The State of the European Market
The Global Fleet Advisory Board (GFAB) meeting (August 26, 2022) began with Hans Damen of Fleet360 providing an overview of the current state of the European market.
“We are all struggling with a hugely disruptive supply chain that is building tensions between suppliers and OEMs," he said.
Chief among these was OEMs riding roughshod over agreements, with price increases being made, often on a four-weekly basis.
Kimberly Fisher (NOV) asked U.K. and European editor Ralph Morton if the same issues were affecting the U.K. sector. Fisher said that she was experiencing real difficulty in getting vehicles signed off by both the finance and HR departments as the constant price rises took drivers over allotted grade ranges.
Morton said such OEM practice was currently commonplace. Fleet managers were experiencing difficulty in accurately predicting fleet costs because prices constantly increased. Even where long-term OEM/fleet relationships were concerned, particularly with a commercial vehicle fleet, the OEM was increasing prices by up to 40% adding some £130 to the monthly rental across an 80-van fleet.
Fisher added: “It’s becoming really disheartening for me because prices are going up before delivery, creating issues for me with both finance and HR. I have to make decisions on ordering cars or we lose them — so I need some leeway on pricing structures to get vehicle approvals.”
Take the Risk and Take the Profit?
There was further discussion about the currently high RVs of vehicles. Damen said that leasing companies were making good profits on resale. Mario Moses (Bayer) questioned whether open-ended leases might be better, where the RV value could be realized by the business.
In response, Damen explained that in Europe accounting rules influenced the decision to go for operational leasing.
Moses added that greater consideration should be given to open-ended leasing in Europe. Jim Petrillo (FujiFilm) added that “with open-end leasing it means we can take advantage of the high RVs.”
It was an attitude also articulated by Mike Sims (LDS), who said: “If you’re buying cars now, you’re eating up the depreciation.”
There was also a look at the chip crisis and the new EV credits under the Inflation Reduction Act. Sims said that OEMs were building a pipeline of chips but supply would still be limited until at least 2024, he said, adding: “When you have a healthy supply chain there is not a problem; when you don’t, everything breaks down horribly.”
Regarding the new EV tax credits, the consensus was that it’s too early to see how the credits will really work out and what were the implications of the changes.
Petrillo added: “It’s a complicated formula and It's way too confusing at the moment.”
Welcome to New GFAB Members
Three new members joined the Global Fleet Advisory Board.
Editor Mike Antich first welcomed Kemish Castro, fleet coordinator with The Church of Jesus Christ of Latter-Day Saints (LDS).
Kemish explained that having worked at Enterprise he then moved to LDS, first in their accounting department, but had now transferred to the fleet department with particular focus on LDS operations in Latin America.
Antich next introduced Matt Falcone, national commercial fleet accounts for Subaru of America. Falcone explained that he was taking over from the retiring Tina Kourakos and was just starting to get to grips with Subaru fleet, having moved over from Volvo Cars.
Antich also introduced Kevin Neal (VinFast), the final new member to join GFAB. Formerly with LeasePlan, Neal explained that he was now VP of commercial fleet sales for VinFast in the U.S.
Neal said that after 20 years on the fleet side, mainly with LeasePlan, he was now part of the new Vietnamese OEM VinFast, producing fully electric cars for the US market and expected “aggressive expansion in the U.S. and Europe”.
First vehicles will come to the US in late 2022/early 2023, he said. These would be the VF8 SUV model followed by the larger VF9 seven-seater SUV.
Neal said Europe would come on stream a little later with the compact VF6 SUV and mid-size VF7 SUV spearheading the European market attack. Neal said we could expect battery ranges of between 250-300 miles.
To start with, all models will be made in Vietnam, but VinFast was planning a new factory in North Carolina, U.S., by 2024 and one in Europe by latest 2025. Although the European factory location is under wraps at the moment, it is thought most likely to be sited in Germany.
Neal went on to add that VinFast planned a direct-to-consumer model rolling out on the West Coast before working eastwards. By end 2023, he expected 100 showrooms to be in place, but would not be in all 50 states until the North Carolina factory came on stream.
Antich ended the meeting by thanking everyone for their participation and said the next GFAB meeting for September would focus on the Australasian market.
Originally posted on Global Fleet Management