There have been many articles and news pieces about the supply shortages of new vehicles. This has led to a considerable impact in the consumer as well as fleet market. Anyone looking at a fleet refresh will need to look at alternative strategies for the next few years. Many organisations are having to forgo what they want for what they can get. The good(ish) news is there are alternatives and other strategies / avenues to consider.
Vehicle market in crisis
Every manufacturer is doing it tough on supply at the moment. This is not only limited to capacity issues for vehicles arriving in the country. But also shortages of materials during the manufacturing process. Supply is short for a few reasons:
1/ The ongoing impact of COVID-19. Not only on material supply such as the well publicised chip shortage or even the speculation around a magnesium shortage. There are likely to be slow downs or shut downs in manufacturing related to outbreaks for some time to come.
2/ Even where materials are available. In the global supply chain, many raw materials and components are being impacted by freight globally as we have written previously.
Every brand has seen these issues firsthand at some stage. When you combine these factors – the situation is not going to resolve itself for a while yet. Cars are being drip fed to dealers. Larger scale fleet replacements or roll outs are going to be a challenge for some time to come.
What does this mean for fleet or company purchases?
No matter which brand or variant you choose – supply is likely to be short. While you may get lucky on the odd vehicle here or there, any order of size is going to be a struggle. Unless you are in the top 1% of fleet size buyers out there.
Most manufacturers are only allowing their dealers to order a fraction of their normal stock allocation. This explains why many used car prices have escalated of late.
What are the alternative options?
In terms of new vehicle supply, there are no options short of creating your own car brand. In terms of how you utilise or extend your existing fleet – there are some options. If you are approaching a fleet changeover – you may need to consider a hybrid approach during the next 2 years.
Waiting and hoping that the supply situation will resolve itself is not a strategy that is likely to deliver results in the foreseeable future. Not for vehicles in any category at the moment. Do not dust off an RFP from 2 or 3 years ago and expect that it will work out. It may only lead to the situation being worse down the track and cause a lot more pain into the future.
There are no cut and dried simple solutions that will work for every company. Each company is different. Consideration must be given to the individual variances and a strategy developed. One that meets the current as well as future requirements.
So what should companies be doing now?
The number one piece of advice for every company looking at a fleet refresh in the next 24 months is to plan well ahead of the curve. Start the conversations early. In companies where the vehicle fleet is critical – it needs to be something that is on the senior team’s agenda early.
The second would be to look at the current fleet. Especially non-working vehicles. Much in the same light as many companies have re-evaluated travel or work from home. Working habits during the pandemic have changed. Most company leased or owned vehicles have sat in garages during the lockdowns. And, are being used less as working habits since returning to work have adapted to a ‘new normal’.
You should also consider taking a blended approach. Consider how shorter term leases or hires are utilised as part of a fleet strategy. Or at least as a consideration during a potential wait for a fleet to changeover. Use of shorter term vehicle hire or lease has increased through the pandemic. For example running deliveries to help manage the fluctuations in demand can prove to be a cost effective approach.
If you are looking at new vehicles in the next 12 months. Do not wait. Start discussions now. If you are looking in the next 13-24 months. Start early. You will be glad you did. No matter what your situation or size of your fleet. Whether it is 4 cars or 400. Get ahead of the curve and if you need to, come have a chat with our team to work with you on a plan for the years ahead.