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Tony Elliott, Global Fleet Expert: "China is like a 6 year old boy"

In some circles people talk about a lack of market maturity when describing the Chinese market, but what does this really mean? Global FLeet Expert Tony Elliott thinks about things differently, and he takes us on a whistle stop tour of China by telling us what you need to know.

"If the UK fleet management market is like a 37 year old man, then the Chinese market is like a six year old boy," says Tony Elliott when asked about the maturity of the Chinese marketplace. But don't for a moment think that Elliott is being disparaging about China or the fleet products and services that are on offer.
"Chinese people are extraordinarily bright & adaptive and so will mature in vehicle fleet management far more quickly than we have seen in Europe," he adds. Elliott says that the Chinese market is just different to the Europe or North America model, and there are good reasons why the differences exist. "Europe has been forced to mature due to ever demanding Government tax changes; these particular legislative issues have yet to occur in China," believes Elliott.

Getting it right
The rapid surge in registrations over the past few years has meant that China is struggling to cope with a massive market transformation, but you can bet that fleet products and services will catch up with what's on offer in the west.  For the moment however, success in China means getting the right product, to the right people at the right time, and at the right price. So what are the essential ingredients of success that companies operating in China need to consider? 

Rapid urbanisation, leading to increasingly congested, polluted and unmanageable cities provides the backdrop for any company looking to do business in China. These massive challenges are forcing the authorities to apply the brakes and take a different approach. 

To ease the pressure the Chinese  are offering incentives to corporations to move to other cities or regions. In many cases these cities are being built from the bottom up.  "There's no hanging around.  The decision is made and in a month it's happening," says Tony Elliott. Such pace of change makes planning nigh on impossible.

For car and fleet management, limiting vehicle registrations and placing restrictions on usage are some of the most visible challenges. Companies based in Beijing can't get a registration plate - and they can't lease it either - Tony Elliott tells us. 

"The Shanghai registration plates can go for as high as $25,000, and the numbers available are very limited, but bidding higher doesn't necessarily mean that you are going to be successful.  It not always be clear why some auction bids succeed and others fail, when the rules seem to have been followed by both, "he adds.

If your company is already in one of the increasing number of cities that has registration limits, simply upping sticks and moving  to another city at the flick of a switch is not realistic. But what's the alternative?  Staying with the status quo and finding a way to battle through. That's not easy either - and it can be really costly - but it may be all that's possible. 
Limits on registrations are evidently impacting leasing companies.  ALD Fortune and Arval may say that they are doing really well in the market, but when you look at any of the numbers in China the size of their leased fleets are barely visible.  Why?  The market is difficult.  "It's like the bewildered leading the bewildered," says Tony Elliott
International leasing providers are up against it for many reasons.  Arval and ALD are bank-owned business which means there's compliance issues that there local competitors aren't subject too adds Mr Elliott.

The finance arms of the manufacturers are less constrained, and they are able to get their hands on plates more easily as a manufacturer, but that's not to say it's straightforward or the end of the mobility issues for multi-nationals. Acquiring a car, securing a registration plate and then being allowed to drive on a given day are all big hurdles that need to be jumped. 

Yet it's not just issues surrounding registrations that are limiting growth of western players, there's a question mark over the product on offer.  The international leasing players are promoting a product that is far too mature - at a cost local based companies baulk at - believes Tony Elliott.  

"International players are too busy trying to tell the Chinese what they should want and why," he says.  With local leasing companies offering a less costly product that meets market expectations, why would a Chinese corporate want to pay for services that it simply doesn't want?  With this in mind, should multi-nationals look at local providers?
"You don't know what you are going to get,"cautions  Elliott.   A new car contract doesn't mean a new car will appear, there will also be uncertainty over servicing and risk of counterfeit products that should not be taken lightly.  "Unless you really fully understand the product and the market, and then know how to manage providers, then multi-nationals in China should avoid local leasing companies," he advises. That's not to say the international providers have got it licked.

Local versus international
So it seems fleet managers are stuck between a rock and a hard place. There's international players struggling to get plates for an ill fitting product, whilst local providers offer a product that comes with too much uncertainty and laden with risks that don't suit the palate of the international company.
Locals however, are happy with what local providers are offering.  China is not about sophistication as we in the west may want to believe, but about what's right for a market at this particular time.  The challenge for the moment is creating that product that fits both western ideals and market reality. With growing insight and greater innovation it will no doubt come. "Orix is making it work. They understand the Chinese market and mindset, they employ Chinese people and they are showing what is possible," says Tony Elliott.    

There's potentially a bright future for fleet and leasing in China across the spectrum of international and local providers, it's just a question of gaining better market insight, working within and around local frameworks and innovating to ensure there's products and services that match customers' needs evolve.   08/04/2015  |  Jonathan Green


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