Does the fleet in­dus­try have a high-speed fu­ture?

Finweek English Edition - - INSIDE - BY GLENDA WIL­LIAMS

10.2m – that’s the num­ber of ve­hi­cles on South Africa’s roads ac­cord­ing to the Na­tional Traf­fic In­for­ma­tion Sys­tem (NaTIS ). Ve­hi­cle sales and their on­go­ing run­ning and main­te­nance costs re­main a valu­able source of in­come to the in­dus­try and the coun­try at large. But de­ter­min­ing how many of th­ese ve­hi­cles have the po­ten­tial to AF­FECT the grow­ing fleet man­age­ment in­dus­try proves dif­fi­cult.

This Jan­uary, new ve­hi­cle sales amounted to 52 306 units, with around 81.9% be­ing dealer sales. The ve­hi­cle rental in­dus­try rep­re­sented 11.3% with 4% to in­dus­try cor­po­rate f leets and 2.8% to gov­ern­ment, re­ports Naamsa. The lat­ter t hree sec­tors made up over 18%, es­sen­tially rep­re­sent­ing non-pri­vate or f leet ve­hi­cles. But dealer sales could also house cor­po­rate and com­mer­cial ve­hi­cles.

Un­like Naamsa and NaTIS, which record ve­hi­cle sales and reg­is­tra­tions, there is no cen­tral data­base to man­age, track and pro­duce pre­cise f leet sales data. Anti-com­pet­i­tive con­cerns also cre­ate a bar­rier to what data can be col­lected and by whom, re­strict­ing the abil­ity of the in­dus­try to re­port in­for­ma­tion.

And f leet buy­ing pat­terns have changed. To­day, the ma­jor­ity of fleet sales come about through ten­der with sta­te­owned en­ter­prises and large cor­po­ra­tions mostly driv­ing f leet sales. Many of the coun­try’s largest f leets are owned by gov­ern­ment (es­ti­mated to be over 100 000), SAPS (ap­prox­i­mately 80 000), state-owned com­pa­nies like Telkom and the all-im­por­tant car rental op­er­a­tors.

De­spite new ve­hi­cles sales in 2014 end­ing on a strong note, David Mo­lapo, head of f leet man­age­ment at Stan­dard Bank, be­lieves that the in­crease in the sales of light de­liv­ery ve­hi­cles and heavy ve­hi­cles was the re­sult of f leets sim­ply hav­ing to re­place age­ing ve­hi­cles af­ter stretch­ing their re­place­ment cy­cles to break­ing point and ex­pects sales of new ve­hi­cles to re­main quite f lat dur­ing 2015.

By con­trast, WesBank’s head of r esea rc h Ru­dolph Ma­honey s ays WesBank’s records demon­strate av­er­age re­place­ment cy­cles around 36 months, adding that the com­pany is quite bullish about 2015, ex­pect­ing a 3%-5% growth in the new car mar­ket mainly due to the f lat­ten­ing of new car inf la­tion, the re­duc­tion in the oil price and the repo rate re­main­ing at 5.75%.

Car rent al sect or

Once an in­dus­try that hired ve­hi­cles out on a ca­sual ba­sis, car rental is now high­ly­de­vel­oped and the in­dus­try now of­fers a range of long-term and short-term prod­ucts.

Many large f leets are car rental com­pa­nies, and the num­ber of ve­hi­cles they ac­quire is largely driven by tourism. Naamsa es­ti­mates that 14% of do­mes­tic new car sales in 2014 orig­i­nated from the car rental sec­tor. That equates to R27.5bn for the over 79 000 ve­hi­cles pur­chased by this sec­tor dur­ing 2014, with de­mand ex­pected to re­main strong dur­ing 2015 on the back of fur­ther growth in tourism and busi­ness travel.

There is a slight dis­con­nect in car rental f ig­ures when com­par­ing the South­ern African Ve­hi­cle Rental and Leas­ing As­so­ci­a­tion’s (SAVRALA’s) fig­ures and Naamsa’s es­ti­ma­tion for the car rental sec­tor. Marc Cor­co­ran, pres­i­dent of SAVRALA, ex­plains: “There has been a steady in­crease in our car rental mem­bers who sub­mit statis­tics. Our parc [to­tal num­ber of ve­hi­cles] has in­creased in line with the in­dus­try − about 3% − tak­ing a dif­fer­ent tra­jec­tory when you look at the Naamsa stats for car rental over five years. I sus­pect that may be due to a change in re­port­ing by some of the Naamsa mem­bers where some of the smaller car rental mem­bers may be pur­chas­ing t hrough a deal­er­ship, there­fore cap­tured un­der re­tail rather than un­der car rental.”

SAVRALA, the rep­re­sen­ta­tive voice of South­ern Africa’s ve­hi­cle rental sec­tor, man­ages the bulk of car rental op­er­a­tors, a ve­hi­cle parc last year of 63 000. But they do not rep­re­sent ev­ery sin­gle car rental op­er­a­tor in the coun­try. “There are hun­dreds of smaller car rental op­er­a­tors who typ­i­cally would not be re­new­ing

their f leet ev­ery year and would tend to run their ve­hi­cles longer. And some down in Cape Town for in­stance are sea­sonal op­er­a­tors,” says Cor­co­ran. Re­duc­ing over­all f leet costs is the main chal­lenge for f leet man­agers. And f leet costs can pur­port­edly be re­duced by as much as 30% through f leet man­age­ment pro­grammes. “The t y pica l South African f leet, try­ing to con­tain costs over the last few dif­fi­cult years, still has l ot s of r o om t o ma­noeuv r e by im­ple­ment­ing pre­ci­sion-man­age­ment tools; not only the lat­est ve­hic­u­lar te c hnolog y a nd te l e mat­ics, but man­age­ment sys­tems and ser­vices as well,” says Mo­lapo. “Fleet man­agers need to bud­get for an inf la­tion level of at least the cur­rent 6%, but can emerge with a stronger, more eff icient f leet pro­vided they fully em­brace the sys­tems and meth­ods avail­able on the mar­ket,” ad­vises Mo­lapo.

But there is a dif­fer­ence be­tween bank­ing in­sti­tu­tions − which, as well as lend­ing money, also pro­vide a range of f leet ser­vices such as fuel man­age­ment − and spe­cial­ist f leet man­age­ment com­pa­nies whose key el­e­ments are man­ag­ing cost con­trol, risk man­age­ment and ad­min­is­tra­tive ef­fi­ciency on be­half of t heir clients, as well as ve­hi­cle main­te­nance and driver be­hav­iour.

Ap­pre­ci­at­ing that man­ag­ing a f leet is of­ten more ef­fec­tive through a spe­cial­ist f leet man­age­ment com­pany, many cor­po­rates, gov­ern­ment de­part­ments and those in the com­mer­cial sec­tor are tak­ing ad­van­tage of the sav­ings that can be de­rived by out­sourc­ing their f leets. Last year, the In­no­va­tion Group landed a fiveyear con­tract es­ti­mated to be worth R200m to man­age main­te­nance on over 100 000 SA gov­ern­ment ve­hi­cles.

In Europe, around 50% of ve­hi­cles sold end up in the f leet man­age­ment sec­tor. In SA, the grow­ing and highly com­pet­i­tive f leet man­age­ment in­dus­try houses key play­ers l i ke Avis Fleet Ser vices and Eqs­tra Fleet Man­age­ment, the lat­ter man­ag­ing over 40 000 ve­hi­cles and hav­ing a client base of more than 4 000 com­pa­nies.

“The lo­cal f leet man­age­ment in­dus­try is very com­pet­i­tive, es­pe­cially when it comes to fore­cast­ing resid­ual val­ues, and ex­change rates and new ve­hi­cle mod­els inf lu­enc­ing costs,” says Cor­co­ran. The prod­uct, he adds, has also changed sig­nif icantly as more play­ers, l i ke telem­atic com­pa­nies or in­ter­me­di­aries − who wouldn’t have been around 10 or 15 years ago – have en­tered the in­dus­try.

The num­ber of ve­hi­cles glob­ally is grow­ing, bring­ing with it op­por­tu­ni­ties for the f leet man­age­ment in­dus­try. The global f leet man­age­ment in­dus­try, ac c ord i ng t o re s e a r c h c om­pany Mar­ket­sand­Mar­kets, is cur­rently worth R12bn, fore­cast to be $35.35bn in 2019. If, as Mo­lapo sug­gests, many of the lo­cal f leet op­er­a­tors have yet to fully utilise the mod­ern tools and tech­nolo­gies avail­able to them, the lo­cal f leet man­age­ment in­dus­try faces an ex­cit­ing fu­ture.

Fleet man­age­ment

David Mo­lapo

Stan­dard Bank: Head of fleet man­age­ment

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.