Fleet News

Service the key in new Euro market

EUROPE as an entity is a relatively young market in terms of vehicle leasing.

The fleet environment is similar to that of the UK some 30 years ago and tendering for pan-European fleet business has been traditionally carried out with a heavy emphasis put on price.

Multi-national fleets are more pragmatic and flexible than before in their approach to pan-European fleet management, not necessarily expecting to deploy a single fleet strategy across a diverse framework of national regulations and work cultures.

However, they have become noticeably more demanding about the services that fleet management companies (FMCs) provide, seeking improvements such as better lines of communication, more long-term strategic thinking and consolidated purchasing.

This is to be welcomed in the interest of quality. Furthermore, service can be a force for stronger cohesion, with service level targets being universally applied and measurable elements in the pan-European FM packages.

These developments are taking place against a backdrop of major changes in the evolution of the European fleet market.

In my article for Fleet News Europe on January 2, 2003, I mentioned the Basel II Accord, by which banks will be insisting on the declaration of previously off-balance-sheet assets. As I said then, the impact of Basel II is likely to be very significant but is difficult to fully assess.

The Basel Committee on Banking Supervision published its Third Consultative Paper (CP3) in April 2003, which generated more than 200 comments from banking and financial institutions worldwide, including LEASEEUROPE (European Federation of Equipment Leasing Companies Association) which commented: “We are of the opinion that special characteristics which differentiate leasing from other means of financing are not fully recognised”. Its full deposition, and other information about the Basel II Accord, can be found on the Bank for International Settlements website www.bis.org.

My belief remains that Basel II should encourage fleet management companies to concentrate on promoting the total benefits of their products, rather than selling primarily on the attractions of off-balance-sheet funding.

Once again, therefore, promoting and achieving high service levels is taking on a new importance.

From May 2004, 10 new countries will be joining the EU, namely Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovak Republic and Slovenia. The entry of these 'accession countries' will radically change the environment in which FMCs and their customers operate.

Most are former Eastern Bloc nations, where the concept of leasing is not yet well established and where FMCs need to initiate programmes of information and education.

My Polish colleagues comment that they frequently have to go back to explaining the basics of operating leasing, residual value and rental, because such concepts are little known in Poland, which has a strong tradition of buying out of capital.

There are, of course, also wide differences in the markets of the current 15 EU members, ranging from the UK, with less than 1% of all customers accounting for 16% of the entire company car parc, to Italy, with over 60% of the total company vehicle parc comprising of sub-25 unit fleets.

The lifting of Block Exemption, offering motor dealers new flexibility in vehicle sales and servicing, is yet another element of change affecting national and multinational fleets throughout Europe of every size and type.

The two-fold challenge for FMCs with a European presence is to service and develop the markets within national boundaries whilst also meeting the demands of the growing number of fleets operating across borders.

US companies are the most active in seeking pan-European solutions, which provide the possibility of greater control vehicle acquisition and the financial and manufacturer support benefits associated with economies of scale.

However, as mentioned before, realism dictates a degree of flexibility to accommodate the pressures of local interests.

Structuring to manage fleets across the EU requires a correct balance between independence at a local level on matters such as vehicle sourcing and disposal and coordination on Europe-wide issues such as car policy design and implementation.

E-commerce and technological resources such as telematics are valuable tools for controlling the fleet and for improving the quality of information available and the response times within which it can reach decision makers.

Together with the skills, experience and motor industry leverage that the FMC can provide, the elements are in place to meet the high service level commitment that pan-European fleets demand and deserve.

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