Fleet News

Fleet News Europe Conference: Fleets face up to the Continental challenge

INDUSTRY experts gathered in Brussels to air their views on crucial fleet issues. Reports by Mike Roberts, Steve Moody, Martyn Moore.

Legislation changes

THE chance of genuine tax harmonisation throughout Europe was at the very centre of the discussion on fleet legislation led by indirect taxation expert Bart Vanham, leader, ITX Automotive Network, at tax consultants PricewaterhouseCoopers.

Mr Vanham talked through proposed changes to VAT refunds on cross-borders leases, that will make it easier to lease a car in one country and run it in another, as well as the concept of a CO2-based tax on all cars throughout Europe.

With 27 different governments needing to agree on tax levels, many of the delegates felt there were too many vested national interests for any coherent strategy to be feasible.

As one said: ‘Governments like taxing their cars too much to allow the European Union to have a controlling influence over the tax take.’

The discussion was in response to European Automotive Manufacturers Association secretary general Ivan Hodac’s statement earlier in the day that the only way to get drivers into greener cars was through a harmonised emission-related tax, but that if agreement could not be reached, ‘we may as well shut the EU and go home.’

The threat of terrorism

TERRORISM and companies moving into Eastern Europe from China and India could change the shape of European company car parc of the future, conference delegates were told.

In a session looking at future developments in the European fleet market, Professor Peter Cooke, of Nottingham Business School in the UK, outlined areas which could have an effect on how the market develops.

Prof Cooke said: ‘Companies across Europe are being bought by large Chinese and Indian companies and how will they change vehicle policy? It’s something we need to ask ourselves.’

Terrorism is another factor that could potentially change the shape of the future fleet industry over the next decade, Prof Cooke said.

He added: ‘As fleet providers we need once in a while to look where our customers will be in five to 10 years’ time. How will these companies have changed? We will see lots of changes coming in Europe.’

Keeping an eye on costs

A EUROPEAN fleet executive who thought his annual spend was about €60 million found out that it was considerably higher – at €100 million.

This example was given to delegates at the conference by Peter Soliman, chief executive officer at Fleet Logistics International, who urged fleets to investigate exactly what they were spending.

Explaining how such an example could happen, Mr Soliman said: ‘A lot of fleets do not have the transparency needed to see what they are spending across Europe.’

The speaker also predicted more consolidation in the leasing industry.

He said: ‘Consolidation has speeded up over the last few years and we believe that will continue.’

Mr Soliman also used his presentation to highlight how the sophistication of fleets varied significantly across Europe and how the growing trend to shift from finance leasing to the more common operational leasing differed in each market.

He said operational leasing would account for the majority of new units expected to join the European company car parc over the next five years.

Maximising residuals

PAN-EUROPEAN fleets can maximise residual values of their end-of-contract cars by implementing a proper remarketing strategy, experts said.

Remarketing giant BCA analysed six three-year-old cars, each having covered between 120,000 and 160,000km, to see how much each was worth in Eastern Europe, Germany, Portugal and Spain.

One finding was that on paper, used prices in Portugal can seem much higher for some cars than in other countries, but the figures are skewed by its particular tax system.

Company bosses said the findings showed the importance of allocating their used cars across Europe to maximise prices.

Delegates attending the Remarketing Across Europe breakout session heard that saturating one market with the same make vehicles at end of contract would drive down prices.

Dr Florian Kaufmann, sales and marketing director at BCA Mainland Europe, said: ‘The used car market has a lot of opportunities but is very complex. You need to be able to track exactly what is going on in each market.’

Dr Kaufmann added that fleets could also maximise used values by not selling solely through auction, recommending that companies choose a remarketing partner that can offer a range of services.

What clients want

UNDERSTANDING customers’ needs is key to the success of fleet suppliers across Europe.

Matthew Dyer, managing director of LeasePlan International, outlined to delegates what is needed to successfully deliver on requirements that customers want.

He cited ‘global experience and local expertise, commitment on delivering tangible results and having joint control on progress and process’ as key factors.

For global experience and local expertise, Dyer told delegates this includes management reporting on local and consolidated level and applying best practice across all geographic regions.

Mr Dyer said: ‘You have to go on a journey of innovation to find out what your customers want.’

Three goals for success

THE three goals fleets should look to achieve when working with a supplier, according to Bruce MacLaren, global auto program manager for Microsoft, are cost efficacy, market median and compliance.

MacLaren, whose annual global budget for 6,500 vehicles across 100 countries is £100 million, said fleets needed to understand the market median, using surveys and studying peers, to ensure their suppliers were operating at the required level and they were not overpaying for services. They then needed to ensure cost efficacy, or good value, through cost control, transparent reporting and competitive pricing.

Compliance was also key, Mr MacLaren said, with executive support and buy-in needed, followed by annual audits.

‘Defined requirements, long-term commitment, objective feedback and continuous improvement will ensure a win-win relationship,’ he concluded.

USA work v Europe perk

NORMAN Din, vice president of client relations at US leasing company Wheels Inc, spoke on the lessons that can be learned by looking at the different fleet business model on his side of the Atlantic.

‘There are significant differences between the business practices of the United States of America and the countries in the European Union, to the point that they are so different I feel the fleet business of both will always remain different. It’s a case of work in the USA versus perk in Europe,’ he said.

The American fleet market is dominated by a few big leasing companies, leasing cars for essential work purposes. Almost none of the cars leased through fleet schemes are for perk purposes, he said.

As a result, there is enormous pressure on profitability, which has resulted in leasing prices staying flat or even declining in the last 15 years, in spite of rising costs.

The pressure has also led banks and most finance companies to exit the fleet leasing business, Mr Din added – contrary to what is happening in Europe, where many banks and investment companies have been buying leasing firms.

Only around 7% of new cars in the USA are leased for fleet purposes, compared to nearly 50% across many European countries.

So it is unlikely that the business models of the USA can be used on the various European states. Instead, said Mr Din, fleets need to optimise their businesses within the cultural, legal and operational constraints of each unique market and not try and impose other business models from elsewhere.

Identifying emerging markets

EMERGING markets in the European fleet arena will have a combined company car parc equal to that of Germany’s, delegates heard.

Bulgaria, Greece, Romania, Russia, Turkey and the Ukraine were identified as the main emerging markets by Jugo Stojanov, fleet analyst at Datamonitor.

He said reasons why suppliers should invest in these countries included the fact that they are fast-growing car markets, have growing economies and will account for a 58% increase in company car sales over the next five years.

Although a company car does not come as part of a salary package in many of the emerging markets, multi-national companies moving into the area over the coming years will change that, Mr Stojanov said.

Opportunities for suppliers include a comparatively old company car fleet that is in need of replacement, operational leasing is in an early stage of development, except for Greece and Turkey, and that international companies moving into the area are familiar with outsourcing.

Challenges they face include an undeveloped fleet market, bad road conditions and low-quality fuel that could affect residual values, an unstable used car market and an undeveloped company car culture.

But Mr Stojanov’s advice to suppliers was: ‘Be there first. You then have the advantage of being part of the early development.’

Road death reduction target

THE European Transport Safety Council wants all new cars to be fitted with Intelligent Speed Adaptation (ISA) and ‘alcolocks’ to prevent drink-driving.

According to the council’s head of communications, Franziska Achterberg, a science-based approach to road safety can reduce road deaths where education, attitude and cultural shifts might be less effective.

ISA fitted to new cars will tell drivers the speed limit, inform them when they are exceeding it and, if necessary, adjust the speed of the vehicle automatically. Ms Achterberg told delegates that inappropriate speed was a factor in one third of fatal accidents and that the introduction of speed cameras in France had resulted in a 30% reduction in road deaths in those areas.

Drink-drivers are responsible for 30-40% of driver deaths and yet many people still admit to driving when over the limit. Alcolocks are the technological answer, Ms Achterberg told delegates.

She advocates the fitting of seat belt warnings to all new cars and vans and called for fleet managers to support the implementation of these important technologies. ‘They will help fleet managers to reduce accidents and related costs,’ said Ms Achterberg.

‘Investing in technology will save you money.’

Call for CO2 harmony

EUROPEAN Automotive Manufacturers’ Association (ACEA) secretary general Ivan Hodac called on the European Union to introduce emissions-based taxes in all countries in order to stimulate demand for cleaner vehicles.

He said: ‘Emissions-based taxation is essential. Only when there is demand for cleaner cars will we be able to lower the overall emissions of the EU fleet.

‘With a harmonised CO2 tax across Europe we will solve the problem but an integrated approach is key. But there are 27 governments and this is a problem. If we can’t agree on this we may as well close the EU and go home.’

Mr Hodac condemned the amount of pressure car manufacturers were put under by the EU to push down average admissions to 130g/km by 2012 – a level he believes has been arrived at with ‘no basis in fact’.

He challenged others to do as much to reduce emissions as car manufacturers had, adding: ‘Which other industry has reduced its emissions by 13% in the last 12 years?’

Sourcing and suppliers

HAVING clearly defined priorities and strategies is integral to effective pan-European sourcing and supply agreements, Simon Boggis, director of procurement at CEVA logistics (formerly TNT Logistics), told the conference.

With operations in 26 countries, Mr Boggis outlined the steps he takes to ensure that his company, customers and suppliers are satisfied with the operation.

He said: ‘If you help the supplier, you help yourself. You need a disciplined, systematic process aimed at reducing the total costs of purchased materials, goods and services while maintaining and improving the value received from suppliers.’

A core team made up of experts from all areas of the operation was fundamental, Mr Boggis said.

He explained the seven-step methodology CEVA uses, which starts with evaluation and assessment to decide the strategy, followed by engagement of suppliers, negotiation and continuous benchmarking.

At decisive moments in the process, all stakeholders have ‘go’ meetings to formalise agreement and objectives.

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