Feature: Fleets of the future

Matthew Sainsbury examines how the upheaval in Australia’s car industry, as well as technological and other changes, will reshape fleet management strategies.

Australia’s car industry is going through a period of upheaval. With all major manufacturers pulling out of the market the impact locally is going to be significant and wide ranging.

At the same time, the global car industry is going through rapid technological development. Telematics (which blends computers and wireless communications technologies) will become standard among many car manufacturers and electric cars from manufacturers such as Tesla are primed to disrupt the traditional diesel motor manufacturing industry in markets such as the US.

These market forces are also going to have an effect on many organisations’ fleet management strategies especially when coupled with a sense of increasing regulatory risk that many company directors will encounter.

“There’s a trend for employers to transfer ownership of cars to employees through novated or car allowance arrangements, particularly where the employee is expected to use their car for work purposes,” Matthew Lanigan, general manager, fleet, at GE Capital, said. “But the ability of the employer to control critical elements such as fit for purpose assessments, vehicle maintenance compliance and driver behaviour becomes more difficult to manage. Directors need to be across their increased accountability according to both the workplace health and safety laws and the chain of responsibility legislation.”

Australia is lagging behind many countries when it comes to enforcing policy on company fleet cars and driver behaviour. For instance, in the UK, employers are required to have policies in place to mandate responsible behaviour by drivers as well as measures to enforce them. This is not the case in Australia. With driver distraction being a major road safety problem in Australia, boards should ensure that management considers driver training a priority. It should be as important as safety training in a factory because the consequences for having employees who are inadequately trained can be as severe. It is not yet a requirement in Australia, but organisations should be preparing for it to become mandatory.

Beyond concerns over safety, the role of a fleet management officer (FMO) within the organisation is also changing, with significant pressure being placed on the role to find savings as the costs of sustainability and fuel continue
to escalate.

According to Lanigan, this pressure is leading many organisations and FMOs to seek out outside fleet management organisations to leverage technology in order to improve efficiencies. “We’ve worked with a number of customers and identified ways to realise a reduction of 20 per cent to the kilometres that their fleet was travelling through analytics and studying their usage patterns. When you consider that 26 per cent of the cost of operating a vehicle is in fuel these savings become material quickly,” he says.

Beyond the regulatory issues with fleet management, Lanigan says FMOs and their organisations will need to address issues that will arise once the local car manufacturers have pulled out of the market. “There will be the removal of some tariffs and excises on luxury and imported cars,” he says.

“From a lessor’s perspective that has the potential to have a negative impact on residual values which will create a balance sheet risk for the lessors and organisations that own their own fleets.”

That said, Australia has a vibrant imported vehicle market, with a large proportion of organisations already using imported vehicles.

Hi-tech fleets?

Australian organisations can be expected to invest in telematics, which can be used to track drivers and plan out routes through satellite navigation, in order to assist with both the enforcement of health and safety policies, as well as to improve the efficiency of the fleet.

“People are asking more and more about it and we have some big plans for it in this space,” says Ed Stanistreet, general manager, Toyota Fleet Management. “Australians are rapid adopters of technology and by 2017, Toyota will have telematics across its range.

“The majority of the take-up of telematics has been among fleets with high business use or those with a high focus on work health and safety, fringe benefits tax (FBT) management and logistics management. Mining and dangerous goods transport, for instance,” he added.

There are some residual concerns around privacy that arises from telematics technology, but these are subsiding as the benefits become impossible to ignore. The other concern from the board level has been the costs involved in making an investment into telematics. The business case for the technology needs to be clearly articulated before it will offer any benefit to the organisation.

“To get the most out of the technology, there needs to be a strong commitment within an organisation at all levels as it can be quite costly to implement and manage. Unless there is a commitment to utilise the information generated by the telematics in the car, customers will not receive the full benefits it can bring,” says Stanistreet. “With that said, we believe that benefits will flow from adopting this technology, particularly when using it to improve FBT liability, utilisation efficiency and driver behaviour.”

However, in other areas of technological innovation, Australia may be a slower adopter. Electric cars, for instance, are a fascinating buzz word and promise that some organisations will look at, considering that they significantly lower the carbon emissions that come direct from vehicles and remove the escalating cost of fuel from the ledger.

But according to Stanistreet, the Australian market will not see electric cars in mainstream use for many years yet.

“Electric cars are expensive, and they still use carbon in the power generation” he says. “They also have a limited range before they need to be recharged and the charge time can be extensive – typically overnight.

“Because of the larger distances between locations – more so than cities in Europe and America – we don’t have the infrastructure in place to support organisations using electric vehicles.

“There is a far higher likelihood that hybrid technology will be prevalent in Australia than purely electric cars. The ever-improving affordability of hybrid technology and improving efficiency is going to slow down any proposed new investment in electric recharging infrastructure. The business case doesn’t yet stack up”.

Future trends

Toyota Fleet Management’s Ed Stanistreet lists the following as the top emerging trends that will affect the fleet industry in the future:

Connected mobility and mobile apps

Until recently, connected mobility has been cost-prohibitive for fleet managers and fleet management organisations. However, most manufacturers will start rolling out cost-effective hardware solutions to a select range of vehicles. This technology will enable companies to manage their fleets more effectively using the technology to monitor driver behaviour, vehicle maintenance, for security and reduction of theft and to manage business and personal usage.

Pay-as-you-drive

Fleet managers recognise the need for more flexible options when managing their fleets. As popularity for personal mobility solutions grows, there will be more support for transient work forces and greater flexibility in packaging while infrastructure contractors will gain more flexibility on shorter or long-term contracts.

Transparency

The market is driving a need for more transparency with financiers disclosing full details of finance, including fees, charges, management fees, residual values through to break-down maintenance, tyres and registration costs.

Complete 24/7 self-service online to mobile device

Customers will demand more online flexibility to manage their fleets. They want flexibility to quote and generate report data in formats that easily allow them to monitor fleet costs. Integration with other systems allows them the ability to import data and simply process it. They will want the ability to choose multiple providers including funders, fleet managers and suppliers for their fleet with the ability to manage a single view platform.

Telematics:

The technology installed in cars that sends and receives information via telecommunication devices. The most obvious application of the technology is the GPS system built in to many cars. However, for fleet management, it can also be used to monitor driver behaviour (acceleration, cornering, harsh breaking, out of business use), provide utilisation rates and data analysis on how efficiently the fleet of vehicles is being used, and automate maintenance scheduling.