Larger corporates to move to operating lease at expense of finance lease or outright purchase: CVO

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Announcement Corporate
Last Updated : Jan 20 2013 | 11:53 PM IST

Corporate Vehicle Observatory (CVO), the independent and international expert platform for the corporate fleet industry backed by Arval – BNP Paribas, today released the fourth edition of the research results - ‘CVO India Report 2011’. The research was undertaken by an independent research agency CSA in 15 countries and identifies key emerging trends in the corporate vehicle market based upon responses from over 4, 500 Fleet managers. 

The Barometer study this year was split into seven key areas 

* Characteristics of the market 

* Car Fleet characteristics and future in India 

* Financing methods 

* Car Policy – current and future trends 

* Key service needs 

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* Safety 

* Environment issues 

CVO 2011 reveals that there is an increase in the large companies opting for operational leasing as their main financing method. 32% of the large companies in Brazil, Russia, India and Turkey (BRIT) consider operational leasing as compared to 10% opting for finance leasing. However, the move is not reflected by the smaller companies. 

European automotive markets are now recovering from lower figures; however the image looks surprisingly bleak when compared with growing, younger economies. The growth potential of large corporates in India is at +66%, marginally better than the +63% of 2010 but at a significant improvement over the +53% of 2009. Meanwhile, BRIT countries demonstrate intentions to develop fleets at well above 55% across businesses of all size vs a European average of 27%. 

Fleet users in BRIT countries are adopting severe selection criteria as per precedent set by Europe over the last 2 years. 65+% fleet managers declare working under stronger cost pressure than in 2010. The uncertainty around the Used Car Market continues to grow with 40+% fleet managers indicating that resale values of their existing fleets with decrease in 2011. Corporate are extending their duration of usage of the vehicles - 65+% indicate increase, and even trying to minimise their costs through outsourcing. 

The Barometer reveals that basic fleet services like maintenance, roadside assistance, and insurance management brought the most savings when outsourced. Also as the Indian market matures services like CO2 reporting, CO2 optimisation, eco driving etc. which were not on the radar just a year ago are coming to the forefront. Outsourcing therefore, seems to be the chosen option by fleet managers across segments within India and the other BRIT countries. 

Motivational aspect of the company car is also more recognised by Indian Corporates with HR participation in Car Policies than it is in Europe or other BRIT countries. A greater proportion of Indian corporates provide incentives when compared to Europe and BRIT nations. In India, 31% of the mid-size companies provide incentive vehicle to their employees as compared to 12% in Europe. 

Indian corporates like their BRIT counterparts seems to have advanced well ahead of Europe where safety driving training is concerned. Majority of companies across segments claim to either have well established training processes or are in the initial set up phase. Approximately 60% fleet managers agreed that safe driving behavior on professional journeys was a shared responsibility between the company and the driver. BRIT countries however, do not seem to be thinking about driver behavior at present. 

India leads the way for fleet managers across clusters where ‘green’ initiatives are concerned. Be it low consumption vehicles, CO2 reduction targets or greener car policies –India’s response to environmental measures is very encouraging. 90% of the small and mid size Indian companies have guidelines in car policy regarding impact on pollution and 85% have policy regarding CO2 emission. 

Stefano Berlenghi, Managing Director, Arval India remarks on the change in the corporate vehicle market: “The operational leasing market has shown a significant growth in last 2 years and is expected to grow further in the coming years with a clear trend shown by the larger corporates. With ever increasing cost pressures on company car fleets, more and more fleet managers are choosing to outsource fleet management to experts in the leasing space leading to more efficient fleets and additional savings for the company. India’s response to environmental measures too is remarkable and the willingness to adopt new technology very encouraging.”

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First Published: Aug 02 2011 | 6:27 PM IST

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