New report predicts leasing industry on verge of 'structural' upheaval

THE current wave of contract hire and fleet management company mergers and takeovers is the tip of an iceberg of major structural change still to come, according to a new report from Nottingham Business School.

Fears are mounting that the changes will ultimately result in the long-anticipated emergence of a contract hire superleague with small leasing companies forced out of business and the surviving large and medium sized companies struggling to meet rising fleet customer expectations profitably.

However, the report says contract hire and fleet management companies could reduce costs and widen their services to fleets by selectively outsourcing some of their functions.

The 44-page report, 'Vehicle Management Outsourcing - The Key to Profitable Service Differentiation', was written by Professor Peter Cooke, head of the School's Centre for Automotive Industries Management and sponsored by Solihull-based Overdrive Business Solutions.

Cooke said: 'With so many fiscal, environmental, regulatory and legislative pressures on them, the automotive and fleet industries have a pressing need to find a new model for the way they run their businesses. Outsourcing offers fleet management companies the opportunity to buy in routine services and the management of the vehicle at a known cost. They should be able to reduce costs through trading on the purchasing power of the outsourcing partner.

The benefits of outsourcing to contract hire and fleet management companies, according to the report are:

Reduced costs through purchasing power and economies of scale.
Improving service through enhanced competitiveness.
Enhanced flexibility.
The leveraging of service delivery.
Known costs.
Smaller players gain access to hi-tech systems/service.
Companies can focus on core competence of customer relations.
A benchmark operation for further development.
A chance to move ahead of the competition.
Provides a base to develop new service products based on bought-in services.

While acknowledging that outsourcing is 'not for everyone' or 'a quick fix for a particular weakness' the report concludes that outsourcing will often prove to be a win-win solution, with benefits for end user fleets and their company car drivers as well as for contract hire or fleet management companies.