in the range of technologies and software aimed at the fleet management market.
As technology and data becomes more deeply embedded in the transportation industry, the role of fleet managers will evolve. High performing fleets will need to prioritise the tracking, management and implementation of insights from their vehicles. For managers, data-literacy and technology strategy will become an essential part of delivering value.
Going green
Alongside technology, the other major influence on fleet development is the influence of sustainability. Across Europe, multiple factors are combining to push the industry in a greener direction including:
Sustainability legislation
New EU emissions targets came into force 1 January 2020, setting new rules for CO2 output and vehicle safety across the European Union.
Manufacturers will have to meet stricter targets for the fleetwide average emissions of their new cars and vans registered in any given calendar year. Meanwhile, benefit-in-kind tax bandings heavily incentivise the uptake of electric and plug-in hybrid, providing drivers with attractively low tax bills.
Green buying trends
While electric vehicles still make up a small share of the market overall – 3.4%, according to the latest figures from Britain’s Society of Motor Manufacturers and Traders (SMMT) – their growth has been impressive, with 30X more electric vehicles on the road now than eight years ago.
Efficient sustainability
Efficiency savings around more effective trip and vehicle management incentivise a green approach to transport. There is strong impetus for fleets to scrutinise driving behaviour, promoting a more eco-friendly to performance behind the wheel reduces costs across fuel and maintenance.
As sustainability rises in social and commercial importance, fleet managers will need to integrate systems that can track and share data across emissions and driver performance, as well as providing the flexibility they need to allocate vehicles on-demand.
The Electric Revolution
Despite record low fuel prices in 2020, registrations for electric vehicles have more than doubled in the midst of the global pandemic. This adds extra urgency to a shift that was already well underway. Already, twenty-four European cities accounting for 62 million people are set to ban diesel vehicles by 2030, lending a strong push to transformation efforts.
In addition to the pressure from governments and legislators, there is an ever stronger business case for electric vehicles. An International Council on Clean Transportation (ICCT) report found that electric vehicles are significantly less costly to own and maintain than those running on diesel or petrol. Despite initial high-prices, battery electric vehicles (BEVs) expected to reach cost parity with traditional cars by 2025 and a new push to exempt them from VAT could help tip the scales permanently in their favour.
As electric vehicles become the norm, fleet managers will have to deal with increased complexity and new concerns such as battery health and lifetime management, charging infrastructure and setting new benchmarks for performance.
Risk Management & Technology
In addition to its role in the vehicles themselves, technology is playing an ever larger role in the management and upkeep of fleets. This is especially important when it comes to dealing with market disruption and uncertainty. 2020 has seen significant shifts in work and commercial conditions which will have long term effects on fleet management strategies as businesses adapt, including:
- Increased working from home and distributed teams
- Managing risk through multiple transport suppliers and solutions
- Shorter and more flexible leasing contracts
Technology will play a key role in managing the effects of this disruption, including:
Customer Flexibility
Disruption has affected industries in unique ways, depending on their existing infrastructure, employee and customer demographics and commercial conditions.
For multi-industry auto-leasing providers, flexibility and customer experience will be more important than ever. It’s essential that your leasing systems can manage a range of different contract structures, lengths of engagement and SLAs.
Risk Mitigation
It’s unclear at this stage how new credit conditions will affect this industry as due to COVID-19, accounts are now spread out and there won’t be up to date trading conditions until Sept 2021.
In an uncertain situation, credit scoring and underwriting will be essential to manage your risk and prevent exposure. Modern auto-leasing platforms must be able to quickly and accurately capture customer financials, process them and provide reliable insights that can drive smart business decisions.
Service and accountability
As businesses focus more on efficiency, cost-to-serve and ROI, fleets will be under intense scrutiny to ensure that they continue to deliver value in the ‘new normal’. Fleet providers and internal fleet managers will have to create compelling business cases, backed up by data, that prove the value of managed mobility services. Fleet management systems will play a key role, aggregating data and connecting software solutions to create an end-to-end picture of the benefits created by fleets.
Driving Service with Technology
Increased competition, new regulations and competing incentives have transformed the fleet management landscape. In this rapidly changing market, fleet managers need more support from their auto-leasing partners.
For firms who can leverage the right tools and advice, this is a chance to build stronger, more value-driven relationships that drive long-term business. This will require three key service level updates.
Data-driven relationships
Accurate, up to date insights into fleet conditions and usage are now an essential part of building a high performing fleet. As your customers look to manage their costs and efficiency at scale, fleet management companies will need to work with their clients to provide the data and support they need to improve their performance. This starts with centralising your customers’ data to make it accessible to everyone who needs it. Your leasing system needs to be able to categorise, share and update information across metrics such as fleet health, EV penetration, leasing lifecycle and service agreements to demonstrate value to customers.
Flexible Technology Stacks
The rise and standardisation of technology, pushed by legislation, sustainability and data-infrastructure improvements will require a collaborative approach to software and tools. In this new world, fleet managers will be turning to a range of solutions to do their job effectively. It’s essential that your leasing software can integrate effectively with new tools in this ecosystem and adapt to customers needs.
Different customers will inevitably have different software requirements. To stand out, you need to be able to accommodate, advise and adapt to new requests and commercial strategies. In this technology-driven world, legacy solutions are a threat to your competitive advantage. Auto-leasing firms must consider digital transformation as a priority, implementing cloud solutions that can connect to other platforms as necessary to drive customer service.
Mobility advisory
As the nature and role of fleets evolves, with the advent of electric, or soon autonomous, vehicles, so does the role of fleet providers. Fleet managers need support to manage change and fleet providers are ideally placed to fill this role. The fleet provider of the future will have a hybrid technology/service role, managing both the provision of transport and the systems required to implement those assets effectively. In this scenario, customer experience - how much value you add for the customer in their role - will be a key measure of competitiveness and business retention.
This year has shown that the future can change faster than we expect. The next stage of fleet evolution will go beyond electric vehicles to autonomous vehicles, bringing new questions of ownership, ROI and strategy. Technology use will also explode as IoT and smarter vehicles become the norm.
Competition in the fleet industry has already increased, and will continue to do so. Those businesses that build an advantage today will be in a stronger position to sustain it over time and maintain market share as more providers move into this space.
That’s why future-proofing your business requires urgent investment in the right infrastructure.
QV Systems already supports some of the world’s most innovative auto-leasing and fleet services businesses in creating new, digital service offerings. We’ve built a future-ready platform to help you adapt to a changing industry and enable digital transformation at scale. Our industry experts work hand in hand with your team, ready to help you adapt and evolve your business for long term success.
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