17 Apr 17

How to include APAC in an International Fleet Programme

As is true for any product, the maturity of leasing, fleet management and mobility is equally driven by both supply and demand. In this sense, due to the increasing focus of corporates on their Asian fleets and the increasing offer of vehicles and sourcing options, we can conclude that the Asian markets are maturing and it is becoming easier to include the region into international fleet programmes.

However, Asia is the most diverse of all continents and any statement with regards to the whole of the region is subject to mistake and discussion. Therefore, let’s look at the different sub-regions and try to define some trends.
The ASEAN (South East Asian countries, such as Singapore, Malaysia, Thailand, Indonesia, Philippines) countries have already started to organize as a ‘union’ and facilitate trade amongst themselves, which will eventually ease cross-country solutions. This will lead to harmonization of product offering, pricing and innovation, also in the leasing industry. The time will come where consolidated ASEAN fleet management is possible and realistic. But not just yet.

An interesting development in the ASEAN countries is the increase in digital short distance mobility solutions. Taxi’s, tuk-tuk’s and buses have always been around, but even more than in any other region in the world, mobile taxi or car reservation applications (Uber, GrabTaxi) are a huge success in South East Asia. This success is obviously driven by insufficient public transport, (except for Singapore), but also underlines the willingness of the South East Asian population to go for digital. This predisposition will help develop mobility solutions in the near future.
SOUTH ASIA, more specifically India, is a mobility economy by itself. Indians are traders, travelers and digital aficionados. Leasing is becoming increasingly popular, fleet management (either outsourced or not) is a recognized product and the users are desperate to see more and better mobility solutions made available to them. The main hurdle until now however, is the diversity of taxes and regulations between the 29 states. Luckily, the current government is starting to take the first steps of harmonization. Our prediction is that India will become a predominant leasing market and, once trade between states becomes easier, will start offering true mobility solutions.
NORTH EAST ASIA (Japan, South Korea, Taiwan) cannot be considered as a unified sub-region, although similarities between the markets are greater than in any other Asian sub-region. Trends are similar (popularity of leasing and digital mobility solutions), needs are similar but collaboration between NEA countries is limited.

Japan takes the lead when it comes to leasing penetration and B-to-C mobility solutions: car sharing, very short term car rental (15 minutes and upwards), city-to-airport-to-city car rental and so on, are commonly accepted and often used by the Japanese consumer. The main driver for mobility solutions is the running cost of a private vehicle and the fact that an expensive private parking is required to own a vehicle.

Surprisingly enough, these solutions are not popular with the professional customer who is extremely conservative and will only accept change initiated by the employee rather than innovation proposed by the market.

We suspect however that the Japanese fleet market will have to embrace mobility solutions soon to guarantee people transport at affordable pricing. And as Japanese tend to do: once they embrace a solution, they will become the best at it.
China is, as often, the odd one out. Leasing is still not fully regulated, congestion is a daily hassle for every employee, and mobility solutions are limited except for relatively good public transport, especially in the new megacities. Corporates struggle to organize transport for their employees and, although they would prefer it, simple solutions such as home office are often impossible due to bad internet connections. In other words, the country is desperately looking for smart solutions.

A first light at the end of the tunnel is the Chinese Government’s intention to promote electric vehicles. The initiatives are driven top-down, i.e. from the development of batteries and vehicles to tax incentives for companies and individual users. Projects have been launched to create leasing companies specifically designed to promote EV’s, which will probably lead to a better regulation for more traditional operational leasing as well.

Our educated guess is that China will very soon catch up, simply because the economy suffers from the lack of mobility solutions.
In terms of conclusion, we do advise taking Asia into consideration in global mobility programs and fleet management initiatives, but always taking into account the different development speeds and contexts of the sub-regions. Disregarding the identity of the different Asian sub-regions and countries will lead to failure. To put it bluntly: focus on India and ASEAN first, be more careful with Japan and Korea and jump on the train when China starts innovating.

Authored by: Yves Helven