Fleet News

Leasedrive predicts 10 key trends for 2012

Leasedrive Group’s commercial director Roddy Graham has listed his top ten key trends for 2012, starting with a prediction of further consolidation in the contract hire and leasing market.

Graham said: “For the past few years, I have headed my top ten predictions by saying that further consolidation within the industry seems inevitable and I’m going to be no different this year.

“The 2011 Fleet News FN50 saw seven companies drop out from the previous year’s table. ING and Masterlease were acquired; the latter by us, while three went into administration. Another moved out of funding to retail while the seventh failed to meet the requirement of third-party funding.

“They were replaced by seven new entrants lower down the league table. With the top 10 accounting for 75% and the top 25 accounting for 94% of the funding of the smallest FN50 for 12 years, expect consolidation to continue with fewer players making up a more select league table.”

Asset Funding vs. Asset Management

He said: “In December last year, Ally Financial Inc - formerly GMAC Inc - divested itself of Masterlease UK, which we successfully integrated within our business this summer. And in July, another financial institution, ING Group NV divested itself of its leasing operations across Europe.

“As the squeeze continues on financial institutions, set against a backdrop of the Eurozone debt crisis, expect further banks to question non-core activities and consider concentrating on what they do best. At the same time, expect potential new funding entrants to the leasing market with an appetite for healthy profit.

“We demonstrated creativity by engaging with Investec, a FTSE 100 company, to facilitate and importantly fund the exciting Masterlease UK opportunity and introduced a new financial investor into the fleet sector. There’s a wide gap between asset funding and asset management which more banks are recognising – expect change.”

Cost – The War Cry

He said: “Top of the agenda in the current tough economic climate is a renewed focus on costs. Expect every cost line to be challenged and the winners will be those who do even more with less.

“Past failure to invest in leading edge fleet systems will expose those who for too long were content to rest on their laurels. A combination of world class fleet management systems, integrated solutions and top quality people will be the winning formula for delivering further added value to cost conscious customers.”

Olympic Transportation Nightmare

He said: “It’s hard to see London not repeating the Atlanta Games nightmare when it comes to transportation delays. During the 16 days, an extra nine million spectators will descend on the capital, which is often log-jammed at the best of times.

“Transport for London has spent an extra £6.5bn on improvements and line extensions but accepts delays are inevitable. Businesses will be encouraged to stagger working times, deliveries and increase home working. Controllers will be able to manually switch 6,000 traffic signals while 2,350 road junctions will be monitored by computer and signals adjusted according to road conditions.

“A third of the 109-mile Olympic Route Network in London will comprise exclusive Games lanes for the 80,000 directly involved with the Olympics. Expect fireworks at the very least but hopefully not the launch of any surface to air missiles which may be used to protect the Olympics from terrorist attacks. Transport definitely appears a weak link and will affect the fleet industry.”

Tax Efficiencies = More Salary Sacrifice Schemes

“With salaries frozen or increases kept to a bare minimum, salary sacrifice could become more popular for hard-pressed employees wishing to see their money go further.

“They can enjoy the benefits and status of a company car at a lower cost than anticipated, with savings on income tax and NI contributions outweighing BIK contributions. They’ll also be behind the wheel of a more fuel efficient, fully serviced and maintained new car for the next two or three years backed by comprehensive insurance provided by their employer. It’s tax efficient, so expect more employees to show interest.”

Company Cars vs. Cars-for-Cash

“The company car is back on the road. Companies are becoming increasingly aware of their duty of care responsibilities. Driven by concerns over potential corporate as well as individual director liability, companies are favouring a return of the company car.

“For them, it’s a safer, greener and cheaper option than cash-for-car and for drivers it’s a more attractive component of a total reward package. Fuelled by a combination of factors – lower CO2 emissions, higher mpg, wider model choice, tougher car policies, a sensible Benefit-in-Kind regime, greater vehicle manufacturer incentives, the company car is back on the road again, something I predicted would happen six years ago.”

Electric Vehicle Charge Forward

“With more and more new electric vehicles coming on stream from vehicle manufacturers, expect EVs to start making their presence quietly felt, albeit unannounced to pedestrians and cyclists, in towns and cities.

“Also expect more breakdowns away from home as they run out of juice. Currently only driven by true believers, I expect more people to test them, either through city car clubs or vehicle rental companies. We might even add a couple to our own fleet, along with charging points, to gain greater insight into the driving experience and true cost of ownership.

“As always, the greatest drawback is the lack of a proper charging point network infrastructure. With the Department for Transport finally announcing a central database for charging points, expect a more concerted and consolidated effort to not leave drivers stranded with no charge.”

Greater Pump Price Stability

“As predicted last year, the price of oil has risen steadily, now hovering around $98 a barrel. I actually predicted around $100 a barrel – not a bad guess! Uncertainty surrounding Iran’s nuclear capability could hasten major hostilities in the region, Israel having reportedly already threatened a pre-emptive nuclear strike.

“If that should happen, expect a major war and a leap in oil prices. Otherwise, the expectation is that a barrel of oil will cost around $113 a barrel in twelve months. Closer to home, drivers are downsizing as the cost of fuel continues to rise. And with sky high fuel prices, the FairFuelUK Campaign collected more than 100,000 signatures to secure a Parliamentary debate on scrapping the three pence per litre petrol duty increase in January and called for a fuel price stabiliser where taxes go up when oil prices fall and drop when oil prices go up.

“It all makes sense, and with the government wanting to avoid a backbench revolt, the Chancellor completed a U-turn in his autumn statement by scrapping the planned increase. The FairFuelUK Campaign has had unprecedented success so far and expect it therefore to drive for more concessions from government.”

Lower Vehicle Rental Costs

“The word on the street is that one of the major rental companies has so upset its rivals that they have had enough and are determined to recover market share through aggressive pricing.

“A price war for market share would result in lower vehicle rental costs. The only question is how long the price war can continue before one of the major names cries wolf as profits become significantly impacted. The vehicle rental sector is notorious for its inability to collectively raise rates to more sensible levels. There is always one major name willing to try to grab quick market share by not following the rest to raise prices. And in that regard they are helped by vehicle manufacturers once more turning to the sector to offload product as consumer new car purchases continue to fall.”

Proliferation of Fleet Management Outsourcing

“No change with my last prediction either. In a tough economic climate, businesses naturally wish to focus on core activities, those that they are expert at.

“Non-core activities tend to get outsourced in such circumstances and expect the trend to continue. So once again I expect a steady rise in medium and large-sized organisations turning to fleet outsourcing. Specialist vehicle management companies have the right people, the right expertise and the right technology to make things happen while their customers concentrate on their core functions.”
 


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