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The State of Global Fleet Management

The following is the state of the global fleet market report, by global region, based on presentations given at the GFS Conference, and also includes additional input from global fleet management companies ALD Automotive, Wheels, and FleetPartners, who shared their insights about the global fleet market with Automotive Fleet after the GFS conference.

January 2012, by Mike Antich - Also by this author

Note: You can download bonus material related to this article, in PDF format, here.

The Global Fleet Services (GFS) alliance held its fourth conference Oct. 5-8, 2011, in Brussels, Belgium. The conference focused on the commercial fleet management industry and examined global market trends on a region-by-region basis.

Founded in 1994, GFS is an alliance of fleet leasing companies serving specific regional markets. Companies that comprise GFS are:

  • Automotive Resources International (North America).
  • ORIX (Asia and Australia).
  • Eqstra Fleet Management (Africa).
  • RENTING Colombia (South America).
  • Total Fleet (South America).

The following is the state of the global fleet market report, by global region, based on presentations given at the GFS Conference, and also includes additional input from global fleet management companies ALD Automotive, Wheels, and FleetPartners, who shared their insights about the global fleet market with Automotive Fleet after the GFS conference.

South American Fleet Market

There are 77 million registered vehicles in South America, of which 22 million are commercial vehicles. However, the number of fleet-managed vehicles represents a small percentage of the commercial fleet market.

Following is a summary of the fleet market in specific Latin American countries:

Brazil: With a population of almost 200 million people, Brazil is the largest fleet market in South America, according to Joao Andrade, sales director for Total Fleet Brazil – Localiza.

The six major fleet management companies (FMCs) in Brazil have well-developed processes to manage fleet operations. Localiza is the largest car-rental network in South America, with more than 460 locations in seven countries and a history of stable management. It is also the largest individual client of Fiat, General Motors, and Volkswagen in Brazil and operates a fleet of more than 100,000 cars.

Out of the approximately 4 million corporate vehicles in the country, more than half are located in the Southeast region of Brazil, which contains the major population centers, including Rio de Janeiro and Sao Paulo. Examples of companies operating major fleets in Brazil are Proctor & Gamble,  Kraft, Merck, Honeywell, Pirelli, and Danone.

Fleet management in Brazil faces several challenges. First, Brazilian fleets have little leverage with car manufacturers and limited bargaining power. Three automotive companies control 75 percent of the Brazilian market share — VW, GM, and Fiat.

The second challenge is the geographical dispersion of fleets due to the country’s size. “This is compounded by poor road conditions and poor driver education,” said Andrade. “There are also issues in terms of reliability of the service-provider network and parts availability. Lastly, there is unpredictability in remarketing values, which creates high depreciation risks.”

The vehicle maintenance/service-provider network is not reliable in some parts of the country, and there are widespread shortages in parts availability. Total Fleet Brazil has two employees dedicated to locating parts to minimize fleet downtime.

The current labor shortage in Brazil is impacting the quality of services from fleet service providers. In addition, there are recurring quality problems with brand-new vehicles sold in Brazil. “The poor quality of some OEMs in the market is affecting product credibility. This is compounded by a spare parts shortage,” said Andrade.

Presently, the used-vehicle market is depressed and resale values are uncertain. One factor behind the uncertainty in future resale values is a trend in decreased new-car sale prices, said Andrade.

There is also market uncertainty as to whether the economic crisis in Europe may spill over into Brazil.

“Last year was a year of dynamism for the Brazilian fleet market, although the last months of 2011 showed some signs that the economic crisis initiated in Europe might herald some tougher times to come here as well,” said Pascal Vitantonio, general manager for ALD Automotive Brasil.

For most of the year, indeed, the 2011 economic landscape replicated, albeit with less intensity, the favorable equation for a developing industry that had taken place in 2009 and 2010.

“In addition to many multinationals entering the Brazilian market, the economy is surfing the wave of huge investments in the oil sector and in infrastructures in the wake of international events, such as the 2014 Soccer World Cup and the 2016 Olympic Games in Rio de Janeiro,” added Vitantonio.

“Nevertheless, the car market — whether for new or used vehicles — being extremely sensitive to the availability of personal credit showed a brutal deceleration the last four months of the year, triggered by extremely prudent financial institutions that the government and the Central Bank try to avoid repeating the 2008 crisis. Beyond the obvious impact on the used-vehicle sales that all the actors of the industry are closely monitoring, the most recent situation on the credit market has also been a strong impact on the other end of our product lifecycle, namely funding. Developing and structuring funding capacities at competitive prices are back on top of the agenda of all the actors of the industry, and it is expected that asset-backed solutions become more frequent and cost-effective,” said Vitantonio.

Argentina: This market continues to be the second largest fleet market in South America. The top three OEMs are PSA Peugeot-Citroen, General Motors, and Ford. Fleet leasing is not prominent in Argentina; it is more common for corporations to purchase fleet vehicles.
The fleet management market in Argentina is primarily comprised of rent-a-car companies. The estimated number of cars in the Argentine commercial fleet and rental market is about 8,000 units.

Corporations usually purchase their fleet vehicles, rather than leasing. 

Colombia: Colombia operates approximately 3.8 million fleet vehicles. In 2011, approximately 320,000 new vehicles were sold, representing a 30-percent increase over the prior year. “There were several factors contributing to this, including lower taxes on imported vehicles, an average income increase for Colombian workers, brand and price diversity, and growing financing alternatives,” said Carla Podesta, service development manager for RENTING Colombia. Most fleets in Colombia are small. “A company with 20 vehicles is considered a big fleet,” said Podesta. However, there are exceptions. In 2007, RENTING Colombia signed up SABMiller, which operates a 1,500-vehicle fleet.

In 2012, Colombia will stop importing used vehicles from China. “Once used vehicles are no longer imported, it will help new-vehicle sales,” said Podesta.

Key drivers for fleet sales growth are companies focusing on their core businesses. Also, free-trade agreements are forcing companies to invest in productive assets and consider leasing. There are tax benefits to company-provided vehicles.

New-vehicle prices are going down and the used-vehicle market value is difficult to predict, resulting in increased depreciation risks. Poor road conditions and an insufficient number of qualified drivers also contribute to poor vehicle condition, which directly impacts depreciation.

Peru: There are approximately 1.7 million fleet vehicles in operation in Peru. In 2011, approximately 150,000 new vehicles were sold, representing a 29-percent increase over the prior year. The factors contributing to the increase were identical to those in Colombia. The fleet market is still immature and there is a lack of understanding about the fleet leasing product. Dealer and service reliability issues also exist.

Mexico has a population of 112 million people with a diversified economy. It is the 14th largest economy in the world.

There are 34 million vehicles in operation in Mexico, of which 34 percent are commercial vehicles. “Annual new-vehicle sales have been increasing in Mexico. In 2011, 557,339 vehicles were sold, representing an 11-percent increase,” said Victor Campuzano, director, sales & marketing for ARIZA, a joint venture in Mexico between ARI and the Groupo Zapata.
“Seven key FMCs operate in Mexico. They are Ariza de Mexico; General Electric; Wheels; Facileasing (purchased by BBVA); and Masterlease (purchased by Banregio Bank). Wheels is partnered with IXE, which was purchased by Banorte. LeasePlan and ALD are the newest entrants in the Mexican fleet market,” said Campuzano.

Nissan is the top vehicle brand for commercial fleets in Mexico. “GM used to be No. 1, prior to its bankruptcy,” said Campuzano.

Manufacturer fleet pricing is based on buying volume. Fleet vehicles can only be purchased through dealers and a courtesy delivery system is in place. Fleet order-to-delivery times average between four to 12 weeks.

“Most fleet leases in Mexico are open-end leases. Closed-end leases are not very popular and are typically more expensive than open-end leases. The preferred option for most medium and large corporations is purchasing; they are afraid of the interest rate risk. Typically, funding uses a floating interest rate; however, fixed rates are available tied to the Prime rate,” said Campuzano.

Taxes are a major factor in fleet purchases. “There is a federal tax ‘tenenica,’ which is 10 percent of the original cost of the vehicle in four years. Also, license plates must be replaced every three years. There are also additional taxes levied by individual Mexican states,” said Campuzano.

At end of service, most corporations give drivers the option to buy the vehicle, regardless of the kind of acquisition. “Approximately 95 percent of fleet passenger vehicles are sold to drivers,” said Campuzano.

“In 2011, total Mexican domestic car sales will still remain behind their best performance in 2007-2008, even if the Mexican automotive sector’s record production level is sustained by growing exports to the U.S. By contrast, the dynamic company fleet market is therefore gaining unprecedented importance: Even if cash owned by companies in a liquid economy still remains the worst enemy for leasing, the traditional asset-driven culture is moving toward a more ‘focus on core business’ approach, which favors outsourcing non-core activities, such as car fleet ownership and management, even in the public sector, which has been one of the most active segments in 2011,” said Thierry Merienne, general manager for ALD Mexico.

“This dynamism is increasingly leading new actors, such as banks, to develop fleet management abilities, through acquisition of existing independent lessors or through agreements with fleet managers. In this fast-development phase, which we anticipate to be a long-term trend, both open- and closed-end schemes have been growing quickly, and users are increasingly shifting their criteria for choice from cost of acquisition to a more comprehensive TCO (total cost of ownership) approach,” said Merienne.

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