Changing face of fleet management
"Every risk provides a chance," Jochen Schmitz, Volkswagen Financial Services' (VWFS) new head of international fleet, tells Finance Director Europe. Schmitz has every reason to be bullish. While fleet management may be in a state of flux, it is a market that has proved itself to be resilient and adaptable to the challenges thrown its way.
The single largest issue with which the sector has to contend is undoubtedly technology; specifically, keeping up with the march of innovations such as connected cars, telematics and driverless technology. But, rather than see this as a threat to traditional fleet management models, the industry is embracing such changes.
"The automotive and leasing industry is in a changing environment at the moment," explains Schmitz, who assumed his new role in November 2016, having previously headed up Volkswagen's implementation management and consulting division for its international fleet.
"We are currently working on an international mobility strategy where all car-park-related and travel-related issues are involved. Our product range is changing from classic leasing to telematics and, in the end, towards total mobility."
As Schmitz mentions, in light of such trend developments, Volkswagen has broadened its solutions portfolio with regard to its international fleet customers. Traditional total cost of ownership models are gradually being replaced by an approach centred around total cost of mobility.
"VWFS is offering this in a modular approach," says Schmitz. "Fleet leasing, fleet management or the combination with travel management can be chosen by the customer."
The smart policy
Total cost of mobility is increasingly seen as an attractive option for fleet managers looking for better visibility around not only the car but also a wide range of other considerations, including travel management and factors affecting how people travel. With this comes unparalleled levels of data and insight, which can be actioned to increase overall efficiency.
This growing inclination towards smart mobility management has seen VWFS forge stronger relationships with its clients, as "we focus more on the outsourcing processes than on the car on its own", Schmitz says.
"The relationships strengthen as more customers are outsourcing to the mobility manager, because it is no longer just car-related," he explains. "We are supporting the customer in changing the car policy into a mobility policy. As the customer is also affected by several influences inside and outside the company, we are partnering to find the best solution. As the preferred mobility partner, we will steer and manage all car park and travel issues by providing a single point of contact methodology."
Consequently, all vendor management activities are conducted by VWFS, so as to reduce complexity, increase savings for customers, and steer and monitor all services. The group is then able to provide an international overview of these items in its global reporting.
New employee needs
An evolving workforce has also led to the aforementioned move towards mobility solutions, claims Schmitz. The creation of new job titles within companies equates to fresh mobility needs.
"The roles of the employees within the companies have rapidly changed," he says. "In the past, we only had the classical account manager and the few directors driving around in their country. In this area, the car and the leasing contract is in focus.
"Today, we are facing a high number of different jobs. For example, international project managers or consultants with short employee contracts have different and specific mobility needs. Therefore, more large fleets want to have flexible mobility solutions for their changed job profiles."
For a little while now, telematics has changed the behaviour of company employees, whether they are full-time drivers or company-car owners. Since its introduction at the start of the century, the tool has morphed from simply being able to record the location and duration of vehicle journeys into a sophisticated piece of intelligence, able to generate data on how cars are being driven.
This can concern a range of driver behaviours, including information on acceleration and speeding, as well as breakdowns. With such data at their disposal, companies can make better-informed decisions on driver training, cutting down dramatically on costs.
VWFS's telematics solution, FleetCONNECTED, enables fleet managers to collect and evaluate driver data at the press of a button. Data is sent from the CAN bus system, which covers all Volkswagen brands, allowing the benchmarking of the driving behaviours of employees using the same or different vehicles.
FleetCONNECTED currently consists of four areas: damage management, diagnosis, trip reports and driver's log. The damage management product automatically sends damage protocol to the fleet manager when damage occurrs, while diagnosis concerns the use of the intelligent hardware through which the fleet manager will be immediately informed of the failure of a technical component.
With the extensive trip reports, the fleet manager can also keep an eye on their fleet. By maintaining a driver's log - which can then be submitted to the tax office - the actual share of private use can be conclusively proved.
This has led to "approximately a 5-10% saving on fuel", says Schmitz. This allows space, he adds, for fleet managers to introduce incentives for drivers, such as bonus systems.
"Telematics is automatically a psychological barrier for the driver to misuse the vehicle in terms of speeding and aggressive driving," he continues. "This leads to fewer accidents. Meanwhile, the fleet manager doesn't just have healthier employees but also fewer costs in insurance and a decreasing amount of downtime."
But, as Schmitz says, there are also challenges for fleet managers - not least in regulations, such as the International Financial Reporting Standards (IFRS), which require assets and liabilities stemming from leases to be included on a company's balance sheet.
New reams of red tape have followed IFRS, including the introduction of a new international driving cycle, the World Light Duty Test Cycle (WLTC), by which European companies are now expected to abide, instead of the previous New European Driving Cycle (NEDC).
According to experts, the change from NEDC to WLTC - scheduled to come into play later this year - will result in an increase in fuel consumption and carbon emissions of approximately 5%. Alterations to the test procedure, vehicle set-up and operating conditions will also have an impact.
Nonetheless, the phasing out of NEDC - the origins of which date back to 1970 - has not been well received by all within the EU, who believe the new standard is not yet fit for purpose and requires further testing.
Whether it be these "political influences" or "facing new competitors, like Apple and Google", says Schmitz, the fleet management sector is prepared for what lies ahead. And so is VWFS.
"VWFS is, and will be, offering a full range of downstream segment products and services," he confirms.