Ted Chan, Schindler: The rise of Flexible Pricing in the Fleet Industry
During the Global Fleet Summit Virtual Experience on 5 December 2023, fleet professionals were invited to provide a short, but to-the-point response to one of 12 central questions.
Ted Chan, Manager Fleet at Schindler, answers the question: “Is flexible pricing as we know it from Travel a viable solution for Fleet?”
With a fleet in North America of 3,800 vehicles and a travel group of 2,000 employees under his supervision, Ted Chan emphasized the fundamental principles of supply and demand dictating prices. He explained how the post-pandemic era has introduced unprecedented fluctuations in the automotive market due to microchip shortages and supply constraints, leading to scarcity and inflated prices.
Ted Chan pointed out Tesla's bold step into flexible pricing, drastically reducing the cost of the Model X from $135,000 to $80,000. This move aimed at preserving market share against traditional OEMs, triggering discussions on the sustainability of such price adjustments.
However, the feasibility of flexible pricing in the automotive industry remains uncertain. While Tesla's strategy attracted attention, other manufacturers, like Ford with its variations of the Ford Lightning pickup, experimented with price increases, signaling a divergence in approaches.
The evolving dynamics of variable pricing imply a potential shift from the conventional annual discounts negotiated by fleet managers with OEMs. Instead, Ted Chan suggested building robust partnerships and agreements with manufacturers to navigate fluctuating pricing structures.
Parallels between travel and fleet
Drawing parallels between travel and fleet management, Ted Chan highlighted differences in pricing dynamics. Unlike the varying prices observed in travel bookings depending on the day, vehicle prices historically remained consistent for about a year until Tesla's disruption.
While flexible pricing offers advantages, such as potential cost savings, its implementation raises concerns. Buyers might face challenges in determining the best time to make fleet purchases compared to the predictable strategies prevalent in travel reservations.
Ted Chan emphasized the importance of establishing agreements with OEMs that provide price protection, an aspect often overlooked. His recommendation stems from experiences where agreements yielded refunds due to price drops, contrasting with Tesla buyers left without recourse for overpaid purchases.
Relive the “Answers that Matter” from the Global Fleet Summit Virtual Experience
- Almy Magalhaes, Ecolab: “How can my Commercial Fleet benefit from AI and ML?”
- Carlos Roberto Guemez Shedden, UNHCR: “How can tracking data support in reducing road crashes in countries with a low road safety culture?”
- Marc Sibbald, IPWEA: “Should I anticipate specific and more flexible fleet funding methods like subscription, novated lease, private lease?”