State of the Global Fleet Market: Europe, Asia, South America, Australia & Africa
High fuel prices, credit availability, and sustainability are some of the issues facing fleets located in Europe, Asia, Australia, South America, and Africa. This state of the industry report examines fleet trends in each of these regions.
Vehicle asset management in the European Union is very sophisticated and, in many cases, on the cutting edge of best practices in fleet management. There are many similar trends impacting fleets on a worldwide basis, such as cost-containment pressures, utilization management, vehicle downsizing, maximizing fuel efficiency, and complying with sustainability mandates.
Although fleets outside North America share similarities, there are also dramatic differences. For instance, in Asia, about half of the fleet vehicles operated by major multinational corporations are two-wheelers, particularly in India, Indonesia, Philippines, and Taiwan. Operating a two-wheeler fleet versus four-wheeled vehicles requires different asset management and utilization practices. Another difference is global fleets are more heavily taxed, and in many instances, operate under stricter emissions requirements than mandated in the U.S.
What follows is a summary of current global fleet management trends broken out by regional market.
Asian Fleet Market
A variety of market challenges affect fleets in Asia, such as a conservative lending environment, increased concerns about CO2 emissions, and the possibility of governmental mandates to control these emissions.
China: China surpassed the U.S. as the world's largest vehicle market in 2009 and 2010. Nationwide sales are more than 17 million units per year, which include medium- and heavy-duty commercial vehicles. Currently, there are 85 million vehicles on the road. By the end of this decade, China is forecast to have 200 million passenger vehicles in operation. A key reason for the growth in the Chinese automotive market has been the rapid rise in wealth accumulation, resulting from the country's fast-paced economic growth and industrialization.
Despite growth in the Chinese economy, all fleet leasing companies operating in China still have very small leased-vehicle portfolios relative to the size of the economy. The top four fleet management companies operating in China are Dazhong, Shouqi, Avis, and ALD. Other fleet management companies, such as ORIX, are viewing China as a "green-field" opportunity. The country's largest fleet lessor is Dazhong, which has a modest portfolio of 4,000 units. One reason, among a variety of reasons, for the small fleet market is that many salespeople in China rely on public transportation. In addition, as one fleet manager recounted: "You can go from 'first-world Shanghai' to 'third-world China' very quickly. Outside of the major cities, road infrastructure remains subpar."
An emerging fleet trend in China is the use of company vehicles as an employee recruitment and sales incentive tool. Many multinationals operating in China report annual employee turnover rates as high as 25 percent, primarily due to the expanding economy and employment opportunities for properly qualified candidates with experience working with multinationals.
Another factor contributing to increased automotive sales is the expansion of the dealer network. Also, the Chinese government cut taxes on new-vehicle purchases and implemented subsidies on fuel-efficient vehicles.
The Chinese government has increased spending for the development of alternative-energy vehicles. China is the world's largest emitter of CO2. In addition, China's reliance on importing fuel increased by 55 percent in the first half of 2010, and fuel prices continue to climb. China consumes about 8 million barrels of oil per day, nearly 10 percent of the 88 million barrels consumed globally on a daily basis.
Japan: The size of a typical Japanese fleet averages 200 units. However, there is also a grouping of commercial fleets operating thousands of vehicles. Fleet lessors serving the Japanese fleet management market include ORIX, GE Capital, and Sumitomo Mitsui Auto Service.
Delivery fleets represent the largest segment of the commercial fleet market. Japanese cultural norms emphasize the sale of fresh food, which requires a steady replenishment of stores throughout the day by fleets of delivery vehicles operating in major urban areas.
An increasing number of Japanese companies are acquiring hybrid vehicles to reduce emissions and fuel consumption. According to John Carter, managing director for ORIX Australia & New Zealand and ARI/GFS partner, the Japanese government will ultimately "go electric" and legislate the use of one battery type for electric vehicles. "It is clear the Japanese are going electric," added Carter.
Philippines: For many multinational companies, the Philippines is the second largest fleet market in Asia after Japan. One reason is the nation is an archipelago of more than 7,000 islands, requiring vehicle concentrations confined to individual islands.
The fleet leasing market is dominated by local lessors. With the exception of ORIX, most of the major global fleet management companies do not have a presence in the Philippines. This is due to the ownership requirements placed on international businesses by the government to partner with a local business. The average size of fleets in the Philippines is under 50 units.
India: Both retail and fleet sales have been increasing dramatically in India due to the country's economic growth, increased availability of credit, and the growing number of OEMs launching new products in the local market.
In calendar-year 2010, the Indian light-vehicle market had a record sales year of 2.69 million units, compared to 2 million units sold in 2009. Annual sales of light commercial vehicles in 2010 grew even faster to 522,000 units, up 38 percent compared to the prior year. The 2011-CY forecast is for annual light commercial vehicle sales to be 630,000 units, up 19 percent compared to 2010.
The average fleet size in India is about 100 units. The top five fleet management companies operating in India are LeasePlan, ALD, ORIX, Hertz, and Arval. In addition, the recent global financial crisis prompted an uptick in the number of companies outsourcing fleet services to third-party providers. All vehicles in India are regulated by Euro 3 emissions standards.
Indonesia: Some fleets in Indonesia are very large, with 3,000-
4,000 vehicles, operated by international tobacco companies with huge growing operations in the country.
"ORIX identified Indonesia as a growing market many years ago, due to the growth in international investment," said Carter. "ORIX has seen continued growth and development in the auto lease product in Indonesia due to the demands from multinational companies."