Developing a clear Fleet Strategy allows our clients to focus on their core business
Fleet strategy covers several inter-related areas with a broad range of stakeholders, including representatives from Operations, Finance, HR, Procurement, Payroll and Health and Safety. Each business is unique and requires a fleet strategy to meet the organisation’s specific needs, and no one size fits all.
Working collaboratively with our customers, we understand the business, challenge where appropriate, and develop realistic and deliverable strategies that flex as circumstances change. The fleet management strategy process starts with getting a thorough understanding of our clients business by asking questions such as:
1. What is the purpose of the fleet, and how does it align to the overall business objectives both now and in the future?
2. How to operate the fleet effectively and safely?
3. How do I fund the fleet and operate it cost-effectively?
4. What are the risks associated with the fleet, and how do I effectively control them?
5. How do I ensure the fleet is optimised, covering operational requirements and employee benefits?
6. How do I incorporate ESG requirements?
Fleet Strategy Review Process
Our Fleet Strategy Framework uses a robust three-step methodology. Therefore, the output is comprehensive and measurable against the business objectives.
Why Use EVP to Support Your Fleet Strategy?
Setting the right fleet management strategy can be a challenge for a lot of businesses we work with. Often, an independent viewpoint helps to provide direction and clarity through managing a wide range of internal perspectives.
Creating the right strategy significantly impacts how the fleet operates, creating efficiencies and better driver experiences.
If you need some help with your fleet management strategy, then please contact us.
Fleet Strategy Toolkit
Fleet Market PESTEL | How macro-environmental factors impact your business
PESTEL (Political, Economic, Social, Technological, Legal and Environmental) analysis is a business framework. The tool helps identify the various external factors that might affect a business and, specifically, the fleet’s running. The goal is to figure out just how the different factors influence business performance.
We look at how this is currently positioned for the Fleet Management companies in the UK, although the implications have a similar impact elsewhere within Europe and beyond.
Infrastructure
There is pressure on the Government to upgrade infrastructure for road and rail users due to increased congestion. The Government has confirmed that the high-speed rail link HS2 is proceeding; although the Eastern leg, running from the Midlands up to Leeds has been scrapped. Instead, the Transport Secretary has said money is aside to upgrade the current transport in the area.
Infrastructure spending will become increasingly important following the pandemic to support broader economic growth.
The UK Government originally agreed to ban the sale of internal combustion engine vehicles by 2030. However, in September 2023 Rishi Sunak has extended this to 2035 and made other changes in relation to the UK net zero ambition. It is currently unclear if other tax incentives will change in line with the new deadline or if they will be maintained at current levels.
Brexit
Brexit is now complete, and a trade deal in place but there is still uncertainty around both short and long term implications which is disrupting supply chains.
Negotiations are taking place for trade deals with various states in both the goods and services industry, which will influence future costs and product availability in some countries.
Trade
China, US, and EU tariff discussions potentially significantly impact the cost of sourcing vehicles in different territories. The outcome of trade discussions will impact where manufacturers will focus resources over the medium term. In September 2023 the EU announced an investigation into the supply of Chinese electric vehicles into the European markets with the view that Chinese companies have been receiving unfair subsidies.
US Election
The Biden adminstration appears to have a more traditional approach to the presidency compared to his predecessor. However, there is still a significant contingent of Trump supporterers who still maintain an ‘America First’ approach. This will come into focus as the former President appears to have strong support from within the Republican party and is set to run again in the 2024 election.
War In Ukraine
As a result of the Russian invasion of Ukraine supply chains have become disrupted with some specific parts only having a manufacturing base in Ukraine. In addition the inflation resulting from fuel price rises is causing cost of living challenges in many European countries. Interest rates have risen significantly across the world from historically low levels.
Supply Chain Changes
The impact of Covid-19 on global supply chains has been significant. Car production has been hugely affected by the semi-conductor shortage, which has had severe impacts on the technology industry as a whole. 2023 has seen an easing of these challenges although the backlog of demand will take some time to address.
Personal Tax
The increasing tax burden for company car drivers leads to the increased attractiveness of the cash allowance alternative. Company car volumes are lower year-on-year. The reduction of travel due to the Covid-19 pandemic is likely to exacerbate this trend as the tax from company vehicles reduces.
The exchequer will have lower receipts from fuel duty as there has been a reduction in general travel. There has been talk of road pricing due to the tax losses on fuel and vehicle excise duty.
Personal Leasing
The low interest rate environment adds to personal leasing through Personal Contract Hire (PCH) and Personal Contract Purchase (PCP). This segment of the market has seen significant growth in recent years and seems likely to continue. This will likely erode the potential demand from the traditional company car market as drivers opt for company car allowances instead.
Fleet Management Market Consolidation
Low interest rates lead to the consolidation of fleet providers through attractive returns from asset-backed funding. As a result, the leasing market is becoming more consolidated among the largest suppliers. Manufacturers are also expanding their footprint, as demonstrated through the acquisition of Inchcape by Toyota Financial Services.
Shrinking Overall Market
The reduced company run vehicle volumes are forcing Fleet Management companies to focus on profitability. This involves selling more additional value add services as part of a mobility mix. Fleet Management companies will review the relatively unprofitable businesses such as the broker market, with a view to accessing customers directly.
Fuel Duty
The long-running freeze on fuel duty helps with vehicle running costs, but this will come under increased pressure due to the pandemic and increasing penetration of electric and low emissions vehicles.
Asset Ownership Models
Generation Y are challenging the ownership culture, leading to a reduction in demand for passenger cars. Subscription services are becoming a widely accepted usage model within a variety of settings. The increased prominence of Uber and platforms such as Zipcar and Lime are adding to the available mobility mix.
User Experience
Car drivers expect the Amazon shopping experience. Tesla has led the way in creating new deployment models for sales and in-life user experiences.
Climate Change
There is an increased focus from many, especially the younger generations, regarding the environmental impact of travel. Innovations in electric vehicles offer a genuine low carbon alternative to fossil fuel vehicles. Other fuel sources such using Hydrogen as a greener alternative to internal combustion powertrains are also being developed.
Fleet Electrification
New electric vehicle technology is paving the way for a fully electric future. Infrastructure requirements at a local and national level will place additional demands on the national electricity grid. Other fuel technologies such as Hydrogen are also being investigated but remain a niche in the overall mix.
Autonomous Vehicles
Autonomous driving technology is leading several manufacturers to rethink their product development strategy from products to services. However, there is still much work to be done before fully autonomous vehicles hit the roads, with legislation providing the biggest obstacle to deployment.
Mobile Phone Technology
The age of mobile apps facilitates the rise of mobility alternatives such as Uber, Lyft and Zipcar. The implementation of 5G will offer a vast array of other possibilities within the automotive sector.
Mobility Services
The increasing availability of open-source information is helping to increase interoperability between transport options into a mobility solution. In the medium term, this will reduce the need for company vehicles.
Digitisation of User Experience
Increasing use of digitisation of the company car experience is helping to reduce the cost to serve and maintain or enhance profitability.
Connected Car
Connected car technologies offer increased opportunities within the big data and artificial intelligence space. Many of these services are in their infancy but are growing rapidly.
Worldwide Harmonised Light Vehicle Test Procedure (WLTP)
WLTP legislation impacts short term demand for vehicles due to the phased introduction and impact on personal tax.
EU Emissions Legislation
European legislation regarding new vehicle emissions forces manufacturers to invest in using new technologies to reduce emissions. Manufacturers face potentially huge fines for missing emissions targets.
Air Quality
Clean air zone (CAZ) legislation and legal challenges are enforcing action in many cities. Despite the delay in some CAZ implementations because of Covid-19, there is still a legal requirement for them to be put in place.
Covid-19
Covid-19 had a significant impact on traffic in local environments lowering emissions and improving air quality. There has been pressure from employees to keep some of these gains as we move forward, especially in relation to home or hybrid working practices. However, there has also been push back from industry
Global Warming
There is significant pressure on government to reduce carbon emissions of which road transport provides a considerable proportion. The UK originally committed to stopping the sale of petrol and diesel vehicles by the end of 2030 but subsequently has extended this deadline to 2035.
Clean Air Zones
Local air pollution forcing many local councils to think about introducing clean air zones to avoid significant penalties. To see the impact and breadth of the changes, follow this link: https://www.bvrla.co.uk/resource/CAZmap.html
Urban Environments
The pedestrianisation of inner cities is leading to alternative transport modes such as Santander Bikes in London and the rise of the e-scooter offering from Lime.
Fleet Industry | Porter’s Five Competitive Forces Analysis
The competitive forces analysis examines those factors which influence competition within a particular industry.
Our analysis covers the full-service fleet management industry.
Competition (Med/High)
Fleet management services are commoditised, and hard to differentiate the overall proposition. In addition, many providers utilising the same IT platforms as in-house systems can be cost-prohibitive for all but the largest suppliers.
Many providers use very similar second-tier supply chains for in life services and use the same OEM and dealer networks. In addition, manufacturer discounts are “owned” by the end customer rather than the lessor, so the sale of suppliers is less of a competitive issue.
Pricing can vary according to different assumptions relating to forecasting residual values and maintenance requirements.
There is less competitive rivalry on specialist assets or more complex commercial vehicle requirements as many providers will cap their services at the level of light goods.
Bargaining power of buyers (High)
Wide range of different suppliers and brokers offering vehicle finance and associated services.
Headline pricing is relatively transparent.
Relatively low switching costs, although these can be more significant where services are fully outsourced.
Limited competition for global suppliers
Bargaining power of suppliers (Low/Med)
Many suppliers offering similar services gives a limited chance for differentiation.
Digital enablement offering some opportunities to reduce customer services costs and improve service offerings.
Niche areas such as specialist vehicles or new services linked to mobility as a service (MaaS) offerings can offer advantages where customer requirements exist.
Threat of new entrants (Low/Med)
High capital requirements mean banks, vehicle manufacturers, and private equity are the main players.
Government legislation and FCA regulations can make compliance an onerous and costly activity.
Competitive market for skilled employees
High cost of obtaining new customers in a cost effective manner
Threat of substitute products & services (Low/Med)
Fleet management services are commoditised, and hard to differentiate the overall proposition. In addition, many providers utilising the same IT platforms as in-house systems can be cost-prohibitive for all but the largest suppliers.
Many providers use very similar second-tier supply chains for in life services and use the same OEM and dealer networks. In addition, manufacturer discounts are “owned” by the end customer rather than the lessor, so the sale of suppliers is less of a competitive issue.
Pricing can vary according to different assumptions relating to forecasting residual values and maintenance requirements.
There is less competitive rivalry on specialist assets or more complex commercial vehicle requirements as many providers will cap their services at the level of light goods.
Fleet Cost Savings | 15 Tips To Make Efficiencies In Your Vehicle Fleet Operations
Fleet cost savings are significant for most organisations as they can be one of the highest costs to hit the profit and loss account.
Managing fleet costs is not always easy, as they tend to be in different accounts. But, typically, the cost for each vehicle on fleet ranges from £5,000 to £10,000 per annum.
The starting point for fleet cost reduction is the existing cost. It is crucial to establish a cost baseline incorporating all costs associated with the running of the fleet. Then, measure any savings from this baseline to ensure any changes to fleet strategy have the desired effect. Often changes may save cost in one area only to increase expenditure in other areas.
When looking to reduce costs, it is essential to look at the different stages of a vehicle lifecycle: acquisition, in-life and disposal.
Vehicle lifecycle: Acquisition
The selection of the vehicle forms an element of fleet cost reduction. There are several key considerations for the acquisition stage, which are detailed below:
Vehicle lifecycle: In life
When you acquire a vehicle, it moves into its in-life phase. Here, you’ll need to think about the cost of fleet maintenance. It is possible to make fleet cost savings through several areas and initiatives highlighted below.
Vehicle lifecycle: Vehicle disposal
Once the vehicle has come to the end of its useful economic life, it will need to be disposed of. We have highlighted some considerations regarding the disposal process below:
Looking for more information on fleet management?
EVP Solutions has years of experience offering expert support for companies looking to outsource their fleet management and finance solutions.
Get in touch with a member of our team today on 0161 973 8579 or send a short introductory email to hello@evpsolutions.co.uk to find out more. Our fleet glossary and blog section offers more useful information and free resources on the world of fleet.