Richard Brown draws together UK fleet findings from Alphabet, GE Capital and Timetric
Although private registrations may be on the rise in the new market, fleet and business registrations in the UK for the first half of the year accounted for 52.09% of the market, according to the Society of Motor Manufacturers and Traders. That’s 606,125 new fleet and business registrations, up 4.25% year-on-year. Over the same period, commercial vehicle (CV) registrations, trucks and vans from 4x4s and pickups to 18-wheelers, have risen 7.53% by volume to 154,397.
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However, the finance market for business vehicles continues to fluctuate. According to latest figures from the Finance & Leasing Association, the volume of new and used cars bought on finance by businesses is down, year-on-year, for the month of May and three months to May. But looking over the past 12 months shows volume growth up by an average of 0.31% a month, 2% for a three-month period, and by 5.38% for a rolling year.
With the market appearing volatile at first but with long-term gains available, many analysts have taken the opportunity to evaluate the UK fleet industry, including Alphabet, the fleet lessor under the BMW Group umbrella, GE Capital, the finance arm of the industrial giant, and Timetric, independent data provider (and of which Motor Finance is a part). And an increasing number of players in the market are taking such analysis on board: 60% of fleet managers surveyed as part of the Alphabet Fleet Management Report 2012 said they benchmark fleet costs against the industry average, up from 42% in the previous year’s report.
Drawing together responses from both fleet suppliers and buyers, the Timetric Industry Survey 2013 identifies the five areas of strongest demand in UK fleet predicted by respondents to be software, telematics, risk management, daily rental and driver training. Of all company car users, 60% expect driver training to increase or significantly increase in 2013, followed by 58% nominating risk management and 53% telematics. The top three areas of expected growth for fleet suppliers, however, are software (58% expecting an increase or significant increase), telematics (58%) and commercial vehicle leasing (47%).
There is less expectation of growth in finance but fleet providers appear generally more optimistic than users with 42% and 31% of buyers expecting some increase in CV leasing and vehicle finance, respectively, compared to 47% and 43% of suppliers. The situation is reversed in car leasing, whereby 39% of buyers expect an increase, above the market average of 33% and 21% of suppliers, although 18% on both sides of the industry expect to see a decrease. However, nobody on either side of the market expects significant growth in CV purchases, although 3% of all respondents believe there will be a significant decrease in car purchasing.
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By GlobalDataCut instead by size of fleet operated by companies, 100% of companies with a fleet of more than 500 think car leasing, fleet management and risk management will see growth in 2013, compared to 31%, 20%, 49%, respectively, for companies running a fleet of up to 50. For companies with a fleet of 51-500 vehicles, the areas most expected to see an increase are software (76%), risk management and telematics (69% each). And cut by companies’ annual turnover, the two areas with the most consistent predictions of an increase in growth are CV leasing, where just under half of all company sizes expect growth, and vehicle finance, where just over a third expect growth.
The greatest concern in the UK fleet market is market uncertainty, as identified by 64% of all respondents, followed by pricing pressure (58%) and rising competition (55%). Market uncertainty was identified as a concern by 71% of respondents from middle-tier companies (those with an annual turnover between £100m and £1bn) and 83% from large companies (with annual turnover in excess of £1bn), while rising competition was a worry for 86% of middle-tier respondents and 67% of those from large companies.
Meanwhile, responding to pricing pressure is a concern for 65%, higher than any other, for staff surveyed from small companies (under £100m by annual turnover.)
Of all those on the supplier side of respondents – fleet service providers, industry observers, plus trade bodies and government organisations – 42% are ‘more optimistic’ about revenue growth in 2013, increasing to 44% among senior-level respondents, including chief executives, managing directors and board members. Of small company respondents, 50% are "more optimistic", as are 33% of large company respondents. Tellingly, 14% of middle-tier company respondents replied "Don’t know" to the question of revenue growth, accounting for the entire 3% total of respondents.
Who’s buying?
According to the Timetric survey, average expenditure is projected to decrease 0.3% between now and April 2014, although 32% of company vehicle users expect fleet spending to rise between 1-10% and 29% expect expenditure to stay at the same level.
By fleet size, 26% of respondents from companies running fleets of fewer than 50 vehicles expect a decrease in their budget while 36% expect an increase; 37% of respondents from companies with a fleet of between 50 and 500 vehicles expect their budgets to reduce, while 44% expect them to increase (although not by more than 10%). By turnover, 19% of small companies expect a decrease and 45% expect an increase, while 55% of medium companies expect a decrease and 23% expect an increase (again, not by more than 10%). Only 12% of those at a senior-level expect a decrease, and none by more than 10%, in their budget while 42% expect an increase.
The cars most expected to be added to fleets are lower-mediums (such as the Focus, Astra or Golf), and most predominantly by companies running fleets between 51-500 or more than 500, and with a turnover between £100m and £1bn. The next most-expected additions were upper-mediums (the Mondeo, 3-Series or C-Class), followed by CVs.
The majority, 75%, of fleet users expect supplier price rises in 2013, split between small (73%), medium (69%) and large (90%) companies’ predictions. In order, fleet users list price, level of service, quality and supplier’s record for reliability as the most important factors to selection. However, supplier’s record for reliability is also felt by buyers to be a factor most often overestimated by suppliers, alongside innovation and supplier’s brand reputation.
Company car users also believe suppliers underestimate the importance of proximity to supplier’s operations and price.
According to the survey, the three most important procurement objectives for buyers are internal operating cost reductions (nominated by 56% of buyers), sourcing lower-costs of supply (46%) and improving sustainability and environmental performance (46%). The effect of the last of these can be seen in GE Capital’s figures for UK fleet CO2 emissions reduction since 2008.
The least important three are the drive to innovate and update inventory management (17%), and the involvement of external advisors and consultants and improvement the security of supply (14%, each).
richard.brown@timetric.com
