Jean-Laurent Paris, DEKRA: “Vehicle price is just the tip of the iceberg”
Profit in the automotive industry is increasingly made or lost at the end of the ride, when the car is resold. As a consequence, Used Vehicle Management (UVM) is central to all players involved in the process, observes Jean-Laurent Paris, Managing Director of global Used Vehicle Management specialist DEKRA Automotive Solutions: “OEMs and lessors now see UVM as essential”. But so should everyone: good UVM saves money.
First off, how is DEKRA Automotive Solutions doing today?
Jean-Laurent Paris: “Very well, actually. The key target assigned to us by our board in Stuttgart is to deploy our business model outside of Europe, in particular in Brazil, the U.S. and China, and we're doing just that. And we're on course for our targets within Europe. So we're happy – even if we have to fight for our success, because the economic context is still very tough on some markets. But we see signs of improvement”.
What would your definition of Used Vehicle Management (UVM) be?
“Interestingly, it's hard to define because the answer varies according to whom you ask. For most people, UVM is only about reselling the vehicle. But for us, that is only the tip of the iceberg. For us, it's about the whole in-fleet and de-fleet processing of vehicles. That means taking into account all technical, logistical and administrative issues as well as the remarketing ones”.
“The technical aspect comes down to the condition report of the car. A precise damage report, consisting of several targets, has a clear impact on the residual value. That assessment is also essential so the lessee can be invoiced for any damage”.
“Logistics are also very important: How will you transport, store and refurbish the car? And then there are administrative aspects, such as the exact moment of transfer of property: OEMs dealing with rental companies need to know when and how this going to happen – delays may lead to penalties. For us, UVM is the sum of all these parts”.
How would you say UVM has evolved over the past few years?
“All stakeholders now see UVM as essential. They realize the value of the used vehicle often determines whether or not a particular deal is profitable or not. So, it's in damage appraisal that the profit is made – or lost”.
"In the contracts between OEMs and rental companies, or between lease companies and their customers, there's strong focus on profit, down to the last eurocent. But if they fail to handle the total product stream well, those OEMs and lessors will lose money on UVM”.
What's your advice to fleet managers looking to optimise UVM in order to minimise their cost?
“Keep in mind that vehicle price is just the tip of the iceberg. So it's essential to be very professional on all processes upstream: have accurate and clear contracts with precise rules, defining what must happen on each step of the vehicle's life cycle”.
Big fleets often complain about lack of transparency on what is and isn't acceptable damage. What are the standards?
“When we do damage assessments, our goal is to have a totally independent and objective report. That is why we build a technical specification book together with our clients. But the valuation of the damages must be done according to what the two main stakeholders have agreed – an OEM with a rental car company, for example, or a leasing company with its lessee”.
“We have two different ways of doing the quality checks: our own flying inspectors, who go check multiple times a year in every market whether our technical inspections are appropriate and compliant with our customers' requirements; and then there are some clients who ask another company to check whether we are in line with their requirements. Which is fair, as this also helps us stay focused and avoid mistakes”.
As cars are changing so quickly nowadays, won't checklists have to evolve as well?
“Yes, and the checklist is being adapted, based on the vehicle's usage and typology – and on the client's level requirements and expectations. One of the advantages for DEKRA is that our company 'technical DNA', enabling us to work with OEMs on their new products. Which helps when we want to generate trust with our clients, for example via our knowledge of the batteries of electric vehicles”.
Many big fleets fund their vehicles via full service operational leasing. Why should they care about RV as he risk is entirely with the lease company?
“Of course residual values are not key for them. On the surface, they're paying a monthly fee and that's that. But they can optimize their costs identifying with the lessors which cars would do well on the second-hand market in a few years' time. A good and attractive car policy is a mix between benefit for the driver and TCO for the fleet manager!”
How has the internet changed UVM?
“Speed is the first, most obvious change. Today, a defleeted car is immediately visible to all stakeholders with web access. So the resale process is much faster than 5 to 10 years ago”.
“The second change is the remarketing process itself. Most of the resale happens online, not just via e-auctions, but also via telesales and other channels. You can even anticipate the sale of certain fleets thanks to the tools we have today. So Internet helped in decreasing distribution costs.”