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To judge from the plethora of glossy adverts showing sleek vehicles speeding along forested hillsides, it would be natural to assume that selling cars directly to consumers is the prime intent of motor manufacturers.
In fact, more than half of the cars sold in the UK in the past two years went to companies and rental groups, according to the Society of Motor Manufacturers and Traders. Fleet management provides a steady stream of business compared with the whims and spending habits of individual drivers, and is more than a third of carmakers’ profits, according to estimates from Exane BNP.
Across Europe, the picture is similar in some respects. Of the 13.4m vehicles produced across the continent in 2015, 6m were sold to consumers while 3.8m went into fleets such as company cars, according to a senior figure at a car manufacturer. The rest were rental vehicles or preregistered demonstration cars.
It is a market in flux and this report looks at the challenges facing different types of fleets — from traditional cars, vans and lorries to drones and London’s black cabs.
Innovations such as electric drivetrains, connected cars, telematics and driverless technology present a long-term threat to traditional business models in the sector. Over shorter time horizons, many haulage companies are benefiting from low oil prices but some operators in Europe face the challenges of disruption created by the refugee crisis.
The advent of drones has consequences not just for delivery groups — which may see Amazon turn to airborne parcel carriers — but also for industries as wide-ranging as agriculture, firefighting and oil exploration.
Telematics is already changing the way that employees — whether full-time drivers or company-car owners — are behaving. Richard Perham, director of Airmax, a hardware and software engineering company, says installing telematics allows fleet operators to reduce expenses fraud and cut down significantly on costs. His clients who install the technology have an average cost saving of 30 per cent in the first year, he claims.
“Once people know Big Brother is watching,” Mr Perham says, “they drive very differently.”
Instances of claiming mileage for commuting to work — which is illegal — dropped sharply, while drivers waiting for deliveries turned off their engines rather than leaving them idling, a move that could save £250,000 per year for a business with a fleet of 750 cars, he estimates.
It also reduces insurance costs for business, who can know much more accurately the location and conditions of their vehicles.
“Insurance is a big cost, and potentially a big headache, for fleet managers,” says Jonathan Hewett, chief marketing officer at Octo Telematics, the world’s largest provider of monitoring technology, with a 36 per cent market share.
Number of telematically-connected cars in the world
“In an accident, for any fleet company, the quicker you can identify, locate and recover the vehicle, find out what’s wrong and repair it and get it back on the road, the better,” he argues. “When an underwriter looks at a fleet of vehicles that have telematics embedded in them it helps.”
But penetration levels are low. There are 12m telematically connected cars globally, out of more than 1bn cars in total. In the UK, around 764,000 fleet cars have telematics, with half that number of consumer cars fitted with the technology. “In five or ten years’ time every vehicle in the UK will have some type of technology fitted,” Mr Hewett says. He predicts 93m cars globally will be fitted with the technology by 2020.
Ride-sharing, the so-called “Uberisation” of transport, has many carmakers worried about sales falling in years to come, but for fleet managers, the issue is deemed less pressing. “The company car is still seen as a status symbol, and it will be very hard to break that,” says Ken Buckley, head of sales at TCH Leasing, a contract hire and fleet management company.
“I don’t see any of the car-sharing initiatives impacting on the industry in the short term.”
Driverless technology, however, may disrupt the sector more fundamentally. Fully autonomous vehicles that render lorry drivers redundant, known as “terminator syndrome” by some companies, could be decades away. But significant steps are being taken in that direction.
Later this year the first self-driving truck convoys — called platoons — will be tested on UK roads after George Osborne, the chancellor, announced plans in the Budget to roll out driverless haulage technology by the end of the decade. The platoons travel together on the motorway, sometimes as close as four metres apart, and use connected technology to brake or accelerate simultaneously.
While each one will still have a driver in its cab, who takes over control once the trucks leave the motorway, many lorry makers say they already have technology that can negotiate city traffic and intersections.
The greatest barrier to the innovation being adopted widely is regulation, and questions remain unanswered over whether rules on autonomous vehicles will apply across borders, essential to haulage and logistics groups in regions such as Europe. Governments are moving to clarify these; in the UK Mr Osborne pledged to remove impediments.
This month a continent-wide road trip organised under the EU-supported “Safe Road Trains for the Environment” scheme let six of the largest truck groups trial platoons across several countries, ending in Rotterdam on April 6.
Truck platoons offer the possibility of saving on fuel costs, as the air resistance experienced by the laggers in the group is significantly less, proponents argue — although this is disputed by some in the industry. Professor Alain Kornhauser at Princeton University, faculty adviser to the Princeton Autonomous Vehicle Engineering team, has calculated that only 1-10 per cent of truck miles travelled are “platoonable”, taking the shine off the alleged savings.
Rules over tailgating, and the ability of different truckmakers to co-ordinate on technology, are among the barriers that the 44-tonne vehicles have to pass before they can become properly autonomous.
And even if such problems are overcome, they will not lead to the mass destruction of jobs that many have forecast, some say. “Most of our customers don’t drive for a living,” says Newth Morris from telematics group Telogis. “They drive to go and do their job.”