Features
24 nov 23

Fleet TCO to fall slightly in 2024

Fleet costs are set to decline slightly next year after three years of savage inflation, according to industry experts.

The decline is modest, but will be welcome news for fleet and procurement executives who have witnessed vehicle prices, finance costs, maintenance expenditure and fuel spend soar since the pandemic.

Fabio Carello, senior fleet consultant, Ayvens (pctured above), told delegates at the International Fleet Managers Institute meeting in Lisbon that as lead times for new vehicles had returned to 2019 levels, so discounts were starting to reappear in some markets. EU inflation has also slowed down, from its peak of 8.4% to 5.4%, and is on course for 3% in 2024, which should mean that the ECB’s interest rates rise no higher than their current 4.5%.

TCOs to fall in 2024

The decline in TCO is forecast to be only -0.31%, but it’s a step in the right direction after a 30% rise in the last five years over a typical four-year, 120,000km lease, according to figures from Arval (below).

Chinese OEM competition

Competition is certainly intensifying as Chinese OEMs offer electric vehicles at lower acquisition prices than their established rivals, although their distribution and support networks vary widely from country to country.

This triggered a warning from Antonio Vidal Tost, global head of fleet, used cars and head of region Germany, SEAT Cupra (pictured above).

“​Models from new brands may experience higher depreciation rates, affecting their residual values compared to more established brands. Established brands have a well-developed service and maintenance network, providing easier access to repairs, parts and customer support. New brands may have limited network,” he said.

Hybrid procurement strategy

The need to think globally and locally highlights the opportunities presented by a hybrid procurement strategy, said Nicolas Michel, senior international consultant, Arval (pictured above). Combining global and local suppliers allows fleets to set international goals and benefit from long-term partnerships, while remaining agile on the ground.

“To implement a hybrid sourcing strategy, businesses can work with a mix of local and global suppliers, strategically selecting the best sources for different products or services based on factors like cost, quality, and risk,” he said.

These decisions are unique to each business, added Michel.

“Businesses must carefully weigh the pros and cons of each approach and consider factors like cost, quality, risk, and environmental impact. A hybrid sourcing strategy may offer the best of both worlds, providing the flexibility to capitalise on the unique advantages of local and global suppliers,” he said.

“Fleets face more changes and the frequency of changes is getting faster, so it’s harder for companies to adapt. The real challenge is to be agile so you can make changes faster.”

 

 

 

Authored by: Jonathan Manning