Fleets’ future is hooking up to IoT

Whether your rental or leasing agency calls your connected fleet “smart” or “intuitive” one thing is guaranteed: Europe’s rental and leased space is quickly riding into the sunset of automated, communicating and interactive cars. If your fleet’s not connected, you will soon fall behind the curve.

Leasing companies offer leasing services to companies, relieving them from the risk of vehicle ownership and the operational burden of fleet management. In doing this they can operate as well-informed consumers buying products and services from carmakers and repair shops. Apart from offering cars under leasing contracts, leasing companies are also responsible for a substantial share of the second-hand car market, approximately 20% in The Netherlands in 2013.

The competitive advantage of a leasing company mainly rests on its ability to push the extra efficiencies for the management of fleets. A key activity is the monitoring of vehicles and authorising repairs. This creates the need for accessing vehicle data that the leasing company can use in its interaction with repair shops. As leasing companies are able to interpret sophisticated vehicle telematics they can be considered well-informed buyers. More specifically, if leasing firms get access to detailed vehicle records, information asymmetries relative to repair shops would decrease, allowing more accurate decisions on whether a repair is appropriate.

Since vehicle telematics would allow more informed decisions, it delivers lower fleet management costs and enhances leasing firms’ bargaining positions as large buyers of repair and maintenance services. It can therefore be expected that the efficiency gains through the use of telematics in repair shops would, at least partially, result in price reductions for customers.

Also, access to telematics data would offer leasing companies opportunities to innovate, especially by offering additional services enabled through better monitoring possibilities. For example, constant monitoring allows not only timely servicing but also avoids unnecessary inspections. This lowers costs and also increases customer value by avoiding unnecessary unavailability and the inconvenience of switching to temporary replacement cars. Vehicle telematics can also help monitoring driving behaviour and the impact on fuel efficiency, wear of components like tyres, etc. Various efficiency or driving experience enhancing applications could be developed using such information. For example, in-car apps visualising the impact of driving behaviour on car parts, a dynamically adjusting “eco” driving score, etc. The added value created by these apps could be monetised in various ways. For example, corporate customers could get the chance to include clauses in the contracts with the actual drivers that specify the conditions under which the driver is liable for specific costs, for instance, from irresponsible driving behaviour.

Analogous to repair services, there are two types of players involved in the leasing market. On the one hand, there are the leasing services offered by VMs themselves (”captive leasing firms”). They offer mostly cars of one vehicle manufacturer. On the other hand, there are independent leasing firms that typically own a more diverse fleet. According to the ranking of European leasing Companies in Europe, a large part of leasing contracts are with independent leasing firms. As one type is directly linked to the vehicle manufacturer and the other type is not, questions arise on equal access to vehicle telematics and its consequences.

Marketing professional Nick Wienerhaushas worked for several years on European accounts for a leading US firm providing a comprehensive range of leading edge automotive-grade connectivity solutions.

“The global auto industry is looking to European connectivity models,” Wienerhaus said. “Autonomous vehicles in particular will have the highest impact on the industry.”

Driving Safety and Convenience

We asked Jelle Oosterhoff, senior product development manager of international products and services at LeasePlan to give us his thoughts:

Q. What are the benefits of connectivity to you and what potential developments to you see having an impact on the industry?

“I identify internal and external benefits coming from connectivity. Internal ones focus mainly on improvement and increased efficiency of operations and external ones focus mainly on increasing driver safety and convenience and increase our added customer value (reducing costs, reporting with real-time data). The impact on the industry is high. Traditional processes will change and it will be harder to escape the commodity of leasing for the leasing companies which ignore connectivity.”

Q. What lessons are there from new mobility models that can be applied to the industry?

“The industry should reinvent itself since the new mobility models are eating parts of the traditional business models. Take, for example, autonomous vehicles and the impact on insurance. Car sharing (more drivers for one vehicle) and the increased need for flexible products can potentially also become a threat to our industry.” 

Q. What concerns do have about connectivity and what needs to be done to address these?

“Actually I don't have a lot of concerns. For our customers I believe that privacy issues are very relevant but as long as the benefits for the driver are high enough, the driver will accept the perceived (impact on privacy). I always compare this with the usage of a smartphone. I don't think that anyone ever reads the terms and condition before accepting these. This is because we don't care since the benefits of using a smart phone are massive and easily outweigh the possible privacy issues.”

Q. What connectivity services are most prized by your customers?

“There is no single answer to this. It really depends on the requirements of the customer and the composition of the customers’ fleet. A fleet of remuneration vehicles has other needs than commercially used vehicles. Think of a case when vehicle off-road time occurs. The impact of this for a service vehicle will be much higher than that for someone who is using the vehicle for commuting.”

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