GE Capital. Fleet Management across the globe

Transcription

1 GE Capital Fleet Management across the globe 2015

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3 Contents 4 Benchmarking your Fleet Costs 5 About GE Capital Fleet Consultancy 6 About the TCO Research 7 Optimising TCO 8-20 Country Analysis Sweden UK Benelux 16 Germany 9 USA 11 Spain 12 France 13 Italy Japan 10 Mexico 21 Fleet Management Across Borders 22 Beyond TCO: The Future of Fleet 19 Australia 20 New Zealand

4 Benchmarking your fleet costs For companies around the globe, when it comes to managing their corporate fleets, cost control remains a top priority. One of the most critical lessons that businesses learned from the global financial crisis was how to manage their costs more effectively. And despite facing a positive economic outlook and early signs of business growth, fleet managers are under more pressure than ever to drive down these costs. In the world of fleet management, that includes everything from the actual costs of leasing or buying the vehicles, to other variable costs like fuel, tax, insurance and depreciation. By aggregating all of these cost elements into a total cost of ownership (TCO) figure, companies can calculate expected costs of individual vehicles throughout their lifecycle. To gain a real sense of their TCO performance, fleet managers need to understand individual cost drivers and how to optimise them, including the ability to compare themselves with a benchmark for TCO data. The problem is the sheer scale, volume, and volatility of data that needs to be sourced and analysed. And for any fleet manager whose role spans more than one country, the various factors making up TCO can vary significantly across countries, making international TCO comparisons even more complicated. For example; Vehicle maintenance and repair costs vary by region and location, as do the costs associated with road risk management and driver safety. Within Europe alone, the treatment of carbon dioxide emissions in relation to vehicle tax, and fluctuations in fuel prices, are two significant variables that can impact TCO differently even in neighbouring markets. European VAT regimes are equally inconsistent, ranging from 100% recoverability on leasing rentals in countries like Germany and the Netherlands, to an absence of any VAT recoverability for passenger cars in France. Similarly, when you look across continents, we may see significant variations in individual cost elements due to the difference in open vs close ended models. The US favours the open ended model, where the residual value is often assumed to be low (to minimise chances of booking a loss at the end of life), leading to a higher depreciation. Also, in the US services are on a pay as you go basis, thus impacting tyres and maintenance/repairs as a % of TCO. As against this, Europe prefers a close ended product (with Residual Value risk with the lessor) and a known monthly budget for services. Then there are the so called hidden costs such as variations in labour costs. And since labour costs are incurred as a result of a road traffic accident or breakdown, or the costs of vehicle refurbishment when the term of the lease is up, these can in turn impact other cost categories. With so many variables to consider, and the fact that key TCO data is heavily impacted by economic, political and regulatory factors (both domestically and globally), reliable external benchmarks for TCO are difficult to find. Yet, access to that data would enable fleet managers to really get under the skin of TCO, understand the pivotal factors that influence costs, and ultimately make changes to their fleet policies to bring about significant reductions in their TCO. 4

5 } As Florian Waldegger, Director, Global Fleet Consulting, GE Capital, says Our role is to help our customers optimise their TCO. To achieve this we have to be at the forefront of industry developments. Having undertaken 9,000 studies across 700,000 vehicles in Europe between , the team are well placed to provide this insight. About GE Capital Fleet Consultancy GE Capital s Fleet Consultancy is a comprehensive consultancy process, led by a team of highly skilled professionals, that is aimed at helping fleet managers optimise their total fleet costs. The objective of this service is to recommend and implement cost saving opportunities. The fleet consultancy team attacks the different cost components of running a fleet and focuses on the Total Cost of Ownership. It considers every aspect of the fleet management process (operational, financial, HR, taxation and fleet policy requirements) to identify areas of potential productivity improvements, process efficiencies and financial savings while also ensuring the safety and satisfaction of the drivers. The consultancy service has extensive experience of optimising fleet costs for large multinational fleets, providing a service that is consistent across all countries, starting from fleet policy analysis (specific to the industry), tailored recommendations, support with implementation and result tracking. With its global insight into TCO the Team has enabled many clients with fleets in multiple markets to make substantial reductions to TCO. The fleet consulting team has been operating for over 10 years, and in 2014 alone performed over 1,500 studies in Europe, identifying savings of 78,000,000. 5

6 Global TCO Research Fleet Consultancy Insights Established in more than 20 countries, GE Capital s Fleet Consulting Team provide specialist insight and analysis for its customers corporate fleets in these countries. By bringing these insights together GE Capital is uniquely placed to identify the average TCO percentages from over a million drivers across the road. Over 1,000,000 drivers across the globe From 9,000 individual studies Undertaken over the last 10 YEARS 13 COUNTRIES analysed in depth TCO Research Methodology To ensure representative results the study is based on the most common passenger car, prevalent financing product, contract term, mileage option for the 12 months preceding the study, by country. Services considered include taxes, accident& insurance costs, tyres, maintenance, interest, management fees, and all costs associated with depreciation (including but not limited to, sourcing, vehicle choice, contract duration). Research based on GE Capital s customers fleets in Australia, Belgium, Canada, France, Germany, Italy, Japan, Mexico, Netherlands, New Zealand, Portugal, South Korea, Spain, Sweden, Switzerland, UK, USA. Findings validated in the final quarter of 2014, and first quarter of Key consideration For simplicity, this study is based on a single car per country (selected based on GE Capitals most popular passenger car model in that country) to arrive at benchmark TCOs for the country. In reality, cost components vary widely by car, and most importantly vary widely by contract and driver specifics, based on a wide range of variables (Contract duration, vehicle discounts, usage profiles etc). The benchmark TCO by country should thus be used only as an indicator, and remember that the greater value of TCO is to determine the total cost of running different fleets within a country, rather than comparing across territories. For full details of the areas considered, speak to your GE Capital Fleet Consultant. Global TCO in Action GE Capital s Fleet Consultancy Team worked with a global pharmaceutical company, to help it to improve TCO through optimisation of its OEM (Original Equipment Manufacturer) policy. The global fleet, which comprised 20,000 vehicles deployed across 18 countries (covering Europe, North and South America, and Asia Pacific), had reported baseline annual costs of almost $192 million. After studying the firm s existing OEM structure, the consultancy team identified optimising OEM choice as a key opportunity and developed strategies aimed at reducing those costs. This involved co-ordinating three bidding opportunities with the OEMs, covering all countries and seven car size segments. By focusing on sourcing and vehicle choice, the company was able to reduce its annual fleet costs by 10%, while retaining driver choice and satisfaction levels. Florian Waldegger, Director, Global Fleet Consulting, explains At the end of the process, the company selected a strategy that supported both their cost requirements and the need for employee satisfaction with their choice of vehicle. They reduced the number of OEM providers from nine to four, and are currently anticipating a cost reduction of 10% on their TCO across all the markets in which they operate.

7 Optimising Total Cost Of Ownership The average TCO for all countries in the study reveals that depreciation and fuel are the two largest cost areas for fleet management, accounting for 67% of all costs. Depreciation, the main cost area within the TCO, is linked to the purchase price of a vehicle. As markets get back to growth mode and car manufacturers start to reduce discounts offered, this has a significant impact on the monthly depreciation. Furthermore, as the company car is still a crucial component of the compensation and benefits package, we expect this cost to stay the most significant part of your TCO. The next cost area, fuel, was also always a key component of the Total Cost of Ownership. While manufacturers are doing their best to improve the fuel efficiency through new technologies, this cost will not start to fall unless we can tackle the issue of driver behaviour and related education; in fact the incorrect usage of these new technologies may yield even higher fuel consumptions than we see today. The top 4 savings areas GE Capital have identified thus relate to factors that impact either depreciation or fuel, and these are: Sourcing: selecting the right combination and number of OEMs for a specific fleet can impact an organisation s TCO significantly, by reducing the capital cost and thus depreciation. As used car markets are getting back on track and new car sales are also back to showing growth, the biggest opportunity to identify cost savings is likely to come from the right OEM selection and discount negotiation. Vehicle Choice: with such a wide range of vehicles, the choice of models that are offered to employees can make a large difference to TCO. As manufacturers are offering more and more products it will be even more important to really understand the needs of the fleet. The models that best fit your needs might be dictated by your compensation and benefits policy, or other practical criteria such as storage space, fuel efficiency etc. Contract Duration: Identifying the correct combination of contract duration and mileage is vital. Too short a duration does not let you benefit from the favourable impact on depreciation spread over time, while too long a duration leads to additional costs in the form of increasing maintenance cost as well as plunging residual values. TOP 4 SAVINGS AREAS SOURCING VEHICLE CHOICE CONTRACT DURATION FUEL Management Fees Maintenance /Repair 2 Fuel Fuel: Given that fuel is the second largest cost component, it is critical to consider the various ways of lowering the cost of fuel across the fleet. The first criteria is to start with the selection of the best fitting car model for your fleet needs, but it is also key to consider driver behaviour, which can be influenced in several ways. CO2 capping will ensure that benefit fleets do not always select the biggest engines (driving up TCO), and ecodriving training can help to improve driver behaviour (e.g. braking, speeding) as well as understanding how to use the newest technologies in the correct manner. Each fleet has its own requirements and savings opportunities, and may vary significantly from the benchmark for the country. Studying the detail behind each area of TCO will help identify individual savings areas. Taxes Tyres 8% Accident/ Insurance Global TCO 4 Depreciation 7

8 UK Netherlands Belgium Sweden Germany France Italy USA Spain Japan Mexico Australia New Zealand Country analysis The thirteen countries featured in this car fleet management report represent a cross-section of large, mature and complex markets within which GE Capital s fleet management consultants operate. These markets are all very different in composition yet each face similar challenges and opportunities. In Europe, we analyse nine countries covering the UK, Germany, France, Spain, Italy, Belgium, Netherlands, (Benelux) and Sweden. In the Americas we look at the US and Mexico. Looking further afield to Asia and the Pacific we examine GE Capital s fleet management operations in Australia, New Zealand and Japan. While the core components of TCO remain the same, you will see how local cultural, regulatory and economic factors can result in significant changes in their mix within the TCO. You will also see in some cases how we expect the TCO to evolve in the future in these countries, as a result of forthcoming technology or regulatory/tax changes. 8

9 USA TOTAL COST OF OWNERSHIP Accident* 5% Depreciation* 45% GLOBAL Total Cost of Ownership Fuel costs 3 Maintenance/Repair 7% 2 8% 4 Management Fee 1% Taxes Market: Passenger car Make/model: Ford Fusion Term (months): 45 Total Mileage (km): 129,735 Insurance costs are not tracked as part of US TCO as a notable proportion of US corporations self-insure Depreciation calculated on contract duration, not on maximum possible term. Tyres Fuel accounts for a third of US TCO, higher than global average Self-insurance of fleets is a common occurrence in the US market USA Relatively high penetration of new technologies, focused on reducing distracted driving. According to the research 3 of average US TCO is linked to fuel costs, higher than the global average. The American market has a preference for large petrol vehicles which leads to higher fuel usage. There is however, a growing adoption of alternative powertrains which over time will help lower total fuel costs. Depreciation for the US is 45% of the average US TCO, in comparison to 4 for the average global TCO. The American market is one of the countries with the shortest average contract duration. In addition, the common funding method in America is openended, which puts the residual value risk on the customer side subsequently, we may see conservative assumptions relating to the end of term valuations (which in turn leads to higher monthly depreciation). At 5% of TCO, Accident costs are lower than the global average. This is partly explained by an active focus by US fleet managers on safety and driver performance and the use of technology to track driver behaviours and minimise accident rates. It is also important to note that the figure for the US covers only accident costs (see footer) while that for other countries includes both accidents and insurance. Figures are for illustration and based on one vehicle type per country. For specific insights related to your fleet, speak to your GE Capital Fleet Consultant. 9

10 Mexico TOTAL COST OF OWNERSHIP Accident/Insurance Depreciation 45% Fuel costs 25% 10% Maintenance/Repair Management Fee 1% GLOBAL Total Cost of Ownership 8% 2 4 Market: Passenger car Make/model: Chevrolet Aveo Term (months): 36 Total Mileage (km): 101,388 Taxes Tyres 1% Maintenance at just of TCO is much lower than global average Insurance and accident costs as a percentage of TCO, are similar to the global average MEXICO In Mexico, there are no incentives or penalties for CO2 emissions The research found that maintenance costs account for of the Mexican TCO, lower than the global average. Dealer / OEM based repair shops are not embedded in the Mexican market as in other countries, meaning independent workshops are more prevalent and are integrated into the fleet management offering. These dealerships can offer more competitive prices, though fleet managers should ensure the are still getting the right quality of service / maintenance. of the average Mexico TCO is linked to accident and insurance, which is only 1% higher than the global average. In Mexico the total cost of the insurance can change very much depending the model, because of the different theft rates. For example, the Chevrolet Aveo is the top selling car in Mexico, with an annual insurance cost of $9,000+ pesos. The Nissan Tiida, a popular car for taxi drivers, has almost the same market value but the annual insurance cost is much higher at $12,000+ pesos as the theft rates are higher. Fuel accounts for a slightly higher % of TCO than the global average. This could be partly due to the fact that there are no incentives or penalties linked to CO2 emissions, and commercialisation of diesel is low in comparison to other regions. Figures are for illustration and based on one vehicle type per country. For specific insights related to your fleet, speak to your GE Capital Fleet Consultant. 10

11 Spain TOTAL COST OF OWNERSHIP Accident/Insurance 18% Depreciation 48% GLOBAL Total Cost of Ownership Fuel costs 21% Maintenance/Repair 8% Management Fee* 0% Taxes 0.5% 2 8% 4 Market: Passenger car Make/model: Volkswagen Passat Term (months): 48 Total Mileage (km): 120,000 * Management fee not included in Spanish pricing structure, costs applied via Servicing Fee Tyres 1.5% Depreciation in Spain accounts for almost half of all TCO Accident & Insurance costs are 10 per cent higher than the global average SPAIN Renault is the most popular brand across Spain, with Megane and Kangoo achieving the highest sales. In Spain, 48% of average TCO is linked to depreciation, which is 5% higher than the global average. Spain experiences relatively low residual values, making it difficult for Fleet owners to achieve good resale prices. However this has improved recently and the used car market has shown significant improvements in Q1 2015, and may lead to a future decrease in depreciation costs. In addition, in Spain the registration Tax (which is linked to CO2) is included in the depreciation (financial) cost. Accident and insurance is 18%, which is one of the highest percentages in the countries analysed. In Spain 90% of the fleet is covered by fully comprehensive insurance where all external body damages are covered without any deductibles resulting in higher insurance premiums. However, that means the end of contract damage charges would be much lower than other countries, as the costs only apply if there are internal damages. In Spain, Tax is 0.5%, over less than the global average. This is linked to the lower road taxes, and because the main taxes for cars in Spain are related to the registration process and included in the financial lease rate. Figures are for illustration and based on one vehicle type per country. For specific insights related to your fleet, speak to your GE Capital Fleet Consultant. 11

12 France TOTAL COST OF OWNERSHIP Accident* 1% Depreciation 4 GLOBAL Total Cost of Ownership Fuel costs 1 5% Maintenance/Repair 1 Management Fee Taxes 8% 2 4 Market: Passenger car Make/model: Renault Clio Term (months): 48 Total Mileage (km): 160,000 *Insurance costs are not tracked as part of French TCO. However, these costs should be considered when looking at company specific TCO structures Tyres 5% Maintenance forms a large 16 per cent of TCO Fuel accounts for a lower per cent of TCO than the global average FRANCE French OEMs PSA and Renault are both in the top three OEMs, in terms of sales, in France. In France 1 of the average TCO is linked to maintenance, which is 7% higher than the global average. Part of these increased costs can be attributed to the fact that 80% of journeys (out of all transportation means) are made by car, leading to a higher demand for maintenance. In addition, labour costs in France are one of the most expensive in Europe, which adds to the cost of maintenance which is resource intensive. Fuel is lower than the global average at 1. This may be driven by the mature nature of the French car market, where there is a trend towards driving smaller vehicles with fuel efficient engines. In addition, there is a range of Government led activity which is driving lower fuel usage, including: Limited Traffic Zones which favour low-emission vehicles in select areas to improve air quality, and the presence of a comparison website to review car emissions, fuel consumption & bonus incentives for over 6000 vehicles. Figures are for illustration and based on one vehicle type per country. For specific insights related to your fleet, speak to your GE Capital Fleet Consultant. 12

13 Italy TOTAL COST OF OWNERSHIP Accident /Insurance 1 Depreciation 37% GLOBAL Total Cost of Ownership Fuel costs 17% 10% Maintenance/Repair Management Fee 2% Taxes 8% 2 4 Market: Passenger car Make/model: Volkswagen Passat Term (months): 48 Total Mileage (km): 120,000 Tyres Insurance and accident costs form a comparatively high proportion of TCO Fuel forms a lower per cent of TCO than the global average ITALY The Italian manufacturer Fiat is the OEM that dominates the market, with Volkswagen in second place. The research found that in Italy 1 of the average TCO is linked to accident and insurance, 11% higher than the global average. This could be linked to the country s relatively high rate of road traffic collisions and the resulting damages. In addition, a rise in the number of thefts, up by 10% since 2013, could have added to the country s higher insurance TCO. Fuel is lower than the global average, which may be attributed to the fact that the Italian market has historically seen a prevalence towards smaller, fuelefficient vehicles which drive on average 10,000km per year less than other European countries. This is why, despite fuel prices being among the highest in Europe, fuel as a % of TCO is lower than the global average. Depreciation is lower than the global average. This could be partly due to the Italian markets preference for small/ medium sized vehicles over premium executive vehicles. In addition there is a tendency to commit to relatively long contract durations, which has a positive impact on depreciation. Figures are for illustration and based on one vehicle type per country. For specific insights related to your fleet, speak to your GE Capital Fleet Consultant. 13

14 United Kingdom TOTAL COST OF OWNERSHIP Accident* 0.5% Depreciation 4 GLOBAL Total Cost of Ownership Fuel costs 21% 7% Maintenance/Repair 12% Management Fee 0.5% Taxes 1 8% 2 4 Market: Passenger car Make/model: Vauxhall Insignia Term (months): 48 Total Mileage (km): 80,000 Tyres* 0% * Insurance costs are not tracked as part of UK TCO. However, these costs should be considered when looking at company specific TCO structures. The fee for changing tyres are included in the maintenance costs Depreciation, is the largest component of TCO at 4, consistent with the global average Fuel forms 21% of the TCO for the UK UNITED KINGDOM Premium brands such as BMW and Audi, and sub-premium brands like VW, have increased in popularity over recent years Depreciation forms 4 of the UK s TCO, and consistent with other countries, is the single biggest cost component of the TCO. In the UK market, managing depreciation focuses on optimising replacement cycles (duration and distance) will help to enhance the residual value, as will the careful selection of OEMs and models which retain their value in the used car market. Tax forms 1 of the TCO. CO2 emissions will continue to have a big influence on tax costs not just influencing the cost to the company, but also the cost for the employee in terms of their Benefit in Kind liability. Good policy design will ensure tax costs are contained. Fuel costs continue to represent a significant cost to any business fleet, forming 21% of the TCO. Within the UK (as with most regions), careful vehicle selection, to ensure the most economical vehicles are deployed, will ensure that the least amount of fuel is consumed at a lower cost. A carefully thought out strategy on how fuel is purchased can also impact the cost of fuel. Figures are for illustration and based on one vehicle type per country. For specific insights related to your fleet, speak to your GE Capital Fleet Consultant. 14

15 Benelux TOTAL COST OF OWNERSHIP Accident /Insurance 12% Depreciation 3 Fuel costs 20% 5% Maintenance/Repair 11% GLOBAL Total Cost of Ownership 8% 2 4 Management Fee 1% Taxes 8% Market: Passenger car Make/model: Volkswagen Passat Term (months): 48 Total Mileage (km): 160,000 Tyres Tax forms a large per cent of TCO in The Netherlands Depreciation as a percentage of TCO differs between Belgium and The Netherlands BENELUX Premium makes (BMW, Audi) are popular in Belgium. Hybrid/electric vehicles (A3, Golf, V60) are popular in The Netherlands, due to driver tax benefits. The TCO for Benelux covers that for Belgium, Netherlands and Luxembourg, but there are differences when we look at the TCO for the individual markets in Belgium and The Netherlands. In Belgium premium makes such as Audi and BMW are most popular, where the vehicle you drive is still a status symbol. This leads to a higher depreciation percentage (42%) due to the higher initial outlay, as compared to The Netherlands (35%) where premium cars are not as favoured. Tax for the region differs from the average Global TCO, and at 8% of TCO is higher than the global average. In Netherlands, this may be due to the relatively high road registration tax, while in Belgium it is driven by both the high CO2 linked registration tax as well as the fact that certain expense types are disallowed expenses in the BIK (benefit in kind) calculation for drivers, thus driving up the total tax. Accident & Insurance costs account for 12% of costs in the Benelux region. This high figure could partially be attributed to the tendency of Benelux companies not to pass accident costs to the driver. Figures are for illustration and based on one vehicle type per country. For specific insights related to your fleet, speak to your GE Capital Fleet Consultant. 15

16 Germany TOTAL COST OF OWNERSHIP Accident/Insurance 10% Depreciation 42% GLOBAL Total Cost of Ownership Fuel costs 21% 10% Maintenance/Repair Management Fee 1% Taxes 2% 8% 2 4 Market: Passenger car Make/model: Volkswagen Passat Term (months): 48 Total Mileage (km): 160,000 Tyres 5% Tax forms a lower per cent of TCO than the global average Fuel costs account for only 21 per cent of the German TCO GERMANY Premium vehicles by German manufacturers are prominent in this market (Audi, BMW, Mercedes) This is a mature market, with a tendency for people to choose premium cars. However we still see that fuel accounts for only 21% of the TCO, lower than the global average. This may be due to a bias towards diesel cars in Germany, and as Germany has one of the lowest fuel prices for diesel in Europe (driven mainly by the fuel tax benefits linked to diesel), the use of high consumption premium cars is outweighed by the cost of fuel itself. An area of TCO in Germany that differs from the average global TCO is tax. This is 2%, half that of the global average. We believe this is due to a trend towards reducing CO2 emissions and embracing green-vehicles. Accident / insurance and tyre costs form a larger percentage of TCO as compared to the global average. As a result of the higher speed limits in Germany, vehicles tend to have higher wear and tear, including on the tyres. Furthermore, relatively large wage costs in Germany and a wide range of add on services (e.g. increased electronics) lead to increased costs for damage repair at the end-of-contract (which is included in the accident / insurance category). Figures are for illustration and based on one vehicle type per country. For specific insights related to your fleet, speak to your GE Capital Fleet Consultant. 16

17 Sweden TOTAL COST OF OWNERSHIP Insurance* 5% Depreciation 4 Fuel costs 17% 10% Maintenance/Repair 8% GLOBAL Total Cost of Ownership 8% 2 4 Management Fee 2% Taxes 2% Market: Passenger car Make/model: Volkswagen Passat Term (months): 48 Total Mileage (km): 120,000 * Accident costs are not included in the TCO. They form part of insurance deductible & are pay-on-use cost - which is not included in this TCO. Tyres 7% Depreciation in Sweden forms a larger percentage of the TCO than the global average Tyres as a per cent of TCO accounts for over twice that of the global average SWEDEN The most popular brands in Sweden are Volkswagen & Volvo. The research found that 4 of the average Swedish TCO is linked to depreciation, higher than the global TCO. The company car is a crucial component in retaining employees and hiring new employees, and thus often leads to a bias towards more expensive/ premium cars. Even though these cars in general have a strong position on the second hand market, the depreciation is driven by high net prices. Another factor affecting depreciation is the local VAT (25%). All VAT on services is recoverable for the company, whilst 50% of VAT for financing is not recoverable. Another factor is tyre cost, which at 7% of TCO is higher in Sweden than the rest of Europe and the USA. This is due to the requirement of winter tyres, between December 1st and March 31st, which are more expensive than summer tyres. Fuel costs represent just 17% of TCO. This is 7% lower than global average of 2. Although Swedish drivers have large cars, almost all are diesel, leading to lower consumption than petrol engines. Figures are for illustration and based on one vehicle type per country. For specific insights related to your fleet, speak to your GE Capital Fleet Consultant. 17

18 Japan TOTAL COST OF OWNERSHIP Accident/ Insurance Depreciation 52% Fuel costs 17% Maintenance/Repair 7% Management Fee 7% GLOBAL Total Cost of Ownership 8% 2 4 Market: Passenger car Make/model: Toyota Aqua Term (months): 60 Total Mileage (km): 90,000 Taxes 8% Tyres 2% Fuel costs for a lower per cent of TCO than the global average Accident / Insurance costs are half the per cent of the global average TCO JAPAN Kei cars is the name given to small vehicles in Japan. They are typically light vehicles with an engine size of 0.66 litres. When looking at TCO% in comparison to the global average it is important to be aware that the TCO total for Japan in absolute $ is significantly lower than other countries. Fuel is 7% lower than the global average. The average distance travelled in car journeys in Japan is nearly half that of other countries in this study. There is a tendency for companies to only allow their employees to use the car for workrelated journeys, leading to less journeys & lower fuel costs. Hybrid & smaller vehicles are gaining share, which may also lead to reduced fuel costs. 52% of the TCO is linked to depreciation, as the Japanese market is led by smaller cars, the list price and hence overall cost base for TCO is lower, which in turn can make the depreciation as a % seem large in comparison to the actual $ cost. Accident & insurance costs are. However, the TCO includes compulsory insurance only. Voluntary insurance is also required in a fleet this cost is highly variable based on the individual fleet manager requirements, and is excluded from this TCO but should be considered when identifying your own TCO. Figures are for illustration and based on one vehicle type per country. For specific insights related to your fleet, speak to your GE Capital Fleet Consultant. 18

19 Australia TOTAL COST OF OWNERSHIP Accident / Insurance 8% Depreciation 4 Fuel costs 2 Maintenance/Repair 8% Management Fee GLOBAL Total Cost of Ownership 8% 2 4 Taxes (Variable) 0% Market: Passenger car Make/model: Ford Mondeo Term (months): 43 Total Mileage (km): 128,000 Tyres 5% Depreciation accounts for 44 per cent of Australian TCO Tax/fringe benefit is highly variable and can impact TCO significantly AUSTRALIA Utility vehicles, or utes as they are commonly known in Australia, make up 3 of the top 10 selling vehicles in the country. In Australia, 4 of the average TCO is linked to depreciation, which is slightly higher than the global average. Given the scale of the country s suburban geography, passenger cars are a core form of transport for the population. The high penetration and volume of cars, makes it a competitive resale market, driving down used car values and thus increasing the depreciation element of TCO. Tax is not included in the TCO calculations, due to the variable nature of this element. The main component is Fringe Benefit Tax which is payable on anything perceived as a benefit to an employee. As the exact amount of the Fringe Benefit Tax is influenced by several factors, including the split between private and business usage, it can only be calculated by the fleet company based on annual declarations. In cases where it could be shown that all usage is private, the Fringe Benefit Tax could increase the TCO by around 30%. Accident and Insurance is in line with the average global TCO, at 8%. Steps have recently been taken to harmonise the Work Health and Safety legislation across all the states of Australia, so this area is high on the agenda with fleet managers keen to reduce accidents, time off road, and the associated economic and human costs. Figures are for illustration and based on one vehicle type per country. For specific insights related to your fleet, speak to your GE Capital Fleet Consultant. 19

20 New Zealand TOTAL COST OF OWNERSHIP Accident * 1% Depreciation 37% GLOBAL Total Cost of Ownership Fuel costs 35% 12% Maintenance/Repair Management Fee Taxes 0% 8% 2 4 Market: Passenger car Make/model: Toyota Corolla Term (months): 45 Total Mileage (km): * Insurance costs are not tracked as part of New Zealand TCO. However, these costs should be considered when looking at company specific TCO structures Tyres 5% Depreciation forms a comparatively low per cent of New Zealand s TCO Over a third of New Zealand s TCO is linked to Fuel NEW ZEALAND Asian and American vehicles are more popular than European brands. In New Zealand, depreciation costs form a lower component of the TCO than the global average, at 37%. Given the mature nature of this market, there is a tendency to use the maximum lease term allowed as per legislative rules (e.g. passenger vehicles have a maximum lease term of 45 months), which in turn leads to a lower depreciation as a % of TCO. Fuel comprises of 35% of the TCO for New Zealand, which is 11% higher than the global average. This can be linked to the fact that in the passenger vehicle segment there is a preference for petrol vehicles, rather than the small diesel hatches that are popular in other markets. In addition, the relatively high fuel consuming medium SUV s are a growing and popular segment in New Zealand. Tax values are excluded from the New Zealand TCO as these are calculated by customers due to their own unique requirements. This should be considered when comparing the ratios against the global benchmark. Note that Tax /Fringe Benefit tax is paid by the company and can be up to 30% of the TCO. Figures are for illustration and based on one vehicle type per country. For specific insights related to your fleet, speak to your GE Capital Fleet Consultant. 20

21 Fleet Management Across Borders It doesn t seem very long ago that companies with a regional/global fleet manager were in the minority and most chose to manage their fleets through local managers in individual markets. But in a sign of increased international expansion and harmonisation, the number of regional/global fleet managers is growing as organisations recognise the business benefits of regionalised fleet policies (this trend in turn may be following a wider trend in organisations, where other sourcing and procurement activities are also growing towards a more regional/ global approach). An effective approach Benefits from scale: regional/ global fleet managers are able to capitalise on the size of the combined fleet across countries, invariably enjoying greater benefits of scale. For example, by managing a vehicle fleet on a global level, as opposed to multiple national deals, they can exercise greater leverage with OEMs to negotiate bigger discounts. This centralised decision-making at head office level can lead to potentially favourable global deals, rather than a series of decisions and agreements being made at a local level. Even smaller companies have the opportunity to achieve manufacturer volume discounts by negotiating across their combined fleets in all the markets in which they operate. Harmonised and consistent policies: A regional/global approach to fleet policies, with certain core elements standardised, can enable companies to better drive through strategic goals (e.g. increase safety, minimise environmental footprint through CO2 caps, utilise the appropriate 5 of Fleet Managers surveyed are looking to optimise their global fleet. Out of this group, 70% are looking for international coverage & centralisation of policies. GE Capital survey View results at docs/ge_fleet_report1_16.pdf funding method to free up working capital tied up in corporate fleets). Better control and data based decisions: Harmonised policies (with fewer strategic suppliers and common data sources/ metrics) can also bring greater transparency and insight into all the fleets operated across various countries and divisions throughout the world, giving the fleet manager greater control and better data to make key decisions. A growing trend An online survey of 72 European fleet managers carried out by GE Capital at the end of 2013, highlighted their growing need to manage regional/global fleets. 60% of those polled were already operating on a European or global scale. More than half (5) were looking to optimise their global fleet, and within this 70% said they were looking for an international coverage and centralisation of policies. Global versus local; maintaining balance What to keep global vs local: This is one of the key considerations when implementing a global fleet strategy. A few strategic decisions are best made at a central level, such as type of funding, choice of OEMs in fleet policy, number of strategic partners/leasing suppliers to work with, CO2 caps by employee band. However some details are best decided locally such as the exact makes/models (within the OEM brand) in the fleet policy, choice of fuel card, and preferred dealers and servicing/maintenance partners. Needless to add, very few operators in the service, maintenance and repair industry are able to negotiate global agreements. Stakeholder engagement: Even when taking central decisions, having local stakeholders on board from the beginning is important to enable proper implementation and follow up. This also ensures the combined global-local approach is delivered through an optimal team effort. By thus using a mix of global strategy and local implementation, companies can ensure they achieve higher efficiency and cost optimisation in their multi-country fleets. 21

22 Beyond TCO The Future of Fleet Whilst a focus on the tangible elements of TCO will remain, with the increasing involvement of HR as a stakeholder in fleet management, additional areas will gain importance, including driver safety/service and environmental impact. Driver Safety More than 20% of crashes are believed to be the result of drivers being distracted or failing to pay attention, with mobile phone usage being one of the main reasons for distraction. Companies that have invested in driver safety training and risk assessment programmes generally report a reduction in incident rates, and associated accident costs. Influencing Driver Behaviour (through technology) Driving habits and behaviours can have a significant impact on all aspects of fleet management, from accident risk and insurance costs, to fuel consumption and vehicle wear and tear. Advances in vehicle technology have provided further opportunities for driver performance to be assessed and acted upon. For example, telematics solutions to identify drivers needing training/ intervention will help to lower fuel as well as accident costs. In the US, some companies are using gamification-based technology to reward employees for exemplary driving behaviour, 22 leading to better safety and thus a lower TCO. Investments in training in eco or fuel-efficient driving can also help lower fuel costs. Environmental Focus Regulators all over the world are continuing to raise the bar for CO2 emissions targets. In the EU, for example, new Euro6 emissions regulations for diesel cars and vans take effect from September 2015, and will also apply to new models launched since Sep OEMs have been developing solutions to comply with new regulations, and while this could drive up costs of fleet vehicle acquisitions in the short term (due to the extra technology that is involved), in the longer term this may be offset by the savings in fuel costs. Financial initiatives such as low vehicle taxation based on emissions can help lower TCO. However, it is key to ensure fleet policies also encourage such adoption, through the use of CO2 caps. Finally, there is a lot of discussion around alternative fuelled vehicles but for these to become more common in corporate fleet policies they will need to deliver lower TCO overall vs. classic cars. Often this is not the case due to the unproven business model for these in corporate fleets. Additionally, driver behaviour needs to change to ensure optimal usage of these new technologies, but this enhanced driver education/awareness is not yet seen in many markets. Alternative Mobility Mobility can be the second or third biggest expense for a business, and combining fleet and travel management may be the key to reducing overall costs. It encompasses all aspects of transport that don t involve direct car ownership, for example, car sharing and public transport. Thus, total cost of mobility, or TCM, is increasingly seen by the industry as the next generation of TCO. This may not just bring down total costs, but may also help better serve the needs of a new generation of employees i.e. the millennials who see car ownership as a secondary goal, with the primary goal merely being able to get from A to B in the most efficient manner. Win Win Driving employee and fleet stakeholder satisfaction whilst optimising costs. All the above initiatives can benefit a company in more ways than one. It helps the employee value proposition; for example, the brightest prospects, especially in the younger generations, will often factor into their decision to accept a job offer the company s social responsibility and employee wellbeing policies. However adopting a greener fleet and improving driver safety/driving behaviour can also impact your costs in a favourable way with the investments in technology and training often being recovered in a short timespan.

23 Global TCO analysis based on a study undertaken across GE Capitals customers fleets in Australia, Belgium, Canada, France, Germany, Italy, Japan, Mexico, Netherlands, New Zealand, Portugal, South Korea, Spain, Sweden, Switzerland, UK, USA in Q / Q The information materials and opinions contained in this document are for general information purposes only, are not intended to constitute legal or other professional advice, and should not be relied on or treated as a substitute for specific advice relevant to particular circumstances. GE Capital EMEA Services Limited, its employees and agents make no representation or warranty of any kind in relation to the savings proposals and calculations contained in these materials, which are estimates and for illustration purposes only. Except as required by law, neither GE Capital EMEA Services Limited, nor its affiliated companies or businesses accept any responsibility and shall not be liable for any loss or damage whatsoever, whether in contract, tort (including negligence) or otherwise arising from reliance on the information, materials and opinions contained in this document General Electric Company. All rights reserved. GE Capital EMEA Services Limited. Registered Address: The Ark, 201 Talgarth Road, London W6 8BJ, United Kingdom. Registered in England and Wales No

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