Fleet Industry's Evolution via Flexible Pricing: A Perspective by Ted Chan, Schindler
In the ever-changing landscape of the automotive industry, fleet managers are seeking ways to navigate the complex pricing structures that have historically been more consistent compared to travel bookings. At the Global Fleet Summit Virtual Experience on 5 December 2023, Ted Chan, Manager Fleet at Schindler, discussed the viability of flexible pricing in the fleet industry.
Ted Chan, who oversees a fleet of 3,800 vehicles and a travel group of 2,000 employees, emphasized the importance of establishing agreements with Original Equipment Manufacturers (OEMs) that provide price protection. He highlighted unprecedented fluctuations in the automotive market due to microchip shortages and supply constraints, leading to scarcity and inflated prices.
One notable example of disruption in the vehicle pricing market is Tesla's reduction of the Model X's cost from $135,000 to $80,000. This move aimed at preserving market share against traditional OEMs and attracted attention, with other manufacturers like Ford experimenting with price increases, signaling a divergence in approaches.
Flexible pricing, when aligned closely with actual fleet usage, can enable better budget control and adapt to changes in fleet size or needs. To make this approach sustainable, key strategies include:
- Flexible Pricing Models: Pricing based on active vehicles rather than fixed monthly rates allows fleets to avoid overpaying for vehicles no longer in use, improving cash flow and cost predictability.
- Comprehensive TCO Analysis: Conducting detailed analyses of all costs over vehicle lifespans, including depreciation, fuel/energy, maintenance, insurance, and indirect costs like taxes, helps set realistic budgets and identify areas for savings beyond just purchase price.
- Multi-Modal Acquisition Strategies: Combining buying, leasing, renting, or flexible rental options allows fleets to adapt vehicle mix and duration according to fluctuating operational needs.
- Digital and Preventive Management Tools: Using fleet software with GPS tracking, telematics, and maintenance alerts facilitates proactive upkeep, reducing unexpected repairs and improving operational efficiency.
- Negotiation and Contract Scrutiny: Examining all clauses related to pricing, add-ons, onboarding fees, and support guarantees helps avoid hidden costs. Enterprise and bulk discount options can be leveraged to scale pricing advantageously for larger fleets while maintaining flexibility.
The evolving dynamics of variable pricing may lead to a potential shift from the conventional annual discounts negotiated by fleet managers with OEMs. Agreements with OEMs can yield refunds due to price drops, contrasting with Tesla buyers who have no recourse for overpaid purchases.
In conclusion, flexible pricing is sustainable when combined with rigorous cost management strategies such as TCO analysis, use of technology, diversified acquisition methods, and thorough contract negotiation. These strategies enable fleet managers to adapt to market fluctuations while maintaining budget certainty and operational control. However, flexible pricing in the fleet industry offers potential cost savings but raises concerns about determining the best time for fleet purchases.
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