The Australian Financial Review invited some leading fleet management organizations and the Australasian Fleet Management Association (AfMA) to answer questions on key issues facing fleet managers in 2014 and into the future.
What do you see as the top three emerging trends that will have an impact on fleet managers in the 2014/15 financial year?
Spiro Haralambopoulos, managing director at LeasePlan Australia, suggests technology will drive emerging trends and identifies integrated telematics, mobile technology and car sharing. He believes each of these areas will allow fleet managers to increase the productivity of their fleets through efficient use and enable a reduction in running costs.
Ed Stanistreet, general manager at Toyota Fleet Management, also nominates technology such as connect mobility and mobile apps. “Until recently, mobility has been cost-prohibitive for fleet managers and fleet management organizations. However most manufacturers will start rolling out cost-effective hardware solutions,” says Stanistreet. Both LeasePlan and Toyota Fleet Management see car sharing as something that will become more popular with smart fleet operators. Car sharing has become popular for private motorists in high-density areas but has been managed poorly by most fleets for years. Technology will allow fleets to do it better.
Scott Taylor, CEO at FleetPlus, sees the adoption of technologies to save costs as a key goal in 2014/15. “There has been a continual rationalization of fleets in the pursuit of stripping OPEX out of businesses globally. Technology like mobile FBT applications will help achieve this.”
Matthew Lanigan, general manager at Custom Fleet, sees structural changes to local manufacturing, tariff reductions and government regulations as key things to watch in 2014/15. “We are anticipating challenges as a result of the removal of tariffs and excises for luxury and imported vehicles. The reduction in price will have a negative impact on residual values, creating balance sheet risks for the lessor and organizations which own their fleet,” Lanigan says.
Ken Thompson, director research and communication at AfMA, sees fundamental changes looming as a result of the closure of local manufacturing. “We see this as having a profound impact. We expect there will be a structural downward shift in new vehicle pricing as the industry adjusts and vehicle importers wrestle for market share,” Thompson claims.
“Any reduction in new vehicle pricing will have a corresponding fall in the residual value.”
Fleet management is a mature industry that has seen many changes over the last 20 years.
What changes to you expect in the next 10 years and how will the industry adapt with new products and services?
Transparency in reporting and cost structures was a theme in responses to this question. Stanistreet says the market is driving the need for more transparency. “Customers want full disclosure of finance contracts , including management fees, and residual values, including a breakdown of maintenance, tires and registration costs. They are demanding details of their contract and want to be actively involved in sharing costs – positive and negative.” Haralambopoulos sees transparency as a growing requirement in relation to the growing number of legislative, regulatory and industry-specific requirements. “Genuinely transparent reporting will be demanded, and fleet providers and their systems must be able to report on all aspects of fleet performance.”
AfMA and Custom Fleet anticipate a greater focus on telematics. This is an area passenger fleets have been slow to adopt because of high initial cost and little perceived benefits. Thompson acknowledges there is great expectation about benefits this technology can provide, but believes the introduction will be much slower than anticipated. Lanigan says: “The convergence of developments in telecommunications, vehicular technologies and electrical engineering is making vehicles smarter, and more connected. As part of the rise in machine-to-machine communication and connected technologies, we will see more vehicles collecting data which can be analyzed to improve efficiency.”
Changes to accounting standards are one thing within the next decade that will force FMOs to develop new products. “While an agreed date looks to be beyond 2018, fleets are already considering changes to how they finance. Some will choose to move to novated [leases] as this will continue to be off the balance sheet,” Stanistreet says.
Trans-Tasman Universal Agreement
Many fleet management organizations operate in Australia and New Zealand. What do you see as the key differences between the two countries for a fleet manager? And can companies successfully implement a trans-Tasman fleet policy?
“If you are an Australian or New Zealand business, and cost controls and savings are important, then trans-Tasman fleet policies should be a priority,” Haralambopoulos says.
“There are great benefits in a universal agreement, a single system and shared back-office space with consistent service levels.”
According to Lanigan, the differences between the Australian and NZ markets are minimal. “Customers are increasingly demanding trans-Tasman solutions because it not only saves administration time, but also has the benefit of consolidating reporting and a harmonization of buying policies and disposal strategies.”
Thompson says: “It’s interesting to note that the issues facing fleet managers around the world are of the same nature. The defining differences are that they are for the most part embedded in different legal and taxation systems. As Australia and New Zealand are very similar, there should not be any great operational differences.”
The last 18 months have seen the three local manufacturers announce they will be closing their doors by the end of the decade. Do you think decisions made by fleet managers have contributed to the demise of Australian vehicle manufacturing?
Everyone saw the end of local manufacturing as a result of decisions made by multiple stakeholders including governments, manufacturers, fleet and private buyers. Thompson says. “The main outcome was a significant shift in vehicle preference from six to four cylinders. The principle reasons were that the smaller vehicle easily met the required operational characteristics and most importantly, it was considerably more cost-effective.” Stanistreet thinks there is a case for and against the influence of fleet managers.
As fleet managers have become more professional, they have made more informed decisions about whole-of-life costs and vehicles that are better suited to their business needs. This process has introduced them to a wider range of imported models that have entered the market because of tariff reductions and competitive exchange rates.
Safety is something all organizations are concerned about and motor vehicles are a workplace for so many people. Do companies give enough attention to safety for mobile employees like salespeople, service technicians and truck drivers?
What needs to be done to ensure they are treated like an office or factory worker?
“AfMA’s experience suggests that many organizations are not fully aware of what is required of them under current OH&S legislation. The law clearly states that the organisation is required to ensure that it provides a safe workplace,” Thompson says. “There is no difference between a factory worker and a vehicle used for business purposes. It does not matter who owns the vehicle. If it is being used on behalf of an organization, that is if the organization owns the task, then it is not only responsible for providing a safe workplace but also has to ensure that others are not adversely impacted by the activity.”
Toyota Fleet Management are seeing a change in customer attitudes with a broader recognition of safety issues when an employee drives a company supplied or personal motor vehicle for business purposes. “This is particularly evident in companies with overseas headquarters, as there are tighter regulations in countries like the USA and UK,” Stanistreet says.
“Most customers grapple with how to manage the responsibility of a vehicle being considered part of the workplace. We have noticed two models being adopted: a pragmatic approach with policies to guide drivers, or using a stick with penalties for non-conformance. In the UK, employers are required to have policies in place, and measures to enforce them. This is not the case [yet] in Australia.”