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Dealers and carmakers fight to retain fleet SMR business

Carmakers and their dealers are fighting to stop more fleet and lease companies – especially those with vehicles on extended contracts – moving to independent service and MoT providers.


And they face an uphill battle.

According to a poll by AM’s sister publication Fleet News, over 50% of respondents have already stopped using franchise dealers to service and maintain their vehicles and another 24% are considering stopping.

One fleet manager summed up the reasons for shifting to non-franchise dealers, even when vehicles are still under warranty.

“We have moved our finance lease vans away from franchised dealers as any problem we would experience from a vehicle would be turned into a crisis, and one that would inevitably cost an arm and a kidney,” Leigh Stiff, fleet manager at Hannaford explained.

“Moving this side of the fleet to a local, well-known and well-respected independent garage we have seen dramatic savings. But not only that, I feel you really can't put a cost on dealing with someone who deals honestly, openly and who can be a little flexible at times.”

Another fleet manager said independents offer a more flexible approach and are willing to come to his business rather than making drivers travel to the workshop.

“We currently use a franshised garage but have started to use an independent mobile mechanic for small repairs as they are readily available and can do the repairs on-site,” he said.

And the move away from franchised dealers appears to be gathering pace.

“As fleets extend their cycles…turning to independent garages for service and maintenance becomes a strong option for reasons of cost,” explained Ken Trinder, head of business development for Epyx.

Labour costs at independent centres can be anything between 15 and 34% less than at a franchise dealer.

A significant number of fleets have already made the switch. Latest figures from Kwik-Fit Fleet shows a 10.4% rise in its sales in 2009 thanks to MoTs on company cars and vans increasing 89.7% and fleet vehicle servicing rising 54.2%.

“Sales growth in 2009 was almost entirely due to business conducted through existing contracts and fleets deciding to extend vehicle replacement cycles,” said head of Kwik-Fit Fleet Mike Wise.

“Time is money and for that reason fleets want a fast and efficient service that is convenient for their company car and van drivers. Our centres already offer seven-day-a-week extended hours opening and with a service typically available within 48 hours rather than the 14-day wait for some franchised dealers. This makes vehicle MoTs, servicing and repairs very attractive to fleet operators and drivers.”

As a result, it is now commonplace for leasing companies, which have over 2.1 million vehicles under their control, to use independent centres for some of their vehicle service needs.
Last week, the country’s largest lease company, Lex Autolease, which has 320,000 vehicles on its books, appointed Kwik-Fit Fleet to supply it with services worth at least £150 million over three years.

Kwik-Fit Fleet will supply and manage all tyre repair and replacement but more significantly will provide a range of ancillary services including vehicle servicing and MoTs.

“Kwik-Fit’s ability to undertake MoT inspections and some standard maintenance work on vehicles at the same time as replacing worn tyres allows us to provide a more flexible service for our customers,” said Andy Hartley, head of third party supply, Lex Autolease.

“Franchised dealers continue to be the most prominent repair outlet for fleet cars, though there has been some trend towards using independent suppliers,” admitted Sue Robinson, RMI National Franchised Dealer Association director.

“Franchised dealers offer service at competitive prices and ensure repair works are carried out to the full manufacturer standards, however fleet and lease companies may choose to carry our servicing and MoT as economically as possible, and this may mean they choose an independent garage.”

However, manufacturers – such as Volkswagen and Nissan – are fighting back in an attempt to keep fleets in their dealer network even when warranties on their vehicles have expired.
“By offering value for money, fixed cost SMR for older vehicles, they can retain fleet business,” said Trinder.

VW’s Fleet Package Pricing programme is geared to ensure fleets remain with its dealers.

“We offer a package that provides pricing consistency to all lease companies to manage their budgets,” says Kevin Eastwood, fleet business development manager at Volkswagen Group.

But with labour prices higher than the independents, it is a battle, he admits. In addition, it is unlikely that a dealer stamp in a non-premium marquee will make any difference to RVs.

“Buyers at auction will always seek out cars with a full service history and while a stamp from a franchised dealer may attract a premium, a car with a full service history by an authorised specialist, using manufacturer approved parts, should not be disadvantaged,” explained Daren Wiseman, valuation services general manager, Manheim Auctions.

However, fleets should not abandon franchise dealers without due consideration, especially is they run premium marques, as CAP spokesman Mike Hind explains: “Rather than an uplift for vehicles with a full franchised service history, trade buyers will tend to penalise a prestige/executive car if it does not have one. This tends not to happen with more mainstream volume models where a full service history by independents will be acceptable,” he said.

“The key for fleets is understanding whether the money saved by using independent service suppliers is justified when it comes to disposal.”

Nevertheless, there has been a decline in fleet business since 2005 as they drift to independents.

But with additional services such as guaranteed three-day booking and the option for lease companies to negotiate further discounts directly with the dealer, that decline is levelling off, claims Eastwood.

And even the prestige manufacturers are working to retain fleet business.

“Within Audi leakage to the independent sector is less of a concern as most Audi fleet drivers do not want their vehicles serviced and maintained other than in the Audi network,” explains Iain Carmichael, head of Audi fleet sales.

“This is partly about the technology on the vehicles, partly about the high levels of training, skill and experience of the Audi technician and partly about the experience of visiting an Audi centre.

“However we have not been complacent and ignored the key aspect of SMR costings. In 2009, after significant consultation with the fleet industry and an extended pilot, we introduced Audi National Fleet Service Pricing; designed to address concerns around both service levels and price.”

This national plan relates to all service and maintenance work carried out, irrespective of the car’s age, so the impact of contract extensions diminishes.

“These measures ensure that we have a strong offer for the fleet industry, continued customer loyalty for the dealer network and the continued delivery of high standards of customer care from the network,” said Carmichael.

Nissan has also announced that it is rolling out a regionalised national pricing programme for fleets in March to raise its competitiveness against independent repairers.

The company estimates that around a quarter of SMR business for fleets is leaking out of its franchised dealer network.

This new initiative is intended to reduce that figure.
“We want leasing companies to go to our dealer network for service and repair, so our dealers have to be good enough and we have to be competitive on price,” said James Douglas, Nissan fleet sales director.

The focus will be on keeping customers mobile, including speed of service, reaction to breakdown and courtesy car provision.


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