Steady year tipped for fleet sales

RUNNING a vehicle fleet can be one of the biggest expenses many financial managers will ever have to deal with.

Buying, maintaining and selling decisions must all be made in the light of a business’s individual circum-stances.

But just how large is the fleet market?

It is estimated there are around 1.2 million fleet cars in Australia, accounting for around 10 per cent of the total Australian car pool.

And at current selling rates, fleet sales will continue to draw the attention of car manufacturers, dealers and legislators.

About 50 per cent of the approximately 800,000 cars sold nation-wide last year were classified as fleet purchases.

Statistically, fleet sales encompass all cars not registered for private use and run the full spectrum, from the small business with just one vehicle to the large corporations and government bodies and corporations such as Telstra.

In WA the picture is similar, with around 50 per cent of sales classified as fleet sales.

Australia’s big three car manufacturers – Ford, Toyota and Holden – have realised the importance of fleet sales to their financial viability.

Of the approximately 300,000 vehicles manufactured in Australia, between 70 per cent and

75 per cent are sold as fleets.

Ford Motor Company WA regional manager Sean Parker said the fleet market had been one of the only shining lights for the company in light of its recent image problems.

While overall Ford sales have been on the slide, the fleet sales have continued to grow.

In a bid to gain ascendancy in fleet sales, Ford established the Ford Business Centre to remove the need for a ‘middle man’.

Many deals between the car buyer and manufacturer are currently negotiated with the aid of a fleet management organisation (FMO) such as Fleetcare or Easifleet.

Mr Parker said the centre pooled all its fleet teams together to try and provide the sort of service traditionally achieved only by the FMOs.

“We are the first to operate in this way. We definitely see it as a competitive advantage,” he said.

“We have a policy of preferencing private (business and government) clients and not FMOs. FMOs are basically just a go-between.”

Car industry consultant Australian Automotive Intelligence principal Richard Johns said fleet sales had been propelled by salary packaging moves.

However, he said uncertainty created by the introduction of the goods and services tax, business tax reform and company downsizing had put a damper on fleet sales, particularly hitting the run of the mill sales of Commodores, Camrys and Falcons.

But Mr Johns believes the wallets are starting to open again.

“Over the past six months fleet sales have started to pick up a bit, but not so much in the large car market. It’s more in the luxury car market,” he said.

“What it appears to indicate is that it is the smaller businesses that have been buying over that time. It might be that the demand is just not there at the moment.”

Australasian Fleet Managers Association executive director Marja Thompson agreed that times had been tough since the GST and she believes it could take some years before companies went back to their old purchasing methods.

“Once a company’s behaviour and policy has changed to reflect the changes to government policy it

is very difficult to change their behaviour back again,” Ms Thompson said.

She believes that even though the Government has back-peddled on its tax input stance on fleet cars, it will be very difficult to change behaviour back because companies were seeing the benefits of sticking to the methods they had adopted.

Ms Thompson said companies had become meaner and leaner in the way they operate their fleets and were always looking to the bottom-line.

A survey of the AFMA’s 600 members indicated that the 2003-04 year would also be a steady year of sales, rather then a boom one.

p Next week WA Business News will investigate when is best for businesses to turn over their existing fleet vehicles.