The Essential European Fleet & Asset Management Update

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  • 1. The Essential European Fleet Management Update Anil Valsan Global Director of Research, Automotive & Transportation Feb 23rd 2010
  • 2. Agenda for the Workshop European Fleet Management Market Overview and Trends Green Telematics Market Overview and Trends Snapshot of Electric and Hybrid Commercial Vehicles Summary and Conclusions 2
  • 3. European Fleet Management Market Overview and Trends 3
  • 4. Erratic Fuel Cost, Duty of Care and Congestion are expectedly the Major Challenges Facing Transport Industry – Opportunities for Telematics Providers Market for Commercial Vehicles Telematics: Challenging Affecting Transport Industry (Europe), 2008-2015 High attrition rate haunts fleet Unavailability of operators information adding to overall operational cost Road charges like toll collection system would mandate installation of telematics box Driver Recruitment Communication at and Retention Speeding and Parking Fines optimum cost Information related to Road Charging congestion needed at critical Driver time Communication Continuous Monitoring Congestion Needed Fleet Operation- Hijacking and Industry Challenges Theft Environment Work Time Directive Need for Integrated Driver Management Promotion of ‘Green Image’ & need Speculative for optimal driving to minimize Duty of Care Fuel Cost pollution Since fuel cost is the major component of the operation cost, companies focus on frugal consumption. Moreover, the erratic Continuous and critical driver nature of fuel cost warrants deployment of monitoring system for monitoring required for comprehensive optimal consumption training 4
  • 5. In the Current Market Conditions Telematics is considered as a Reality Check tool for Many Fleets to Remain Profitable and Stay in Business Greater Service Increasing Cost Benefits Capability High Demand for high Customer operational Competitive levels of service Satisfaction efficacy Advantage and information Desire for transparency greater Customer operation Retention optimisation Improving Market Duty of Care Drivers and other intangible High Emission Benefits Reduction and Market Driver Impact Desire to promote Green Image Introduction Low of Digital Key Market Restraints: Tachograph • Economic slowdown delaying potential investment • Cost of telematics still perceived to be high. Small fleets are difficult to address • Yet to reach critical mass to provide customization 5
  • 6. ROI is Strongest Factor for CV Telematics – Savings of 233 Euros/Month/Truck Benefits of Effective Deployment of FMS Effective Driver Vehicle Regulation Improved Other Benefits Management Management Compliance Consumer Savings Service Customer and Effective time Employee 15% Bi monthly Fuel Cost management. Satisfaction and Productivity Digital Tacho Reduction Reduction of Regulatory increase Read out idle time Compliance Typical Cost Savings per truck per month Payback Period on a Typical Investment 126 € 233 € Investment: per truck Hardware Cost : 2,000 € (net amount) Service Cost : 40 € / month (Comprehensive) 35 € 25 € Payback period per truck with 233 € monthly saving 23 € would be 11 months (approx) 23 € After 11 months the initial investment would start Reduced waiting Digital Tacho – Increased Fuel Consumption Effective Route Total paying back time = increased Mass Data Read Productivity Regulation Planning and Savings billable hours out lesser km wasted (233 * 11) – (2000 + 40 * 11) = 123 € Source: ING 6
  • 7. FMS Installed Base to Grow at 13% CAGR while that of Track Trace at 2.4% Total Installed Base 1,200,000 FMS Track and Trace CAGR 9.0% Installed Base 600,000 0 2008 2009 2010 2011 2012 2013 2014 2015 Market Penetration Year Low High • FMS Penetration would Grow Significantly • Navigation as a feature with FMS would find Across Europe – Benelux, Germany, France increasing adoption among fleet operators. would Continue to be Major Markets • With increasing partnership between navigation • Penetration of FMS to reach 14.5 % by 2015 companies and telematics vendors like Garmin from 6.39% in 2008 + Mix Telematix, the penetration of navigation would gain momentum. • Replacement sale of Track and Trace would be dominant in 2015. • Operation consulting to add huge value to fleets 7
  • 8. Total Revenue – System-wise: FMS Hardware Sales and Service Market Would Continue to be Highly Lucrative Market for Heavy and Medium Commercial vehicle Telematics: System-wise Total Market Revenue (Europe), 2008 2008 Market for Heavy and Medium Commercial 67% Market for Heavy and Medium Commercial vehicle Telematics: System-wise Total Market vehicle Telematics: System-wise Total Market Note: All figures are rounded; the base year is 2008. Revenue (Europe), 2015 Revenue (Europe), 2015 2015 2015 Frost & Sullivan Scenario Conservative Scenario 14% 65% 6% 7% 6% 59% Source: Frost & Sullivan FMS Track and Trace Navigation RVD 10% 7% Emergency Assistance 12% 10% 7% 9% 10% 11% Currently, revenue generated through FMS product Revenue generated through FMS sale and service sale and service accounts to approximately 67 per would witness an year-on-year growth of 8.5 per cent cent of the total market revenue. This would grow at a over the forecast period while that of RVD, CAGR of 13 per cent from 2008 to 2015, and by 2015, emergency assistance and navigation would grow at it would account for nearly 65 per cent of the total a CAGR of 19 to 20 per cent from 2008 to 2015. revenues. Revenue share of track and trace system Under this scenario, the revenue shares of all the would witness a dip and that of other systems would systems would grow, except FMS, which would grow. account to 59 per cent of the total market revenues. 8
  • 9. Third-party Logistics and Petrochemical Industry Show Highest Adoption for Telematics, but Other Industries Gain Momentum Increasing consumer demands Market for Heavy and Medium Commercial vehicle Telematics: Telematics for high quality service coupled Adoption by Sector (Europe), 2008-2015 The importance of fuels to with government legislations to maintain economic stability, maintain high hygiene levels, and timely and safe promote the use of telematics deliveries are a key driver Vehicle for telematics Transport, 11% Retail, 14% Low demand for Food & Beverages, 15% navigation-based systems, although the construction industry is Mining, 7% expected to have 3PL, 23% strong growth in tracking Constructions, Petroleum & 9% Chemicals, 21% Note: All figures are rounded; the base year is 2008. Source: Frost & Sullivan • 3PL have the highest usage for telematics at 23 per cent, as 3PL are demanding continuous improvements in the service level agreements over “..it is imperative that we have solutions based on a time frame scenario…Telematics solutions helps us address a period of time while being able to manage their cost (especially, fuel cost) labour and other direct cost”- A major food service • Hot selling retail products with strong demand as well as perishable goods distribution company in food and beverages are expected to have the highest growth rates. “We have undertaken the major capital investment in the • Construction and mining companies are mainly interested not only in technology and further investment will be incremental, either tracking solutions to optimise their operations but also to track their assets through the addition of one or two pieces of software for the fleet, or the installation of the full hardware and software to each new if they get stolen. truck” – A international transport and logistics company 9
  • 10. Setting Telematics as Standard as well as Leveraging the Existing Sales Infrastructure and Strategic Partnerships will Increase the OEMs’ Share Unit Shipments per year – OEM vs. Third-party suppliers OEM OEM 15% 30% •Increasing collaborations between truck manufacturers and aftermarket telematics vendors to drive OEMs share. The product offering through such alliance to combine truck manufacturer's vehicle expertise and telematics vendor’s transport Third-party Suppliers Third-party Suppliers business expertise 70% 85% •Line fitted telematics proportion to increase 2008 2015 Source: Frost & Sullivan Similar trend is seen in North America – Volvo, International, Paccar are the current OE solutions 10
  • 11. Green Telematics Market Overview and Trends 11
  • 12. Fuel Cost Reduction and Green Image are Key Benefits to Commercial Vehicle Fleets Installing Green Telematics Fuel Cost Reduced Carbon Reduction Footprint Higher Demand Better Efficiency Benefits for KPIs of Green Fleet Telematics Meet Duty of Care Other Intangible Obligations Benefits Green Telematics Package As an optional / standard service with FMS - As a part of larger service package green telematics services could cost around € 15 per month As Product Proposition – With track & trace device, this green service can cost additionally € 15-20/month Dedicated CAN BUS black box with GPS+ GSM/GPRS – Hardware cost €500 and green service cost an additional € 15-20/month 12
  • 13. Key Product Offerings – Green Telematics can be Offered through a Dedicated New System or Using Existing FMS or Navigation Systems Connected Navigation with green routing feature could be a value addition PAYD Insurance • One time investment for hardware - € 220-250 Green Telematics Products Dedicated CANbus integrated hardware, with • Monthly fixed cost including comprehensive vehicle and driver management functionality communication - € 25-30 Hardware cost - €450-500 Service cost - € 15 -20 per month As an add on to track & trace real time routing, speeding and idling reports, basic vehicle and driver Navigation with Green management. Service cost - € 15 per month Routing • Feature Cost : € 250-300 • In case of connected As an add on service to fleet navigation, the monthly management system. service cost is € 8-10 Comprehensive vehicle and driver management. Service cost - € 15 -20 per month Leasing User Group Private users Fleet Company Companies 13
  • 14. Impact of Green Telematics: About 10% Fuel Cost Reduction and An Equal Measure CO2 Emission Reduction is Possible through Green Telematics Penetration of green routing feature in navigation is estimated to reach over 11% in Green Navigation Europe and about 15% in North America by 2015. The adoption of green telematics in the car parc would reach over 4% in Europe and over 4% in North America With about 5% penetration estimated in the commercial vehicle segment both in Europe Green Fleet Telematics and North America, the total revenue generated through new hardware sale and service revenue is expected to reach over $1 billion PAYD adoption would largely depend on the kind of marketing push from business PAYD Insurance community combined with the extension of extended by the regulation environment. PAYD penetration is expected to reach 1.5% of car parc in Europe by 2015 Impact of 20% of Green Telematics Penetration in Passenger Car Parc North American European Market Market Car Parc over 270 million over 160 million On an average both green navigation and PAYD 18,500 km per car Over 18,600 km per insurance could achieve Annual Mileage car 10% reduction in fuel and emission in passenger cars Emission About 15.5 million About 9.5 million Reduction tonnes tonnes M3FA-18 14
  • 15. ROI Analysis for Commercial Vehicle: Up to 10% Cost Saving from Fuel Consumption Reduction Achievable through Green Fleet Telematics Incremental ROI Direct Cost Reduction Further Benefits Green Telematics Service Vehicle & Driver Management Fuel Consumption Driver Productivity Maintenance Improved Management Reduction • Data to control • Key performance • Optimum maintenance Better Corporate Image fuel consumption indicators for management. Remote weakness vehicle diagnostics Customer and Employee • Cost saving and identification and rating • Reduced wear and tear, Satisfaction emission reduction • Accurate analysis of higher residual value Fleet Structure through report driver behavior • Reduced down time and Optimization analysis • Peer to peer evaluation repair time • Incentive calculation Add on Green Services Contract Maintenance • Route optimization and reduced Pay How You Drive / Pay As you pollute Insurance unauthorized driving • Improved driver behavior • Fuel consumption reduction Green Navigation • Further cost saving possible through add on services M3FA-18 15
  • 16. ROI Case Study 1 – Investment on FMS Add on Green Telematics Service can be Realized within 5 Months Based on Just Fuel Cost Savings Typical Cost Saving and Emission Reduction for a 40 Tonne (GCW) Long Haul Vehicle clocking annual mileage of 160,000 km Case 1 Hardware : Mid tier FMS costing - Cost: €1500 Service : Basic Logistics Management + Driver/Fuel/Vehicle management - Cost €35 Cost Saving: Realistic fuel cost saving of 8% achievable through green fleet telematics service Before After Saving/Reduction Fuel Consumption 51,200 L 47,104 L 4096 L Fuel Cost € 58,368 € 53698.56 € 4669.44 CO2 Emission tones 133.1 122.4 10.7 €4670 €420 €1920 €1500 Facts: Hardware Cost Total Cost Incurred Fuel Consumption of 40 Tonne Truck – 32 L / 100km Diesel Cost (UK Average) – € 1.14 per liter Annual Service Cost Annual Fuel Cost Saving CO2 Emission per liter diesel burnt – 2.6 kg 16
  • 17. Green Telematics Truck Parc Penetration to Reach about 4% in Europe LCV Market Green Telematics Market: Green Fleet Light Commercial Truck Parc Penetration (Europe), 2008-2015 • With around 23 million light commercial vehicles in Europe, 12% Telematics Fleet Penetration the penetration of telematics is just over 4 per cent and this is expected to reach over 12 per cent by 2015. Truck Parc Penetration 10% Green Telematics Penetration 8% • More than 80% of the vehicles that are fitted with telematics 6% are track and trace system with GPS + GPRS/GSM module with back end service functionality that provides basic work 4% management capability. 2% • However, there are significant number of operators who 0% 2008 2009 2010 2011 2012 2013 2014 2015 prefer to install CAN bus integrated mid tier FMS solution Year Source: Frost & Sullivan which would give greater control over the vehicle and driver. • Penetration of green telematics services is expected to reach around 3.9% by 2015. Green Telematics Market: Green Fleet Light Commercial Truck Revenue Forecasts (Europe), 2008-2015 250 Dedicated Green Fleet Telematics Hardware Revenue Revenues (€ Million) 200 Service Revenue 150 100 50 0 2008 2009 2010 2011 2012 2013 2014 2015 Year Source: Frost & Sullivan M3FA-18 17
  • 18. Green Telematics Offers True ROI in Case of Commercial Vehicles and Solid Savings on Fuel Cost for Passenger Vehicles Green Telematics Market: Green Routing Feature Penetration Green Telematics Market: Green Fleet Telematics Truck Parc on PND Unit Shipments (World), 2009-2016 Penetration (World), 2009-2016 20% 6% Feature Penetration in Units Euro pe No rth A merica Europe North America Truck Parc Penetration 15% 4% Sold 10% 2% 5% 0% 0% 2009 2010 2011 2012 2013 2014 2015 2016 2009 2010 2011 2012 2013 2014 2015 2016 Year Year Source: Frost & Sullivan Source: Frost & Sullivan Typical Cost Saving and Emission Reduction for a 40 Tonne ROI for an user in UK clocking 16,000 km per annum in a (GCW) Long Haul Vehicle clocking annual mileage of diesel vehicle with 5.9L/100km fuel efficiency and savings of 160,000 km fitted with fleet management system with green 15% through eco navigation service subscription €4670 €300 Savings would pay €163 for the device in €100 around 22 months and the further €420 €1920 savings from the €1500 Average cost of eco navigation PND device is ROI Cost per year considering usage for 3 years Hardware Cost Total Cost Incurred Fuel Cost Savings per year Annual Service Cost Annual Fuel Cost Saving M3FA-18 18
  • 19. Revenue Forecast: Revenue Through Green Telematics to Reach Over €100 million by 2015 in the Heavy and Medium Commercial Vehicle Segment Green Telematics Market: Green Fleet Heavy and Medium Truck Revenue Forecasts (Europe), 2008-2015 150 Service Revenue Hardware Revenue Revenues (€ Million) 100 50 0 2008 2009 2010 2011 2012 2013 2014 2015 Year 2008 2015 20 120 Revenues (€ Million) Revenues (€ Million) 90 10 60 30 0 0 Dedicated Service Extended with FMS Dedicated Service Extended with FMS Extended with T&T Dedicated Hardware Extended with T&T Dedicated Hardware Source: Frost & Sullivan 19
  • 20. Pay How You Drive is the Commercial Vehicle Version of Usage Based Insurance Business Segment 100% UPTO 20% 6.25% Acceleration of the vehicle 80% Cost of the basic telematics solution along Braking the vehicle with the hardware spread over a period of 3 years PHYD Speed of the vehicle 73.75% of Mileage traveled the premium Traditional Discount to To goes to the premium to costumer Insurance insurance Time traveled be paid by based on his Company company. customer previous year claims Business Model – Business Segment Insurance companies buys the box at a price from the telematics company and own them. • RSA pays 100-120 GBP for box and for the basic PHYD functionality and geolocalisation. The leasing company or the end-user pays for the additional services based on their need. • The leasing company or the user pays 3-12 GBP for additional services based on his needs. Benefits to Insurance Co. Benefits to Leasing Co. Benefits to Fleet Co. PHYD, Geolocalisation PHYD, Geolocalisation FMS, Geolocalisation • Monitoring driving behavior and calculation of Monitoring driving behavior & knowledge about • Effective fleet management annual premium based on user’s risk • vehicle service records to assess the value of • On time eCall and SVT assistance • Reduce claim cost of crash and theft the vehicle at the end of the contract. • ECO Driving • ECO Driving 20
  • 21. Key Conclusions – Green Telematics Offers Immense Growth Opportunities and Provides a Definite Social Incentive of Cost Effective Emission Reduction The low cost involved and the ease of adoption among old and new vehicles is the fundamental The penetration of green fleet advantage of green telematics. A With stringent norms teleamatics in the long-haul comprehensive and wide adoption expected in the coming years, segment to be much higher of the same could effect companies are increasingly than local and regional significant emission reduction incorporating environment as segment both in Europe and a component to their overall North America business strategy Promotion of PAYD as an Green Telematics Regulatory compliance and environmental friendly Demand to cost cutting intitiatives to drive insurance with the needed green telematics adoption support from legislation to Increase within the commercial and increse its adoption among Dramatically leasigng segment the consumer segment The desire to cost cutting and Car and truck manufactures to making high value purchase An evolution of comprehensive increasingly adopt telematics to increase adoption of green telematics solution for diagnostics and related navigation with green routing encompasing insurance, services that combined with feature. vehicle and driver consumer efforts could help management is inhibited by reduce emission the limitations inherent with various stake holders. 21
  • 22. Snapshot of Electric and Hybrid Commercial Vehicles 22
  • 23. What do commercial drivers think of electric vehicles? Overall, most commercial drivers feel that using electric vehicles would be a good idea. While some doubt reliability and distance able to travel the vast majority would be willing to use them if their capability requirements could be met. Only very few were very sceptical. “I think they are a good idea with over 5,000 fleet “It is a good idea because we are a company that of vans our company would benefit from this .” travels mainly of small distances within the city.” Commercial driver for EDF Energy, UK Commercial driver for mairie de maurepas, France “Too slow for my line of work, a bad idea. No I do “Perhaps is OK but I have not thought about it not believe they would suit my line of work. I very much.” need to be able to get in vehicle and go, without Commercial driver for Selbst , Germany worrying if I have enough energy to get me where I am going and back.” “It is a very good idea, I would definitely use one Commercial driver for MG Green Maintenance Engineers, UK for sure if it meets my needs. We need to do more for the environment.” Commercial driver for Agentur, Germany “Yes I am ready but my condition is that it can make about 200 km without needing to be “I think they are an excellent idea and I hope to charged and support the maximum 60 kg.” switch to one when they become more available.” Commercial driver for Chefdeterroir, France Commercial driver for National Theatre, UK “It is a good idea to have an electric vehicle. But “I think they are a good idea, assuming I can fit all of my equipment into them and the range is the problem is travelling in rural areas sometimes and it is difficult to find charge points.” enough to get me from A to B.” Commercial driver for PC30, France Commercial driver for HCE, UK Base : Total interviews (N=170), UK n=58, France n=61, Germany n=51 23
  • 24. Market Overview: Electric Commercial Vehicles are concentrated more towards depot based delivery vehicles with fixed payload and work schedule cycle. Electric Commercial Vehicles Market: Overview of suitability (Europe 2010) Electrification Attractiveness High ( 4% ~ 10% of total CV market @ 2015) Postal Vans Urban Refuse Trucks Super Market This implies immediate opportunity and target for (< 60 miles) City Councils Ports Usage Transit Bus electric vehicles Utilities Medium (1% ~ 4 % of total CV market @ 2015) Range Intra Urban Parcel Vans Logistics This signifies an expanding opportunity gained by (<150 miles) Distribution early adopters experience and challenges can be overcome but require substantial investment Highway Low (<1% of total CV market @ 2015) (> 150 miles) Medium to Long Haul This represents the size of opportunity and electrification will need to overcome considerable technical and market challenges LCV MCV HCV Type of Commercial Vehicle Urban Intra-Urban Highway Usage lies in an urban Usage lies in an urban and intra- Usage mostly lies in highway environment with frequent stop urban distribution. May have routes long haulage with heavy and go combined with fixed load stop and go routes loads Source: Frost & Sullivan 24
  • 25. Market Attractiveness of Hybrid Commercial Vehicles Hybrid commercial vehicles deliver attractive fuel economy benefits while reducing emissions. However, these benefits are more pronounced in certain types of vehicle categories and in certain duty-cycles. Frost & Sullivan’s research indicates LCVs, HCVs and transit buses that operate within congested urban areas will emerge as early adopters of hybrid powertrain systems. The fuel saving potential is further enhanced through reliance on electric systems, in diesel-electric hybrids, which deliver the following performance attributes: Start/stop systems turns off the engine when the car stops Engine can be operated at its highest point of efficiency Cold starts are performed by electrical systems Regenerative braking technology recovers energy while braking and stores in storage system North American and European Hybrid Commercial North American and European Hybrid Commercial Vehicles Vehicles Market: Early Adopters for Hybrids (North Market: Potential Fuel Saving by Hybrid Commercial Vehicles America & Europe), 2009 and Buses (North America & Europe), 2009 45 Early Adopters for Hybrid Vehicles 40 Urban Package/Courier Delivery Trucks LCV Potential Fuel Saving Urban Beverage Delivery Trucks 35 30 Utility Trucks MCV Fire/Rescue Trucks (%) 25 Refuse Trucks, Heavy urban delivery trucks 20 HCV (beverage, groceries and produce etc) 15 Bus Urban Transit buses and School buses 10 5 0 Inner City Edge of City 25
  • 26. Summary and Conclusions 26
  • 27. Key conclusions - Growth Opportunities Will Come From the Appropriate Segmentation of the User Market Eastern Europe growth New Volumes Growth Still Expected Consolidation of certain national transport market to boost demand Under penetrated small fleets provide significant growth opportunities Consolidation among fleets Impact of Economy Slowdown would Telematics vendors need to adopt strategic Affect Market Dynamics Significantly growth steps needed to stay competitive Matured market replacement cycle Large vehicle fleets already have high Replacement in More Matured Markets penetration of telematics Focus on value proposition and differentiation Conclusions Demonstrate sector-specific knowledge Industry and Sector-specific Requirements and understanding Focus should shift towards customer Focus on Recurring Revenue retention and value-adding services Further push telematics integration into business process – consulting revenue ROI and operator satisfaction are highly correlated to Implementation Focus the ability to successfully sell telematics 27