Key notions and car policy practices in South East Asia

Managing an Asian fleet can be challenging. There is little harmonisation between countries, limited communication between peer companies and the selection of suppliers is mostly driven by procurement arguments, i.e. pricing rather than service scope. In addition, most Car Policies have been strongly localised & reflect often a desire to maintain status quo, rather than implementing innovation.

This analysis is descriptive, i.e. it reflects the choices that most fleet owners have made. The data come from the author’s experience & network of Asian fleet owners, complemented by relevant market research done in 2017. We will have a closer look at Car Policies in the key ASEAN markets : Indonesia, Malaysia, Thailand and Philippines. As Singapore is not a typical Fleet market, the country is not included.

Local versus Global Car Policies

To what extend are the ASEAN Car Policies driven or dictated by the Global Car Fleet Manager?

• Indonesia : only 15% of all Car Policies are truly global. An additional minority of Car Policies contain elements of a regional or global policy (30%), but have been strongly localised.
• Malaysia : carbon copy of the Indonesian situation; a total of 56% of the policies are purely local, without any influence or interference of the Global Fleet Manager
• Philippines : 52% of the Car Policies are local, although 22% of the corporates in Philippines have implemented their Company’s global car policy, the remaining 26% being a mix of local and nonlocal influences.
• Thailand : a record low of 10% of the Car Policies is Global, 56% is local and 34% of the policies contain some elements of a regional or global policy.

The impact of Global Car Policies on the ASEAN market is low which reflects the general level of involvement of central functions in the Asian markets.

Who owns the Car Policy in South-East Asia?

As a general rule, the HR function or more specifically, the Compensation & Benefits function is taking the lead (about 90% of all Car Policies in the region are written and maintained by HR). As a result, 2 topics take up most of the space in the policies : eligibility and safety. There is little attention for the car as a tool (clean and undamaged cars), economical aspects (consumption or CO2), driver behaviour (driver recharge of damages) and even less for innovation (hybrid or electric) and mobility solutions (car sharing, ride hailing).

Nevertheless, it is almost exclusively the Procurement function that, solely driven by the requirements of the functional leaders (sales, production), buys cars or leasing contracts the same way as commodities would be acquired. Practically, the Head of Sales will indicate that she/he needs a number of Toyota Hilux Revo Double Cab’s and these vehicles will be sourced for, without challenging the model, engine or options. Similarly, for leasing contracts, the upfront pricing will be taken into consideration rather than the service scope, the contract or the risks.

Car Policy Reviews

As most of the Car Policies are local, they are not reviewed on a regular basis. In reality, only when a major change in car eligibility occurs, the Car Policy will be revisited. Those companies that do review the Car Policy documents on a regular basis (every one or two years) are the same that have implemented all or part of the Global/Regional Car policy, which is most often subject to regular updates.

 

Car Policies Modernisation

By Modernisation is meant a combination of measures that have been implemented or are being implemented by most US, EU or Global Fleet Managers : reducing the number of cars in function of the real need of the Company, think about hybrid or electric vehicles, select vehicles with a lower consumption and CO2 emission, consider alternative means of transportation such as public transport and car sharing.

1. Adapt the total number of cars to the real mobility need of the Company. Almost three quarters of the Companies have not considered and are not planning to consider a reduction of the number of company cars. Instead, Asian car fleets are increasing in size year after year, often motivated by valid reasons such as company growth. However, even in these circumstances, the allocation of a car is purely defined by the job or function and rarely by the real need of a vehicle
2. Hybrid or electric vehicles : except for Thailand, where 20% of the Fleet Managers has implemented or will implement hybrid or electric (not surprising, as Thailand has an emission based taxation), 19 out of 20 companies in South-East Asia says not wanting to consider hybrid or electric vehicles
3. Lower consumption / lower CO2 emitting vehicles : 90% of the Fleet Managers has no intention to focus on either consumption or CO2.
4. Alternative transportation : less than 25% of the Companies is looking into public transport, car sharing or ride hailing as a solution for the cost and the reduced efficiency generated by the high congestion rate in the South-East Asian countries.

 

Eligibility

Who receives a Company Car? As a general rule, the income taxation in South-East Asia are not as high as in some European countries, where it makes more sense, economically, for a company to give a car rather than additional salary. Nevertheless, to EU or US standards, many employees receive a company car. We’ll be looking into the category of non-sales professionals and exclude the executive or management levels (in other words, regular employees with an office based job).

Over 40% of the non-sales professionals are eligible for car benefits. As a comparison, in the US only 7% of the same population receives the same benefit. This is mainly due to the fact that most of the eligibility rules are based not on the need of a car, but on employee levels and seniority.

 

Conclusion

The TCO of most South-East Asian car fleets has risen dramatically over the last years. This is partially due to the increased size of many Asian fleets, but also to incomplete Car Policies and the lack of control measures.

However, it remains difficult to measure the real savings potential of a good Car Policy : many costs are hidden in expense notes and are not allocated to (the correct) GL’s and Cost Centres.

The international companies that have invested in an implementation of a Global Car Policy and an active involvement in the Asian fleets, have booked generous ROI’s. At the same time, employees have benefited from more adequate vehicles and increased safety requirements. Change is possible.