The future of the fleet is built on innovation
Although the role played by the finance team in many large organisations has undergone significant change in recent years, one of its key responsibilities is still to keep a close eye on costs. In so doing, finance directors have become more aware of the fleet as a component of the balance sheet and have placed more emphasis on effectively balancing mobility costs with the needs of company car drivers.
In many ways, the challenges faced by fleet managers remain the same at their core, but the development of new models and automotive technology is changing not only what drivers want from their vehicles, but also the fleet manager's ability to run a flexible and cost-efficient fleet. As the fleet becomes a more prominent feature of the balance sheet, the fleet manager and finance director must work together to create the optimum mobility solution.
"The challenges always remain the same. First and foremost, it is driven by managing the costs of the fleet in a transparent and fair way. Clearly, there are a lot of operators out there that can offer services to support this insight, but also it is about being smart around developing fleet policies that are attractive to not only the company, but also the driver," says Simon Dransfield, general manager for fleet and business Europe at Jaguar Land Rover (JLR).
The fleet business that Dransfield oversees is active in 42 countries and accounts for 45% of all sales at JLR. The company is the UK's largest premium automotive manufacturer, and its offering encompasses the luxury saloon and sports car marque Jaguar, as well as the leading all-wheel drive brand in Land Rover. Investment in its extensive network has enabled it to become one of the key players in the fleet space in recent years.
"The capability of the network the organisation has put in place over the past six years clearly demonstrates our growth at retailer and national level to address the needs of key accounts, small businesses and leasing companies," Dransfield says. "This ensures we deliver the right products and solutions to grow our sales and increase our level of engagement." As well as its network, JLR owes its prominence to investment in new technologies that have enabled it to create designs that not only reduce total cost of ownership, but also improve efficiency and safety.
"Innovation is critical for us and it is at the heart of how we have grown our business," Dransfield says. "In 2009, we were selling 160,000 cars globally, but we have tripled that in the past five or six years. Clearly, that is driven by products with innovative components. JLR is the largest investor in research and development in the whole of the automotive industry in the UK.
"There are many innovations at the manufacturing and the customer or driver level. The one that stands out is the connected car, and the ability it gives us to really customise and personalise the vehicle to [the client's] own preferences, so that they absolutely have the greatest engagement possible. Then, from a fleet operator perspective, fleet managers have the ability to understand how the car is performing and how the vehicles are being operated by the drivers."
JLR's recent models also show that the company is thinking carefully about the needs of specific market segments. The new Jaguar E-PACE, which goes on sale in Europe on 15 January 2018, features the latest connectivity technologies and practicality solutions for busy professionals, and comes with Jaguar's three-year, 100,000km unlimited service warranty. Meanwhile the luxury performance SUV, the F-PACE, provides sporty handling with enhanced practicality.
"Only 12 months ago, we introduced the Jaguar F-PACE, the first SUV for our brand, and it has been a significant success. The SUV segment is the fastest-growing segment in the premium market globally. Now, we are introducing the E-PACE, which enters the market at €34,950, so it is an incredibly competitive proposition. The E-PACE helps us to address a wider portfolio of customers. Historically, Jaguar has been a male-oriented brand, but with the E-PACE we see 50% of our sales coming from female customers, and clearly that gives us a much stronger opportunity to build a successful market offering," says Dransfield.
The E-PACE has market-leading residual value performance and was ranked number one in Germany, Italy, France, Spain and Norway, according to Autovista's market forecast. "Our expectation is that the E-PACE will follow the F-PACE in terms of excellent residual value performance, which translates into excellent lease rates. So from a cost perspective, we have a valid offer. Then, from a driver's perspective, we have five stars from the Euro NCAP safety agency, so the safety aspect is covered. With the Ingenium engines that blend performance and environmental sustainability, we have a very attractive performance in terms of fuel consumption and CO2 emissions."
The CFO's seat at the table
Technology and design are essential ingredients in an optimum fleet solution, but so is the ability to work with all of the key decision-makers. In this respect, the relationship between a fleet services provider and the finance director is just as important as the relationship with the fleet manager.
"CFOs are the principal sign-off on any policy, so we have always worked closely with a group of people, including fleet managers and finance directors, to determine what is an appropriate car for their policy. We reference a number of different partners across the business when we deal with any customer, and we have seen that finance directors have become more engaged in determining fleet policy," Dransfield says.
Cost is a key parameter in these discussions and companies take different approaches to measuring the best outcome. Some focus on total cost of ownership, while others look at total cost of mobility. Environmental issues are also a vital element in the decision matrix, and a fleet services provider must consider all of these perspectives when tailoring its offering.
"Finance directors want to operate a cost-effective fleet management policy but, clearly, they have to operate with certain parameters, some of which may come from the environmental or HR perspective, which influence what brands are represented within the fleet. So it is about working together on a collaborative basis with many people in an organisation, so that the appropriate policy is in place," says Dransfield.
For a company considering its choice of fleet services partner, it is essential to understand that the automotive industry is constantly changing, as companies like JLR invest heavily in technology development and vehicle design. Driverless vehicles will no doubt become a central issue in years to come, but it is just one of many factors that will increase the choice and flexibility available within corporate fleets. The right partner will be one that understands these trends and is at the forefront of vehicle design, yet still keeps the fundamental needs of the fleet manager and finance director at the top of the agenda.
"The evolution of the fleet market in years to come will be very interesting," says Dransfield. "It will probably become more dynamic than at any time in the 30 years that I have been in the industry. If we look at the autonomy of vehicles or changing mobility requirements, then there are many options for drivers and companies. Then, with the evolution of power trains and batteries, we will see a fundamental change in dynamics. But the aim fundamentally remains the same. It is about satisfying the driver and matching the demands of the business to constantly drive costs down."