Dan Frank, president and CEO of Wheels Inc., provides his insights as to how a shared mobility business model will be incorporated into fleet management and its impact on the future of driver-assigned, company-provided vehicles.
For the foreseeable future there will be no one-size-fits-all mobility model and the ongoing proliferation of competing mobility services will continue to be aggregated under the generic Mobility as a Service (MaaS) umbrella. Ultimately, today’s consumer mobility options will be blended into a menu of hybrid fleet services offered as employee mobility choices by corporations. These services will be new tools in the fleet manager’s toolbox.
To learn how mobility management will be incorporated into the management of commercial fleets, CAF tapped into the expertise of Dan Frank, president and CEO of Wheels Inc
Q: How do you define mobility management in the context of fleet?
FRANK: I don’t think there is one definition for mobility management. Mobility management falls into three different categories. The first category includes the different forms of transportation other than a vehicle. This expanded concept of mobility management includes planes, buses, trains, scooters, bicycles, and all forms of transportation beyond the company provided vehicle. This also includes providing a mobility budget, where rather than providing the transportation, the company provides an employee a budget for it
The second category includes the different business models of providing vehicles, such as rental cars, ridesharing, or ride-hailing. The third category includes leased, reimbursed and pool vehicles. Some people mix autonomous vehicles into the concept of mobility management but it really is just the same as the above except it replaces the need for a driver. However, it will change the game and the economics so drastically that it makes sense to include it in a discussion of shared mobility.
Q: Approximately 60%-plus of the vehicles in operation are vocational vehicles, such as trucks with service bodies, or vans with rack-and-bin configuration. What role would mobility management play in the vocational fleet segment?
FRANK: It’s extremely unlikely that you’re going to see people doing construction, oil and gas exploration or law enforcement out of the back of an Uber/Lyft. Likewise, there are industries such as pest control that require chemicals and decaled vehicles. For many such service fleets, shared mobility models won’t make sense. Conversely, shared mobility technologies may be applicable to service fleets using pool vehicles, as they can optimize the inventory with which that fleet operates. A service company that has a hundred vehicles out of one location might use rideshare-type technology to manage their vehicles, while allowing them to be dedicated, branded vehicles upfit with specialized equipment. In short, the applicability of shared mobility models will depend on the profile of each service fleet. Many people predict that autonomous vehicles will be a big white box with a standard interior. Alternatively, I foresee a lot of customization of interior configurations. As the field employee can make more productive use of their time since they are not driving the vehicle, they will want to optimize their interiors to the work they want to do between calls.
The other thing you might see in the long term is service fleets splitting up or reassigning duties. For example, deliveries might be done separately using an autonomous vehicle to transport equipment, which would allow the driver to use alternative forms of transportation. There are many industries such as food service and parts delivery that may not require the “driver” at all – it’s just about the transportation of goods. The impact that full autonomy will have on these industries is staggering.
Q: One reason company-provided vehicles are provided to salespeople is that they offer lockable storage in the way of a trunk to carry pharmaceutical samples, point of-sale merchandise, medical specimens, etc. How would this be addressed in a world of mobility management?
FRANK: Many salespeople carry a variety of things in their vehicles, whether or not they’re lockable, such as a suitcase, briefcase, printer, samples, or other work materials. They may also keep personal items in their vehicles out of convenience.
But there are other challenges as well. One is cost. The assumption is that Mobility as a Service is inherently cheaper than a company provided vehicle. That assumption is incorrect or not always true. You read statistics that the average vehicle sits idle 95% of the time and that the opposite will be true with a shared vehicle, which will be used 95% of the time. I don’t think that’s necessarily true. First of all, fleet vehicles get used more than 5% of the time. When people cite those statistics, they’re talking about consumers. Company drivers, for the most part, drive much of their day, and are in their vehicle more like 25-30% of the time. The other false assumption is that shared vehicles get used 95% of the time. In order to provide an efficient service, shared vehicle businesses are going to have to scale these solutions to be able to accommodate the busiest time of the day, which is rush hour. So there’s going to be a lot of excess vehicles that are going to be idle much of the day outside of that peak time. The second issue is that shared vehicles drive a lot of empty miles. I’ve seen statistics that they drive up to 40% empty miles. That means by the time they drop off one person to the time they pick up the next, they’re driving without a paying customer in that vehicle. You incur expenses for maintenance, fuel, and depreciation, when it’s not being put to productive use. The third assumption is that having a vehicle sit idle is expensive, which isn’t the case. You’re only paying for interest expense and registration expense whether or not the vehicle is being driven. The majority of expenses come from a vehicle being driven. When you add up these costs that’s a pretty small number compared to the benefits of having that vehicle available when you want it, being able to use it for storage, and the big factor, which is increased productivity
Even in dense, heavily serviced urban areas, the average wait for an Uber/Lyft pickup is somewhere around eight minutes. If you’re a sales rep that makes 8 to 12 sales calls a day, and you wait 8 to 10 minutes between each one, you could lose one to two calls a day. On top of all that, the Mobility as a Service companies are going to charge significant premiums for the expense they have of running those networks, of cleaning and storing those vehicles, and maintaining them. They generally earn much higher margins than what fleet-management companies charge. When you add all that up, the economics favor a well-used company provided vehicle in most cases.
Q: Today, most successful mobility solutions in a corporate environment are niche applications. However, most fleet management services are broad-based across many different industry segments. Do you envision mobility solutions of the future similarly extending across many different industry segments or is it a niche product, or a blend of the two?
FRANK: It will be a blend of the two. Certain industries lend themselves well to various mobility solutions. And certain uses or job functions or even geographies lend themselves better than others. For executives who primarily go to the airport and back, they may be better served by using a ride hailing or a reimbursement application than a company-provided vehicle. In terms of dense urban areas where you’re not traveling far and parking is expensive and difficult, a shared vehicle, ride-hailed vehicle, or even public transportation might make more sense. There may be cultural preferences for some employees who don’t want to own a vehicle and prefer other modes of mobility.
That said, we’ve looked at some of our heavier sales-use industries and, for the most part, there’s not a lot of employees who fall into the category that both live and work in a dense urban area. Most of the people who work in dense urban areas commute in from other places. In most cases, they need a vehicle to get there and back.
Q: European fleet experts envision fleet management evolving into a multi-modal transportation model and the creation of mobility budgets that employees can use at their discretion. Do you foresee these concepts migrating to the North American fleet market?
FRANK: The European market is very different than the U.S. market. First, the European fleet market is much larger than the U.S. market. Vehicles are provided, for various reasons, to a much broader swath of the employee base. Generally, many management level employees receive company vehicles in Europe. That’s probably where it makes more sense to provide a mobility budget. They will have the option of using a company vehicle, but also have the option to use other forms of transportation.
The second way Europe is different is that the geographies are much smaller. They don’t have the types of huge suburbs and rural areas that we do. They have much denser urban areas with tighter geographies. It makes public transportation much more feasible in Europe than it does in the United States.
The third factor is that some European countries are restricting the use of single-passenger dedicated vehicles. Cities like London are either taxing or restricting vehicles traveling into the city center. For the most part, this is not an issue in the United States.
Q: What is your vision of mobility management in fleet one decade from now?
FRANK: I see mobility management providing more options to our clients. There will emerge new forms of business mobility, such as mobile vending machines, mobile advertising billboards, or autonomous service delivery vehicles. As the options expand, fleet management companies will invest in alternative forms of transportation and mobility. We’ll provide the tools to help clients figure out what’s the most efficient, productive, and cost-effective option for using these new technologies. Wheels continues to investigate all of them and work in various arenas, including ride-hailing, pool management, reimbursement, traditional company-provided vehicles, and mobility budgets. We either already have products in place or are investing in all of these areas. In the future, there’s going to be many more options and business cases for providing company vehicles as the cost of driving them goes down. The majority of the time, a dedicated vehicle, whether it’s autonomous or not, is going to still make the most sense