With fleet managers having survived the COVID-induced ‘Carmaggedon’ earlier this year, many are continuing to explore ways to optimise the management of their vehicles – a trend that was firmly in place before the pandemic.
A recent webinar hosted by Jared Campbell, National Manager Customer Advisory of ORIX Australia, explored this theme and reflected on the many changes the automotive sector has experienced over the past 12 months, a period characterised by many highs and lows.
Calculating COVID’s cost
The pandemic prompted major changes to the automotive sector across Asia Pacific. Part of the fallout included disruptions to new car supply, after manufacturers shut factories in places like Thailand and parts could not be sourced from China’s Wuhan province – the ‘Detroit of Asia’. Supply problems were compounded by General Motors pulling out of the Australasian markets.
At the same time, the broader transport sector was experiencing other huge shifts. Businesses quickly produced new vehicle policies to ensure people could maintain social distancing in vehicles. For instance, sectors such as mining and infrastructure mandated single drivers in vehicles and businesses in these industries swapped large buses for smaller vehicles to maintain social distancing when transporting staff. According to the Australian Corporate Fleet Insights Report 2020, 62 per cent of companies placed restrictions on the number of staff who could simultaneously ride in the same vehicle. Additionally, some companies issued instructions to staff not to use public transport in favour of using online platforms such as Zoom or Teams to meet with colleagues and clients. Authorities also issued new restrictions to reduce the number of people who could ride buses, trains and other forms of public transport as part of COVID-safe protocols.
These opposing forces in the automotive and transport sectors resulted in a significant change in mobility trends. On one hand, there was reduced demand for vehicles as businesses sought to decrease their costs by rationalising their fleets and as people followed stay at home guidelines. On the other hand, social distancing and other protocols increased the demand for vehicles. Additionally, the Federal Government lifted the thresholds for the instant asset tax write off program so that businesses with a turnover of up to $500 million could instantly claim deductions for business purchases valued at up to $150,000. This included some new and used cars which further lifted demand for vehicles.
Further changes emerged as the year progressed. With a diminished supply of new vehicles, demand for second-hand cars skyrocketed. Buyers who ordered new vehicles were faced with massive lead times. As a result, fleet managers started to look for alternatives.
Is the traditional fleet model still fit for purpose?
During this period, many fleet managers reviewed their fleet models and changed their approach. Operating leases with maintenance built in remain the mainstay of most fleet management strategies, due to their many positives. These include increased certainty in budgeting, costs pre-built into leases and no requirement for capital expenditure. Of course, they also have certain drawbacks, including fixed contract commitments and the potential for vehicles to be underutilised.
As a result, many businesses are undergoing a significant evolution of their fleet as they pursue greater flexibility, transparency and seek to avoid wastage of underutilised vehicles. Some are reducing the number of company cars they have at their disposal in favour of giving staff access to shared (pool) vehicles and rental vehicles to meet changing demand. ORIX can bring these new requirements together in a seamless way by allowing customers to manage their transport needs using our ORIX OneView platform.
One of our customers sought to reduce its fleet costs and drive more efficient use of their vehicles as part of its response to COVID. Starting with 29 vehicles over five locations, their recent fleet review has seen them lease fewer vehicles, which their staff can share using our ORIX Share smart booking system while maintaining strict, COVID-safe sanitation measures. The result has been a 41 per cent reduction in their fleet size, which has saved them $240,000 in vehicle costs over the life of the contract, while still ensuring staff can continue to provide vital community services.
As we have all seen this year, the way businesses operate their fleets has changed and continues to evolve. This means there has never been a better time to review your fleet management strategy. Look for solutions that enable you to scale your fleet up and down through a combination of long-term operating leases, carpooling and PAYG mobility solutions. This approach allows businesses to respond to changes in the broader environment and to deliver transparency over whole-of-life fleet costs. There are usually lots of opportunities to make adjustments. Overall, a combination of short-term action and medium-term course correction, as well as flexible strategic realignment, is the best way to optimise the fleet to get the wheels turning again.