Fleet and mobility market evolution in Asia-Pacific in 2018
Finally, Asia is receiving more attention from the global community! There’s enough exciting-slash-frightening news coming from China to create awareness at Fleet Manager level that things are moving fast in the East. But obviously, Asia is larger than only China and each country follows a different pace in developing its maturity. Let’s look at the trends for 2018.
Most of the larger fleets are in a relatively good place when it comes to harmonising car policies and consolidating the supply chain in the so-called mature regions. This has led to a first increased focus on Latin America for the last couple of years, but not so much on Asia. However, this lack of attention is costing money.
Asian fleets are generally what can be called “succession fleets”. This means that vehicles are sourced, either in leasing or in purchase, based on a principle of replacing vehicles by similar vehicles. Very often, especially in South East Asia, this means replacing 3 litre double cab pick-ups by exactly the same, new version of the same brand. As the Fleet Management function is underdeveloped (see below), functional leaders, e.g. heads of sales, will determine what new vehicles will be selected and neither the procurement business partner nor the low-level tactical fleet manager will be in a position to challenge those choices.
In addition, Asia is benefiting from massive GDP growth, meaning that rather than being the world’s “production unit”, Asia is becoming a much larger “consumption unit”. In other words, businesses are growing and more cars are needed, locally, to sustain production and sales.
Both factors together lead to one conclusion for the Fleet Managers. The Asian fleets are increasing in size and cost. Some of the Global Fleet Managers – and their CFOs – have been aware of this phenomenon for a while and are looking into, or better, trying to understand, the Asian landscape. Mainly the tobacco industry, agrochemical and pharmaceutical industries have started fleet programmes in Asia, tackling the many savings opportunities that local fleets have to offer. Fit-for-purpose exercises, OEM sourcing, lease versus buy exercises are slowly becoming common in Asia.
Move from procurement to fleet management
The Fleet Management function in Asia is most often procurement driven and function steered. Even if there is a Fleet Manager, her/his function is usually a tactical one – answering driver’s questions, calling dealerships for service appointments, doing in-takes of cars and so on. The same industries that we mentioned above have understood that there’s a need for a more strategic function, at a level that can talk to functional heads and has the leverage and buy-in to implement change.
With the move from Procurement to Strategic Fleet Management come a lot of advantages: smarter sourcing, better consolidation and more importantly, improved cost control.
Increased mobility need
Asian cities are growing fast; urbanisation is expected to grow 61% in Asian countries, resulting in an additional 2 billion people to live in Asian cities between today and 2050 (UN World Urbanisation Report). Urbanisation in combination with large GDP growth means more need for mobility.
Alternative Mobility solutions
Unfortunately, the Asian “infrastructure gap”, the difference between infrastructure needs and infrastructure development, remains important. Adding cars to the metropolitan areas is about the worst solution one can imagine – Jakarta being a good example of how deregulated traffic can impact a corporate P&L. Therefore, the more vigilant Fleet Managers are looking into alternative solutions, such as car sharing and ride hailing to cope with the increased need of mobility.
China, Japan and South Korea are leading the electric/hybrid trend in Asia, but also Thailand has implemented a taxation scheme based on CO2 emission in 2017. As a result, corporate fleets are increasingly replacing traditional ICE vehicles with hybrid cars.
Supply Chain consolidation
Although the CEOs of Toyota, Orix and Sumitomo claim a desire to become true global organisations, we’re still far away from a true regional product and service offering. This doesn’t mean that supply chain consolidation is completely impossible in APAC. We’re seeing good initiatives being taken by fleet owners to harmonise as much as possible, at least on a local level. There’s hope that the supply chain will understand the needs of the corporates.
LAAS – Leasing as a Service
Leasing is still not the most utilised sourcing methodology in Asia and in many countries, it’s considered a “luxury service” rather than a solution that offers tax advantages. The European leasing companies in India (ALD, Arval & LeasePlan) have been doing a great job creating awareness about the advantages of leasing, but there’s more work to do. We see that the increased involvement of Global Fleet Managers is helping to push the leasing solution forward.
Join the Asian Advisory Board
Asian fleets are maturing slowly, but the one thing that won’t change in 2018 is the fact that maturity is not driven by the supply chain, as it should be, but by Global Fleet Managers. The Global Fleet platform has decided to play a role in Asia’s fleet development, by creating more content about Asia and by organising the Asian Advisory Board. This Advisory Board is a group of people from different environments (OEM, leasing, fleet owners, supply chain) who are willing to put their hands together and create more leverage for themselves or their customers. In order to be truly representative, the Advisory Board needs more members. We invite all fleet owners and suppliers with interests in Asia to reach out to Yves Helven and join the Board.
Photo: traffic in Jakarta