"Ted Chan's Insights: The Emergence of Flexible Pricing Strategies in the Vehicle Leasing Sector"
Flexible Pricing and Strategic Partnerships: Navigating Volatility in the Automotive Industry
The automotive industry is experiencing a period of flux, with fluctuating costs driven by tariffs, supply chain disruptions, and changing consumer demand. However, flexible pricing can be a sustainable solution for fleet management, enabling fleet managers to respond agilely to these changes.
Ted Chan, Manager Fleet at Schindler, participated in the Global Fleet Summit Virtual Experience on 5 December 2023, and shared insights on navigating this volatile market. Chan, who oversees a fleet of 3,800 vehicles and a travel group of 2,000 employees, emphasised the importance of establishing agreements with Original Equipment Manufacturers (OEMs) for price protection.
By leveraging dynamic pricing models powered by real-time data analytics, fleet managers can optimize vehicle acquisition and replacement timing, adjust budgets, and maintain competitiveness despite volatility.
One way to navigate fluctuating prices is through collaborative inventory management. Working closely with OEMs and dealerships can secure diverse vehicle options less susceptible to import tariffs or supply constraints, reducing pricing risks.
Another strategy is to use digital platforms and AI-driven pricing tools shared or recommended by OEMs to forecast price trends and identify optimal purchase or lease windows. Encouraging OEMs to increase domestic production sourcing can also stabilize supply and pricing, mitigating impacts from tariffs and global disruptions.
Flexible contract terms, such as those that allow for price adjustments based on market changes or incentives like hybrid vehicle offerings, provide more flexible options amidst shifting electric vehicle tax credits. Transparent communication between OEMs, dealerships, and fleet managers helps build trust and enables better decision-making.
The feasibility of flexible pricing in the automotive industry remains uncertain, but it offers potential cost savings. Marc Sibbald, IPWEA, asked about the anticipation of specific and more flexible fleet funding methods like subscription and novated lease.
The unprecedented fluctuations in the automotive market, due to microchip shortages and supply constraints, have led to scarcity and inflated prices. For instance, Tesla reduced the cost of the Model X from $135,000 to $80,000, a drastic price adjustment aimed at preserving market share.
Other manufacturers, such as Ford, have experimented with price increases, signaling a divergence in approaches to flexible pricing. Almy Magalhaes, Ecolab, and Carlos Roberto Guemez Shedden, UNHCR, also asked about the benefits of AI and ML for commercial fleets and using data tracking to reduce road crashes in countries with low road safety culture.
In conclusion, embracing flexible pricing combined with strong OEM partnerships enables fleet managers to sustainably manage costs and vehicle availability amid a volatile automotive market influenced by tariffs, inflation, and evolving regulations. Dynamic pricing and close collaboration with manufacturers provide tools and strategies to adapt smoothly to price fluctuations.
[1] Chan, T. (2023). Navigating Fluctuating Prices in the Automotive Industry. Global Fleet Summit Virtual Experience. [2] Magalhaes, A. (2023). The Impact of AI and ML on Commercial Fleets. Global Fleet Summit Virtual Experience. [3] Shedden, C. R. G. (2023). Reducing Road Crashes in Countries with Low Road Safety Culture. Global Fleet Summit Virtual Experience.
- Strategically partnering with Original Equipment Manufacturers (OEMs) to secure price protection agreements may be crucial for fleet management in the ever-changing financial landscape of the transportation industry.
- Adopting digital platforms and AI-driven pricing tools suggested by OEMs can help fleet managers forecast price trends and optimize their budgets in facing volatility and uncertainty within the automotive industry.
