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More Diverse Vehicle Selectors: Will the U.S. Mirror Europe's Fleet Market?

Diverse vehicle selectors offering multiple makes and models are relatively common among European corporate fleets. Could the future hold the same for the U.S. fleet market over the next decade?

September 2009, by Mike Antich - Also by this author

Diverse vehicle selectors offering multiple makes and models are relatively common among European corporate fleets. One of the many reasons is each OEM's fragmented fleet market shares. In Europe, a large number of nameplates compete for the same commercial fleet business.
Could the same future unfold for the U.S. fleet market over the next decade? Some think we are seeing embryonic glimpses of it today, especially with the increased interest in the commercial fleet market by nontraditional fleet OEMs, which, in turn, are being spurred by increased inquiries by commercial fleets.

The events of the past year, still unfolding as of this writing, have contributed to this increased volume of inquiries. The experience of two of the Detroit Three quickly entering and exiting Chapter 11 bankruptcy protection, along with some fleet management companies refusing new-vehicle orders, prompted some corporations (especially those sole sourcing) to begin to reassess their sourcing strategies. As a result of these unexpected sourcing disruptions, corporate fleets began developing contingency plans to use alternative vehicle sourcing channels.

A Good Litmus Test

Fleet management companies (FMCs), which manage new-vehicle fleet orders from a broad cross section of companies, report an increase in fleet orders from their client base for import-badged vehicles.
"Our Toyota volume, in particular, is up considerably," said Rick Shick, vice president of purchasing for Donlen Corp. "While some of the increase is related to the recent Chapter 11 activity, I would attribute the majority to customers considering lifecycle costs to a greater extent than ever before due to the economic environment."

Wheels Inc. similarly noted an increased interest in import-badged vehicles among its fleet clients. "We've seen an uptick in import acquisitions, but even more so, an 'interest' in these vehicles. In today's environment, more and more clients are expanding their level of interest beyond the Detroit Three due to concerns about their stability and TCO (total cost of ownership)," said Joe McDonald, director account management for Wheels Inc.

Automotive Resources International (ARI) likewise reports greater interest in import-badged vehicles. "We have seen an increase in the interest level of import brands. The Chapter 11 bankruptcies are the primary reason clients are looking at alternative manufacturers," said Mark Bryan, manager, vehicle acquisition services for ARI. "Also, the import manufacturers have become more active in the commercial fleet segment, generating further interest from clients. Low retail sales volume is causing import manufacturers to look at the commercial fleet industry as a way to increase sales volumes and market share. It will be interesting to see if their interest level remains when retail sales pick up."
A survey of import-badged OEM fleet departments indicates they are experiencing an increase in commercial fleet orders.

"Market uncertainty is forcing commercial fleet customers to make 'safe choices' on vehicle suppliers and move away from single-sourced strategies," said Mark Oldenburg, national fleet marketing & administration manager for Toyota Motor Sales USA. "Existing uncertainty associated with select OEM viability reinforces the uncertainty of residual values."

This market uncertainty is openly cited as a key reason for the increase in commercial fleets discussing sourcing options with import-badged companies. "The uncertain future of the domestic manufacturers has led many fleet managers to consider alternatives. These reasons include product availability, dealership viability, and decreased residual values," said Ross Friedmann, senior commercial accounts manager for Audi of America.

Other OEMs concur with this assessment. "This past year has shown us how dramatically a marketplace can change within a very short period of time," said Rob Fecher, manager, vehicle programs & remarketing for Mazda North American Operations in Irvine, Calif. "The turmoil within the domestic marketplace has changed the dynamics substantially as uncertainty for vehicle deliveries has been a major factor towards the defection to brands, such as Mazda, that haven't been affected by plant closures and/or bankruptcy."

A variety of other factors are contributing to the increased interest in import-badged models.

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