How to cope with Car Policy harmonisation in APAC?
It is not unusual for corporates to aspire to a unified, transparent and harmonized car policy across a region or even across the world. The advantages are numerous: sourcing, depreciation, supply chain and employee steering can be pushed ahead and substantial benefits can be realised in a stroke of a pen.And then there’s Asia
For most companies, the Asian fleets have not been on top of the priority list for a long time. The focus is, traditionally, Europe and the US, or what are called the mature markets. As a result, when a Fleet Manager of a Procurement Manager starts looking into their company’s Asian fleet, they will find a frightening mixture of brands, suppliers, types of contracts (or no contracts at all), a disorganised sourcing strategy and worst of all: a huge amount of costs claimed via expense notes.
So people sit together in board rooms in Europe and discuss action plans for Asia. Regional Car Policies, optimise the supply chain, roll out global deals with manufacturers ...
Big words, fancy powerpoints and impressive savings potentials.
And then, our Fleet Manager takes a business class flight to Asia to instruct people what to do and share best practises. After having given it some thought, the flight will take our Fleet Manager to Indonesia. The company’s fleet size is quite substantial and she has noticed that there’s no local Car Policy in place, so that’s a good place to start. And Bali is only an hour’s flight from Jakarta – great for the weekend.
The plan is clear: the Company wants to put in place a harmonized regional car policy that reflects on the content of the existing EU and US Car Policies. In a nutshell, the objectives are:
- Review the eligibility based on job need and real usage. So no more cars for HR and Finance people – only for the sales staff and then only if they drive at least 1500km per month.
- Standardize the contract parameters to 60 months and 150,000 km
- Make the employee responsible. They should participate in accident related costs and end of contract damages
- Harmonise makes and models across the region. The Company has global agreements in place with some major brands. Rolling these out in Asia is a no-brainer.
- Introduce a ‘fit for purpose‘principle in order to make sure that everyone has the most suitable car with the best TCO.
- Give fuel cards to everyone in order to optimise discounts and reduce expense notes
The first meeting with the Indonesian stakeholders was great. Everyone showed up (they were a bit late, but so friendly), listened carefully and asked critical, but good questions. Individual sessions with HR and Procurement would follow.
This is when reality kicks in. A snapshot of the meeting notes:
- Some employees will not get to the office if the company won’t provide for a car. Buying a new car is too expensive for them and getting a used car is too dangerous.
- Mileages are unknown in Indonesia. Leasing companies don’t keep track, employees don’t fill out their log books.
- They use the car freely during weekends and after working hours. It’s a benefit, considered as part of the salary and impossible to remove
- There are no contracts with mileage, only duration...
- 60 months is not advisable in Indonesia as some of the tax authorities will consider +48 month leases as part of the balance sheet
- Insurance excesses (deductibles) are standardized at IDR 300.000 or less than USD 23. Almost no savings to be realised...
- Due to high import taxes, it makes more sense to go for locally produced cars. And now our Fleet Manager understands why everyone drives oversized Toyota Innova and Avanza...
- Giving the correct vehicle would mean going for alternative makes or models and increase the fleet’s TCO drastically
- There’s no fuel supplier that serves the entire country... only the government owned Pertamina. And their fuel cards cannot be used outside of Jakarta... On top of that, there’s no such a thing as discounts...
After a disappointing trip to Indonesia, our Fleet Manager goes to Thailand (again, no 60 month contracts, employees do +50000km per year), Malaysia (why are leasing contracts so expensive?), Korea (‘we only want Hyundai or Kia‘) and Japan (‘you are not welcome’)...
And we haven’t even touched on the topic of the supplier landscape. Orix and Sumitomo are the most represented suppliers in the region, but they don’t offer regional deals and don’t even offer similar products across Asia. Same for the car brands, almost no regional deals possible...
So, is it impossible to establish a regional Car Policy in Asia? It is, when aiming for a European standard. Therefore we advise a different approach.
- Focus on what can be realised and what represents a benefit for the local employees
- Health and Safety: Select cars with airbags, rear view mirrors, headrests; Introduce safety regulations to reduce accidents
- Comfort: Select cars with air conditioning
- Introduce GPS and Telematics. This will eventually increase the efficiency of the people on the road, but also give you metrics on the use of the vehicle, its location, driver behavior and fuel consumption
- Start change with simple, transparent but flexible rules
- Introduce a car list with 3 types of cars per country (city – dirt road – mountain) based on clearance
- Ask for a buy versus lease for each sourcing project
- Take small measures to disconnect the Tool of Trade car from its driver.
In a first stage, the APAC car policy should contain more local addenda than regional regulations, but you need a multi-phased plan to reduce exceptions and move slowly to a harmonized Regional Car Policy. The continent is evolving quickly and in the right way – don’t try to be ahead of progress, but change gradually as new evolutions present themselves.