30 June, 2020
RALEIGH, North Carolina, Jun 30, 2020 - The coronavirus pandemic has had a significant impact on the fleet management industry, resulting in a sharp reduction in vehicle sales across the world. Car manufacturers are exploring contactless delivery through online booking channels.
As manufacturers return to production, global automotive sales forecast is revised to 20 percent reduction from the previous forecast of 22 percent, with sales of approximately 72 million units, according to Beroe Inc, a procurement intelligence firm. The impact of COVID-19 is high on car manufacturers and alternate mobility, and medium on leasing companies.
Car manufacturers in the U.S. and Europe are returning to production with limited capacities and adequate health safety measures. There has been a slow resumption of fleet activities across the globe, majorly by the essential service operators. It is almost certain that the demand for fleet vehicles has reduced worldwide. OEMs are expected to offer high discounts, as the residual value is likely to reduce. Lease prices are expected to go up as residual values and profitability reduce.
Beroe, which is based in North Carolina, further stated that procurement experts can access this report on market intelligence platform Beroe LiVE: live.beroeinc.com
Demands from organizations have reduced as there is limited business activity. The economic impact of the pandemic is visible with organizations preparing strategic cost saving plans. Organizations with vehicle assets are considering sale and lease back options to improve cash flow. The B2C segment is affected the most now, some of the organizations are inking fresh deals as they are able to obtain good deals. If the pandemic continues, leasing companies are expected to face payment default risk from SMEs and private lease portfolios.
The residual value of vehicles are expected to go down in the coming months as car manufacturers are expected to offer high discounts. Economic challenges are visible, which can stand as a hindrance to demand for fleet vehicles. Organizations are expected to extend their buying cycles by holding on to their assets for a longer period of time while leasing companies are expected to support this by offering contract extensions. OEMs are accepting new orders while production orders are being evaluated for delivery (units, timeline) adjustments.
The research methodology adopted for the report included:
Similar to the 2008 global financial crisis, the fleet industry is at the beginning of a cycle, which can extend for a few years. Discounts can be expected in the form of penalties for delivery delays in the 2020 program year and normalizing price increases for the 2021 program year. Higher discounts can be expected for large fleet orders, and discounts can go as high as 20 percent for direct fleet purchases. Delayed payments from the two critical segments – SMEs and B2C can have significant financial burden on the leasing companies.
The report also includes:
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COVID-19: Assess impact on your suppliers and ensure business continuity with Beroe’s WIRE
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