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Research: fleet vehicle retention to hit dealer profits

Dealers’ profitability could be dramatically impacted by changes in the spending priorities of some of Britain’s biggest car and van fleets.

Analysis of 200 of Britain’s biggest fleets by AM sister company Sewells Research and Insight, reveals their importance to the dealer market.

Between them they operate more than 500,000 vehicles and spend more than £3 billion annually on transport-related product, much of it on vehicle purchasing and servicing.

The companies are part of a new force in the fleet market called the Fleet200, a unique venture which was formally launched at an exclusive breakfast meeting in London.

Among the key issues that will impact on the dealer market is a significant shift in replacement cycles as a result of the recession.

Fleets have moved from away from a standard replacement cycle of three years and 60,000 miles as they hold onto vehicles for much longer periods.

The majority now replace vehicles every four years, typically at 80,000 miles, which brings risks and opportunities for dealers.

The risks cover two key areas.

Firstly, fleets will be purchasing vehicles less frequently, which is likely to push down annual sales to the business sector.

As the vast majority of vehicles that are sold each year are to businesses, this could have a significant impact on dealers.

Secondly, as companies are holding onto vehicles for longer, it is reducing the supply of vehicles into the used car market at a time when dealers need sources of good used stock.

However, dealers would offset some of this risk with a strong focus on maintenance.

As fleets operate vehicles for longer, it is likely they will require significantly more maintenance in their fourth and fifth years of operation.

Engaging with businesses to secure this servicing work would be a vital source of additional revenue. Furthermore, focusing on securing business could avoid business being lost to independents and fast-fits.

Research by the British Vehicle Rental and Leasing Association, revealed at the AM Aftersales Conference this year, showed that while leasing companies currently put the majority of their servicing work through dealers, 60% were considering using independents more often for routine servicing work.

In addition to varying levels of business across all fleets, there are also very different spending expectations in different sectors of the Fleet200.

Some sectors are predicting their spending on fleet will be slashed by up to 10%, as their businesses still suffer in the recession.

This is particularly true in the public sector, where enforced spending cuts are already leading to substantial reviews of fleet spending plans for the coming years.

In contrast, with Britain’s High Street staging an ongoing recovery, there is more confidence in these retail sectors about vehicle replacement.

The type of vehicles dealers will be selling is also set to change as increasing number of companies consider introducing CO2 limits on their fleets. These simple measures block employees from receiving any vehicle that emits more than a certain level of CO2.

For dealers, whether they supply to businesses direct or to the fleet market through leasing companies, this will mean a continuing shift to lower emission models in all vehicle categories.

Understanding how these changes might affect individual dealers or dealer groups and adapting to the market trends could ensure that dealers maximise their potential profitability from the fleet market and minimise the potential impact of spending cuts in key business categories.

The Fleet200 is made up of the 20 biggest fleets in 10 key industry sectors, which qualify according to their car and van fleet sizes.

Every major industry sector is covered within the 10 key categories created for the Fleet200, including transport, public sector, bluelight, utilities, retail, business services, banking, construction, technology and media.

Companies listed account for a large part of the entire end-user fleet market and their actions are a major influencing factor on manufacturers and suppliers.

As part of the launch process, fleet members were surveyed to examine a number of key issues.

In addition to identifying fleet size and spending power, significant further analysis has been carried out to establish sector trends, analyse broad strategic drivers, highlight current and future issues and map out the decision-making process within major fleets.

The Fleet200 confidential report has been launched by Sewells to the fleet market.

'Hidden' business opportunity

‘Grey fleet’ is a hidden business opportunity that could be worth millions of pounds for dealers.

The phrase grey fleet simply represents any privately-owned vehicle that is driven on company business, either for short trips or for extensive business journeys.

No matter how the vehicle is used, companies have a legal obligation to look after employees on the road if they are using a vehicle on company business and this includes ensuring the vehicle is fit for purpose.

With more than 300,000 private vehicles used on company business among Fleet200 companies alone, this represents a significant market opportunity.

Dealers are experts in vehicle safety and servicing, so offering a support service to businesses to safety check their grey fleet vehicles would be a relatively simple marketing exercise.

This could range from simple vehicle checks through to grey fleet management services. It could even involve working with a third-party supplier to deliver grey fleet management consultancy services.

The benefits include introducing the drivers to the dealership with potential long-term benefits and securing potential servicing work immediately if vehicles are found to have faults.

> For further details of the Fleet200 report, contact Sewells on 01733 468254.

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