Fleet management has, arguably, never been as challenging as it is today, writes John Oxley, with the greatest impetus coming from fleets which want to maximise what they get for their money, while running alongside a whole lot of parameters which are sometimes unrelated to the business.

There can include such imperatives as minimising pollution, or rather carbon dioxide output, from vehicles, with limitations on engine size or type, while other major factors can include downsizing of fleets – or the vehicles in the fleet – to reduce both overall monthly leasing costs as well as running costs, as well as outsourcing monthly administrative services.

These can be as low as reminders of when servicing is required, right through to the purchase of tyres, administration of road user charges, and even accident-related services such as repairs and loan vehicles.

At the same time many business managers are looking at ways to get rid of fleets altogether by offering incentives for employees to use their own vehicles rather than a supplied company vehicle.

We asked some of New Zealand’s top fleet management companies what they thought about the latest trends, and how they were tackling them.

Services

First up, we asked what sort of services fleet management companies are being asked to include in their contracts.

Sgfleet’s managing director Geoff Tipene commented: “More and more customers and prospects are looking for a ‘total outsource’ provider rather than someone who leases motor vehicles.

“New regulations and workplace safety laws have made the management of company fleets a priority, and clients need to be confident that their FMO is successfully managing and controlling whole of life costs, fit-for-purpose selection, driver management and compliance.”

Toyota Financial Services’ national fleet sales manager Darren White added: “In today’s market, fleet customers require a structured programme which will not only enable them to manage their costs, but develop efficiencies; whether it’s CO2 reporting or basic maintenance controls.

“On top of this, we find customer’s value ongoing relationships between themselves and a relationship manager, which is why we have dedicated in-house account managers to monitor and advise customer’s throughout their fleet’s lifecycle.

“Customers want a seamless end to end solution inclusive of maintenance, fuel, loan vehicles, roadside and accident assistance.”

He said Toyota Financial Services has been in operation since 1989, and has grown to be New Zealand’s largest motor vehicle manufacturer-owned finance company.

“With more than NZ$1bn in assets, TFS and its Fleet Management have become synonymous with the values you would expect from a Toyota purchase – a trusted, reliable offering,” he said.

“The parentage with Toyota Motor Corporation of Japan has meant TFS has had extensive exposure to the New Zealand vehicle market and grown to understand New Zealand customer’s fleet requirements.”

And Tania Betts, national sales manager for Custom Fleet, said there was no simple answer to what was being included in contracts.

 “It varies from simple ‘off the shelf’ vehicle management services to highly tailored solutions, with an emphasis on fully outsourced management and extensive analytics to drive fleet policy effectiveness,” she said.

Customers’ needs

We also asked if clients are becoming more demanding in terms of what they want for their money.

Darren White disagreed. “Customers require consistent lease rates backed up with experienced  account managers that can deliver superior service,” he said, “so I wouldn’t say customers are more demanding; they just know what value they expect out of the relationship.”

Tania Betts added: “Fleet managers are becoming more sophisticated in their approach to fleet management, so are much more likely to partner with a company which will build a tailored solution around their specific needs to extract the kind of value they need from their investment.”

Geoff Tipene said customers were not becoming more demanding; rather they were becoming more experienced.

“Clients are realising what they have been getting for their money. Unfortunately a lot of decisions made years back on the ‘lowest rental’ alone has cost more money at lease end due to a lack of term management.

“The prospects we are talking to today know exactly what they want and need as a result of previous experience(s). One area that has been very successful for sgfleet is the way we manage the fleet on a day- to- day basis.

“Our approach is that we establish a relationship and deal directly with the drivers, keeping the business contact/management only being contacted by exception, or at the quarterly review period. We become part of their business.”

Downsizing

Next up we asked if downsizing (some call it right-sizing) is proving challenging in terms of those employees who have to carry equipment around with them.

And all three agreed that it’s more about fit-for-purpose than anything else.

“Choosing a vehicle that’s ‘fit for purpose’ remains at the top of the decision making process,” says Tania Betts.

“We actively work with our customers to help present them with vehicle options aligned to their objectives, and while we don’t control the decision making or communications process, we do recommend that customers engage multiple stakeholders for significant changes to policies. 

“This can range from vehicle drive assessments, structured drive day,s or sharing our experiences through our Access GE programme – a programme designed to put customers in touch with others who have undertaken a similar event.”

Geoff Tipene adds: “Sgfleet will spend time with a client/prospect to understand their business and their fleet. The results of that, then aligned with the company’s internal policy expectations, would then narrow the options of vehicles choice to be presented for consideration.

“What sgfleet has done for a number of clients, and would highly recommend to the client/prospect that is changing a legacy fleet, is a drive programme.

“This is performed with a cross-section of the business, the short-listed vehicles, representatives from the distributors, and sgfleet staff.

“Each driver has the opportunity to drive and assess each vehicle being considered. The end result is the drivers and management have had “buy in” on the process resulting in a smooth, mutually selected fleet transition.”       

And from Darren White: “As part of the account management process we ensure that our customer/drivers have vehicles that are fit for purpose. Our account managers work closely with our customers to provide specialised vehicle fit-outs.

“Fit for purpose means the vehicle meets OSH, emissions, environmental, and business requirements.

“And we are always mindful of the impact on staff, and on a number of occasions customers have asked for our account managers to present to their staff on the various options.”

Emissions

Although there continues to be lots of Media attention on emissions, we wondered if in fact this was finding its way into fleet management thinking, and asked if it is getting easier to meet the emissions goals of those companies which have taken emissions reductions on board as an imperative.

Geoff Tipene was quick to answer this one.

“The NZ company vehicle fleet has become greener both by circumstance and motivation to drive out cost.

“The recession provided great impetus for the motor manufacturers to look at global vehicle platforms and fuel efficiency of the motor vehicle, and this investment has meant we have seen massive changes in vehicle pricing, and the efficiency of the petrol engine over the last four years.

“The consumer is the benefactor of this research and development, as we have vehicles that offer great value-for-money and fantastic fuel efficiency.

“The Holden Volt and the Mitsubishi Outlander PHEV have shown us a glimpse the future of the motoring world, and I believe fuel efficiency will continue to be a motivating factor in motor vehicle selection.”

He did not believe there had been any resistance to embracing this new technology; just that developments in petrol engine fuel efficiency had kept electric vehicle sales volumes lower.

Toyota, with the Prius derivatives and its Lexus hybrids, is the leading producer of hybrid vehicles in the world, and has a strong vested interest in emissions.

Darren White says TFS works closely with its customers to meet their emissions reduction objectives. “Given our parentage with Toyota Motor Corporation of Japan we are at forefront of emissions reduction,” he said. And he added that there was increasing interest from his clients in embracing the new technology.

Adds Tania Betts: “While emissions goals have slipped to the back burner for many, fuel efficiency remains key, and fortunately, with many of the vehicles entering New Zealand today, they tick both areas.”

She said there was definite interest in the new technology, but but customers were rightfully conservative in not being quick off the mark to embrace it until they could be sure of all of the factors, eg, battery life, servicing requirements, how its impacted by the elements through to the costs of battery replacement. 

Costs

Talking of costs, we asked whether costs of leasing, and vehicle running costs had been reduced as a result of the stronger New Zealand dollar.

All three agreed on one point – they pass on any reductions in vehicle pricing directly to their customers. But running costs have been affected in some cases by increased workshop labour costs.

Said Darren White: “The vehicle purchase price is only one component that makes up the monthly rental within the operating lease product; other factors include maintenance of the asset, residual and interest costs, to name a few.

But he had good news on running costs: “In a number of cases the overall  running costs have reduced over time, as maintenance intervals on vehicles are now longer, and therefore helping to reduce the overall total cost of ownership on vehicles.”

Tania Betts said running costs varied model-on-model.

“In some instances costs have risen, in others, no,” she said “It’s generally dependent upon models, but as a guide, maintenance costs increase year-on-year as evidenced in the Consumer Price Index, which is one of the key benefits of a fully maintained lease that locks down price at the onset.”

She added that a key trend has been customers approaching Custom Fleet to help them determine the optimum life of vehicles.

“This is generally in leasing, but we’re also having very similar discussions with our customers who own their vehicles. 

“It is an interesting exercise and we have seen instances where customers have changed their fleet policies both in terms of vehicles and terms to get better fleet efficiency.”

Geoff Tipene added: “Lease prices have remained fairly constant over the TOT vehicle fleet for a few years now. There will be exceptions from time to time, but in general rentals have been very consistent.

He said oil and parts cost has remained stable, but labour rates have increased between 3-5 percent. over the last 12 months

“Obviously any increases are absorbed by the FMO when a customer has a fully maintained lease,” he said.

All three agreed on one thing. Despite strong trends in some overseas markets, the New Zealand fleet market is showing absolutely no interest in moving towards “user choosers” or a car allowance system where employees are paid for the use of their own vehicle.