Fleet News

Fleet funding: Globalisation

THE professional management of vehicle fleets internationally is a relatively new phenomenon, and there is a vast array of issues that multinational fleet managers face.

The harmonisation of corporation tax rules and rates in the EU is now being looked at, which will change the game for fleets significantly.

Multinationals are moving into the low-cost labour EU countries seeking fleet solutions and are currently discovering that it is much harder to professionally manage a fleet there than in Western Europe.

Asian markets are growing and will continue to do so over the next 10 to 20 years. What effect will that have on fleet lessors and demand for their products?

China has huge growth potential and although free trade, property rights and shares are not protected there, with labour at $2 per hour it is already set to become one of the workshops of the world.

The fleet manager’s role
A decade ago a multinational trying to manage a leased car fleet in a dozen countries would find it hard to assemble the information needed to make decisions.

Leasing companies have made great strides in recent years in developing systems to meet the needs of their multinational clients, and these will improve. A group fleet manager sitting in, say, London or New York will be able to monitor and control their leased fleet in dozens of countries.

Fleet managers have had to contend with mergers and acquisitions in global vehicle leasing, leaving fewer, but larger, organisations. Several have the international footprint and financial clout to invest heavily in delivering to their multinational clients.

The role of the fleet manager has changed significantly in recent years and they are increasingly asking for advice about new regulations that affect lessors and their clients, the list of which is vast.

Top of the list is probably taxation. It changes rapidly in most territories and is a constant challenge.

And there are so many other regulations to consider: insurances, disability laws, corporate social responsibility, sex discrimination, employment law, driver hours, road use laws, finance laws – the list goes on and on.

Fleet managers need to keep abreast of these and will increasingly expect their lessors to advise them on a multinational basis.

The environment
The environment will continue to be a huge issue and fleet managers are going to find themselves increasingly under scrutiny as governments try to reduce emissions. Carbon trading schemes will increase and fleet managers will have measure their fleet’s global carbon footprint.

There are significant hurdles to be overcome before hydrogen-fuelled cars are a reality.

Hydrogen currently costs more per mile than petrol or diesel, and production produces more greenhouse gasses than conventional engines. Hydrogen is harder to transport and significantly more dangerous.

Biodiesel-fuelled cars are even less likely to happen. It works, but the world is currently producing far less food than it needs.

The global population has increased but the growth in crop yields has slowed, and global warming will reduce the land available for cultivation. Given a choice between growing food or for fuel, we will choose food.

The shake-up in manufacturing will continue to affect multinational fleets.

The number of global manufacturers has shrunk from around 50 in the 1960s to just 12. This makes it easier to find carmakers whose product ranges are wide enough to meet a fleet manager’s needs across a global corporation.

However, despite their sophistication and size, manufacturers still produce too many cars and find it difficult to plan production, so dispose of surplus stock by selling large numbers into the short-cycle markets, reducing residual values and increasing motoring costs for fleets.

Fleet funding
There are several different ways a multinational corporation can run its vehicle fleet.

It can use a different supplier in each country, providing local knowledge and the ability to choose the best firm in each area. However, it provides little opportunity to leverage buying power.

Alternatively, it can appoint one international supplier and use that supplier globally. This can mean a standardised approach, consolidated reporting and one central strategic contact at the supplier.

However, no fleet lessor has a strong presence in every market, so service levels can differ from country to country.

Another option is to use an international alliance of local lessors. Some of these can produce consolidated fleet reporting for each shared client but if the relationship is not properly managed, it can feel like dealing with many friends rather than one supplier.

Whoever said ‘Think Global, Act Local’ was absolutely right. All too often a multinational group goes out to tender for the global supply of photocopiers and then unsuccessfully tries to adopt the same approach to tackle the international car fleet. It is difficult for a multinational to put together one global fleet deal that will meet all its needs.

There are a few areas that can be harmonised. Choice of vehicle is a big one, because increasingly car manufacturers are prepared to look at a multinational fleet and give a discount that reflects its global buying power.

However, a marque acceptable to drivers in one country may not be in another and it is hard to leverage purchasing power in other aspects of vehicle management such as maintenance, fuel supply, accident damage, insurance and disposal.

Nevertheless, plenty can be covered in a multinational deal. Many firms have one group fleet policy implemented and managed by one lessor.

This means only one funding agreement to negotiate, with rentals based on one lessor’s cost of funds for each currency. There could be one agreed margin, one agreed formula for sharing profits on residuals and maintenance budgets and one set of standards for features such as safety to be included in the vehicles.

This can give the fleet manager the benefits of global procurement, with expert local suppliers delivering the service.

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