Fleet News

FN50 Conference: industry faces 'big ugly monster'

Big changes are ahead in the coming years for the fleet industry.

Environmental issues are industry’s ‘big ugly monster’

Supplying fleets with the vehicles they need and that their drivers desire is a big enough challenge.

Mix into the equation the issue of reducing CO2 emissions and the challenge becomes what Tim Hudson, commercial director of LeasePlan, described as the “big ugly monster that the fleet industry is facing”.

Mr Hudson is instrumental in delivering LeasePlan’s GreenPlan green fleet programme.

The plan was created to offer fleet customers a holistic solution to enable them to reduce their carbon output.

“Our customers have been driving this approach and it is incumbent on us to come up with the solution,” he explained.

One customer specified vehicles that produced no more than 120g/km of CO2, had a five-star EuroNCAP safety rating and were cheaper than the current offerings.

While this approach was not adopted by LeasePlan for its financial benefits, its customers have found it beneficial both from an environmental and financial view.

In just three years, one customer reduced its fleet emissions by more than 20%, achieved a 12% drop in journeys, a 36% drop in hire car spend and saved £70,000.

“Going green makes environmental and economic sense,” said Mr Hudson.

Low Emission Zone ‘will avoid congestion charging problems’

Fleet managers have been assured that the capital’s Low Emission Zone (LEZ) will not suffer the same administrative problems as the current congestion charging scheme when it comes into force next year.

While it is HGVs that will initially be targeted, LCVs and minibuses are next on the list.

Coinciding with the introduction of the LEZ, Transport for London (TfL) has proposed that cars with a CO2 output of more than 225g/km should pay £25 for entering the expanded congestion zone.

John Mason, head of enforcement at TfL, said that administration problems, such as correctly identifying vehicles and assessing liability, will be reduced under the new scheme.

“TfL has been pushing the Department for Transport over the issue. We are very happy to transfer liability if necessary,” he said.

Referring to plans to introduce congestion charging in Manchester and Cambridge, Mr Mason said: “It’s very important that we speak to cities looking to introduce these schemes in order to smooth over such issues before they go live.”

He also told the industry that TfL and the Department for Transport are in the process of working out discounts and exemptions which may apply to fleet vehicles operating in the LEZ.

Understanding individual fleet clients is vital to leasing sector

The leasing sector has been advised to develop a better understanding of its individual fleet clients.

Chris Cooper, managing director of Challenge Consulting, explained that fleet suppliers need to understand their customers and not just slash prices.

“Customer service can and does matter,” he said.

Mr Cooper said many suppliers fail to differentiate between the different needs of similar-sized fleets.

He said that taking the time to understand customer values proves more effective for business than simply providing a product at face value.

“What customers want doesn’t necessarily make them satisfied. Understanding what they value and what they are really paying for is more important,” he said.

By analysing their client relationships and understanding customers true values, leasing companies can also determine what aspects of the relationship are most costly to provide.

Price pressure is set to drive consolidation in Europe

Consolidation and outsourcing – two words that will continue to dominate the European vehicle lease industry over the next decade.

This was the message Peter Soliman, chief executive officer, Fleet Logistics International, gave to members of the industry at the FN50 conference.

Driving this momentum of consolidation, which in the US has seen the number of vehicle leasing companies fall to just two or three players, is price pressure.

Exactly the same scenario will play out in Europe (including the UK), Mr Soliman warned.

Profits in the US vehicle leasing sector are now just 6%; in Europe they are currently 20%, but are falling. “It is common opinion of leasing companies that we will see consolidation in Europe and the UK will not be an exception,” he said.

“The European leasing industry will become more consolidated – there is no question of that.”

There is also a major drive to outsource by large European fleet operators.

In a scene being witnessed across the Continent, Mr Soliman gave the example of one large fleet looking to dramatically reduce its operational staff numbers. “This is a common theme among large fleets,” he said.

“I have seen some fleets go down from 40 people to just five managing a pan-European fleet – there is massive outsourcing going on.”

Manufacturers challenged to encourage green switch

Car manufacturers are adapting to the environmental demands of today and tomorrow, but need time and a greater understanding of the way they work from society and legislators.

Simon Barnes, environmental affairs manager for the Society of Motor Manufacturers and Traders, said: “Since the 1990s there has been a levelling off of emissions from cars, while emissions from aviation and haulage are growing.

Today, 58% of road transport emissions come from cars, but that level has fallen since 1997 despite an 8% increase in distance travelled and a 16% rise in the total number of cars on the road.”

A huge challenge for the industry is to encourage the purchase of more cars with emissions of 120g/km or less.

In 2006 just 5% of cars fitted into this category, and Mr Barnes said that figure needed to be closer to 50%.

“Getting the mass market to move is really the challenge we face,” he said.

He urged the Government to scrap the 3% surcharge on diesel for BIK tax to encourage the take-up of lower polluting vehicles.

The hidden depths of good customer service

Customer service means looking beyond price and requires an in-depth knowledge of a company’s operations.

Discussion between leading industry figures who made up the FN50 panel debate raised some interesting points when it came to identifying good customer service.

Whatever fleets want, it’s more than just a competitive price.

“In any sector there will always be customers that don’t just value price,” said Chris Cooper, managing director of Challenge Consulting.

Nick Bridle, fleet manager at Royal Mail, said: “I want to deal with suppliers I can trust, to work in partnership with and who really understand our product and strategy.

For Susan McDonald, head of strategic sourcing at Virgin Media, cultural fit was important, as was an understanding that the supplier was the fleet expert.

“We supply television, telephony, broadband – we’re not a fleet company,” she said.

“You generally find when you get to a certain scale that the price is very similar between different suppliers. So then you have to focus on things that differentiate.

“Service can be looking after the drivers and the vehicles and then there’s looking after the fleet manager, so that you don’t have so much administration. Too often we forget that the main thing is to keep the drivers on the road.”

Stay on top in changing fleet market

Outside pressures are changing the fleet market, and guidance is needed to for manufacturers to keep up.

Peter Stokes, Volkswagen UK’s vehicle compliance manager, said we live in a time of mixed messages.

“We can build a vehicle that the European Union says is absolutely fine to sell anywhere, but then we hit brick walls in certain markets,” he said.

“Likewise with biofuels – one minute they’re great and will save the Earth, but the UN says they’re a blight on humanity.”

The vehicle market is no longer dependent only on competition and consumer demand, he continued.

Outside cost inputs are being applied to consumers to trigger behavioural change when it comes to the environment.

Mr Stokes called on governments to stand by their pledges under the 1997 emissions reduction agreement – to provide financial incentives and public green information campaigns.

He also called for guidelines to local authorities so localised initiatives don’t contradict others elsewhere.

A lack of uniformity in local environmental schemes makes it difficult for manufacturers to develop a car suitable for the whole of Europe, he said.

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