12 October 2020
The automotive industry has been dominated by a specific number of topics in the last year. From coronavirus (COVID-19) to electromobility and the advance of new technologies. But how have these topics impacted one of the industry’s most important sectors? In a new series, Autovista Group’s Daily Brief journalist, Tom Geggus, speaks with industry insiders to discover how these themes are changing fleets. Up first, COVID-19.
As countries went into lockdown to prevent the spread of coronavirus, the toll on the automotive industry was enormous. Between February and April registrations went into free fall, manufacturing ground to a halt and supply chains froze. Currently, incentive schemes are providing short-term stimulation, but the long-term consequences of the pandemic could be much further reaching, for fleets in particular.
In the beginning
Peter Golding, managing director of fleet management company FleetCheck, explained that early on in the pandemic there was a binary divide between essential service operators and those companies which had to put business on hold.
‘If we look at the impact to essential, they had a significant challenge because there was an expectation that they could increase capacity,’ he said. Some vehicles were seeing an exceptional jump in usage, which meant implementing increased sanitisation practices and policies to protect staff. Some companies even found themselves taking on board furloughed staff to meet demand, which meant training inexperienced drivers how to operate a vehicle that was completely new to them, all in non-ideal conditions.
Meanwhile, companies that found themselves operating out of their employees’ homes were without the integral systems that only functioned in an office environment due to safety restrictions. So the businesses with fleet-management software tied to localised intranets were at a distinct disadvantage to those with a cloud-based system. Meanwhile, those companies needing to pause operations and lay up a fleet were faced with a different conundrum.
‘If we are dealing with the issues of laying up fleet, the uncertainty of the duration of COVID-19 and how long the shutdown was going to last,’ said Golding. ‘Having a vehicle stand down for a month is quite different than having a vehicle stood down for five months.’
As time passes
Formed in March this year, the Association of Fleet Professionals (AFP) serves over 1,000 members in the UK, providing best-practice advice, training and representation. As the number of COVID-19 cases continues to fluctuate, fleets may find themselves facing fresh challenges as more time passes.
‘I think the reality for fleet operators, is that they're likely to see impacts well into 2021,’ said Paul Hollick, chairman of the AFP. This could include vehicle safety, as cars sit unused and uninspected for long periods of time, particularly if they are not company assets. Both the driver’s physical and mental health also become a cause for concern, whether they are having to risk commuting into the office or if they are becoming more confined to their home.
‘The other big thing, of course, is cost-saving and cost-reduction as everybody starts to tighten their belts,’ Hollick said. Trying to deliver savings at a time of economic fallout has meant reviewing and re-reviewing budgets to reduce the impact on bottom lines.
But as with operation types, not all vehicle types have suffered the same effects at the hands of the pandemic. ‘The van market has just gone crazy because of course, the delivery sector in a COVID-19 world requires a lot more vans on the road to be able to lift goods and services to people's address rather than to deliver to depots.’
Lars Pappe, vice president of e-mobility design and development at Deutsche Post DHL, considered that even after COVID-19 some trends may persist, particularly in relation to online shopping. ‘So I think the average amount of parcels we ship in B2C-related business, I think it will remain on the high volume level in comparison to before the COVID-19 situation.’
Since parcel volumes are expected to remain on the current high level, for some logistics providers this might mean increasing the number of light commercial vehicles (LCVs) in their fleet, to cope with a greater number of deliveries. Meanwhile, other operators might decide to increase the size of the LCVs they operate, to deal with larger loads. But whether operators are able to acquire additional vehicles, or even refresh their fleet from the currently distressed supply chain is another question.
‘Many companies have pushed to extend their contracts for various reasons,’ Sjoerd Brenters, head of international consultancy services at LeasePlan explained. ‘Clients might be more careful with leasing new vehicles and instead extend existing contracts given the uncertain times we live in,’ he said.
Upon impact, COVID-19 caused OEM supply chains to come to a standstill as the delivery of vehicles became problematic. However, these issues could be rectified as manufacturing restarted. The longer-term changes look to involve order completion and getting the car to the customer. Considering the impact on used-car sales, for example, Brenters explained how the LeasePlan subsidiary CarNext.com was well-positioned to handle the pandemic. With vehicles being ordered online, delivered directly, and all with little to no human interaction, CarNext.com could easily deliver vehicles in a safe way.
There is even the potential for a short testing period, with the option to return the car after a trial period for a relatively low amount. If this were to be the case, the relationship between those who supply fleet vehicles and those who use them could become far more direct, without the need for human interaction.
However, how these vehicles might be used is another matter. While at the start of the pandemic, cars were parked up, the need for these vehicles was not drawn into doubt. ‘Employees and employers are starting to rethink the usage of the vehicle. This doesn’t mean less usage, it just means different usage.’ said Brenters. ‘A car may be used less for commuting to work, but used more for vacations, for example, especially with people wanting to avoid flying.’
Therefore, the need for higher-end vehicles in which a member of staff spends a lot of time travelling would not decrease, its use would just shift. This will surely also influence the size and type of car which employees choose going forward.
On top of the pile
Operating a benefit fleet for its employees, Microsoft leases roughly 9,200 cars across nearly 50 countries. Managing the company’s vehicles in 10 of these European countries including Germany, Austria and Switzerland is Michael Pohl, senior procurement engagement manager fleet at Microsoft.
In the early stages of the COVID-19 pandemic, Pohl’s team received advice that vehicle orders should go on hold, but this was not the path he chose. ‘I remember saying, if everything is piling up, I want to be on top of the pile. We agreed that we are not going to stop anything. We continue to order cars, as well as possible. Within the limitations of operations in spring of this year,’ he said.
‘The only thing we did was to give the employees more time, because it was not possible for them to do test drives, for example. They need more time to figure out what type of car they want to drive in the future,’ Pohl explained.
Looking back, it is not a decision Pohl regrets for a moment. As production lines became operational, Microsoft orders were fulfilled with a shorter lead time, compared to the companies who decided to go on hold.
Looking forward, Pohl explained that COVID-19 is not the death of the company car, it is in fact far from it. ‘Since COVID, people have realised that having a company car gives you an incredible freedom,’ he said. These vehicles open up the potential for commutes without public transport, holidays without aeroplanes, and freedom without compromise.’
Right strategy for tomorrow
The coronavirus crisis has taken so much. It has taken lives and it has taken livelihoods. But it did provide one thing; time. As automotive production paused, distribution dried up and sales stopped, Alain Duez and Wim Buzzi used their time in lockdown to found a new company; let it fleet.
Drawing on their combined 45 years’ worth of experience in the automotive industry, the pair built the company on the pillars of people, procurement and process. Driven by a desire to approach vehicle supply from a customer perspective, let it fleet aims to create customised support that addresses every element of fleet management. This covers a wide gambit from policy assessment, to contract management and recruitment support.
As Duez and Buzzi established their new venture amid the pandemic, others in the automotive and fleet industry also had time to reflect. ‘Coronavirus right now has meant that a lot of companies have time,’ explained Buzzi. ‘They had frozen their car orders or extended their contracts because nobody is driving. And it gave them time to look at things.’
COVID-19 has meant the restructuring of fleet strategies. At present, liquidity remains at the top of the agenda while leasing costs mount. New-car sales have plummeted while lead times increase and manufacturers wrestle with their supply chains. Looking down the road, the company car faces a new world with the likes of more home-based working and the tightening of purse strings.
‘So, the way we will use a car will be totally different in the next few months, maybe even in the next few years. There are a lot of things that will be changing around,’ Duez said. ‘So, I think that we need to anticipate as much as possible for clients, to put in place the right strategy for tomorrow,’ he added.
COVID-19 has acted as a sudden catalyst for change when it comes to fleets. How vehicles are sourced, managed and operated. But the immediacy of the pandemic’s impact has acted as a trojan horse for a change that looks to tectonic. The age of electromobility has arrived, and the automotive industry is plugging in.