US FLEET: OEMS’ ELECTRIC BLUE OCEAN?<\/h1>\n\n Munich, February 2022<\/span>\n <\/div>\n <\/div>\n <\/div>\n <\/div>\n \t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t\n\t\t\t\t\t\t\n\t\t\t\t\t\n\t\t\t\n\t\t\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\n\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\n \n\n\n \n \n\n M<\/span>\n arket dynamics<\/strong> have created a sweet spot and OEMs must position themselves to capture their share of the growth story.<\/p>\n\n <\/div>\n\n \n\n <\/div>\n \t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\t\tUS automakers have typically seen the fleet segment as a volume driver, rather than treating it as a strategic channel to pursue. This is mainly due to its relative importance to the overall car market \u2013 in the US, fleet vehicles accounted for 12 percent of total light vehicle sales in 2020\u00b9<\/span>. By comparison, in Europe the share was around 55 percent, driven by tax incentives for companies supplying vehicles to their employees.<\/span><\/p>Supply challenges resulting from Covid-19 and vehicle shortages have certainly clouded the medium-term outlook. However, we believe there are two significant drivers of growth that will make the fleet segment significantly more attractive to OEMs in the coming years. The first is the transition to electric vehicles (EVs) in both corporate and government fleets. The second is the M&A wave among fleet management companies, which will further consolidate the access to corporate fleets.\u00a0<\/span><\/p>So how can OEMs capitalize on this period of transformation? Below we look in detail at the market opportunities created by the two forces of change, and three possible business models for OEMs and their captive financing arms to pursue.\u00a0<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\t\tMarket Overview: EVs will transform US fleet\u00a0<\/b><\/h3>
In the US, the vehicle market is dominated by light trucks, which accounted for 75.6 percent of new vehicles sold in 2021 (<\/span>see Figure 1<\/span><\/i>). Best-selling models include<\/span> the Ford F-150, RAM 1500<\/span><\/i>, and the Chevrolet Silverado. The light vehicle category, which includes cars as well as light trucks, made up 97 percent of the vehicle market last year.<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\n\t\t\t\n\t\t\t\t\t\t<\/span>\n\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\n\t\t\t\t\t\t\t![\"Bar](\"https:\/\/www.berylls.com\/wp-content\/uploads\/2022\/02\/Slide2-1-1024x576.jpg\")
\t\t\t\t\t\t\t\t<\/a>\n\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\t\tFigure 1<\/em><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\n\t\t\t\n\t\t\t\t\t\t<\/span>\n\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\t\tAs described above, corporate fleets account for a smaller share of the overall vehicle market in the US compared with Europe. However, with 1.68 million light vehicles sold to corporate fleets in 2020, it\u2019s still an important market segment for OEMs\u00b2<\/span>.\u00a0<\/span><\/p>Pre-pandemic, the fleet segment was also growing ahead of the overall market, and we expect that trend to resume as the US vehicle industry overall recovers from the ca. 15 percent decline in sales in 2020. In 2019, the last full year unaffected by Covid-19 disruption, fleet sales grew by 8.6 percent compared with 2018, while overall vehicle sales fell by 1.8 percent. Within the fleet market, we expect a particularly strong recovery in commercial and government fleet vehicles. In 2020, around 887,000 vehicles were sold in those two strands of the fleet segment (see Figure 2<\/i>).\u00a0<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\n\t\t\t\n\t\t\t\t\t\t<\/span>\n\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\n\t\t\t\n\t\t\t\t\t\t\n\t\t\t\t\n\t\t\tInsight download and author information\n<\/h2>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\n\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\n \n \n \n\n\t Authors<\/h2> <\/div>\n \n \n \n Christopher Ley<\/p>\n
Principal<\/p>\n
christopher.ley@berylls.com<\/p>\n <\/div>\n
\n \n <\/div>\n <\/div>\n <\/div>\n <\/a>\n <\/div>\n\n <\/div>\n \n \n Martin French<\/p>\n
Principal & MD (US)<\/p>\n
martin.french@berylls.com<\/p>\n <\/div>\n
\n \n <\/div>\n <\/div>\n <\/div>\n <\/a>\n <\/div>\n\n <\/div>\n \n \n Henning Ludes<\/p>\n
Senior Associate <\/p>\n
henning.ludes@berylls.com<\/p>\n <\/div>\n
\n \n <\/div>\n <\/div>\n <\/div>\n <\/a>\n <\/div>\n\n <\/div>\n \n \n Philipp Enderle<\/p>\n
Senior Associate <\/p>\n
philipp.enderle@berylls.com<\/p>\n <\/div>\n
\n \n <\/div>\n <\/div>\n <\/div>\n <\/a>\n <\/div>\n\n <\/div>\n \n \n Florian Tauschek<\/p>\n
Senior Associate <\/p>\n
florian.tauschek@berylls.com<\/p>\n <\/div>\n
\n \n <\/div>\n <\/div>\n <\/div>\n <\/a>\n <\/div>\n\n <\/div>\n \n \n Yue Zhou<\/p>\n
Associate<\/p>\n
yue.zhou@berylls.com<\/p>\n <\/div>\n
\n \n <\/div>\n <\/div>\n <\/div>\n <\/a>\n <\/div>\n\n <\/div>\n \n \n\n <\/div>\n\n <\/div>\n\n\n\n \t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t\n\t\t\t\t\t\t\n\t\t\t\t\t\n\t\t\t\n\t\t\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\n\t\t\t\t\t\t\t![\"Flow](\"https:\/\/www.berylls.com\/wp-content\/uploads\/2022\/02\/Slide4-1024x576.jpg\")
\t\t\t\t\t\t\t\t<\/a>\n\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\t\tFigure 2<\/em><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\n\t\t\t\n\t\t\t\t\t\t<\/span>\n\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\t\tWe expect growth to be driven by the Biden administration\u2019s commitment at the end of last year to accelerate the transition to electric vehicles (Berylls\u2019 detailed insights into the EV revolution in the US are set out <\/span>in this recent study<\/span><\/a>). Both commercial and government fleets will need to replace internal combustion engine vehicles with new zero emissions models. Under <\/span>an executive order signed in December 2021<\/span>, all light duty vehicles purchased by federal government agencies must be zero emissions by 2027, and the entire fleet by 2035\u00b3<\/span>. To give a sense of the scale of the change that is coming, in 2021 the federal government bought 643 EVs, equivalent to less than 1 percent of its total vehicle stock\u2074<\/span>.<\/span><\/p>Meanwhile, commercial fleets will be impacted by the EV targets set by states and large corporations. California, for example, has set a target that only zero-emissions new cars and light-duty trucks will be sold by 2035\u2075<\/span>, while Walmart has pledged to reach zero emissions from its operations by 2040\u2076<\/span>.\u00a0<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\t\tOEMs in focus: Impact of the EV transition<\/b><\/h3>
Fleets account for an average of 10 percent of OEMs\u2019 sales in the US, but for the big three US automakers, that proportion increases to closer to 20 percent: fleets accounted for 18 percent of Ford\u2019s US sales in December 2021, 17 percent for GM, and 19 percent for Stellantis, the parent company of Chrysler. In absolute unit terms, Ford is the largest fleet supplier, followed by GM and then Stellantis (<\/span>see Figure 3)<\/span><\/i>.<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\n\t\t\t\n\t\t\t\t\t\t<\/span>\n\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\n\t\t\t\t\t\t\t![\"A](\"https:\/\/www.berylls.com\/wp-content\/uploads\/2022\/02\/Slide6-1024x576.jpg\")
\t\t\t\t\t\t\t\t<\/a>\n\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\t\tFigure 3<\/em><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\n\t\t\t\n\t\t\t\t\t\t<\/span>\n\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\t\tIn line with the US vehicle market overall, fleet sales are currently dominated by light trucks such as the F-150, Silverado and RAM 1500. Electric vehicles are still a very low proportion of total vehicles produced in the US, at between 4 and 5 percent\u2077.<\/span> However, we expect the mix to change significantly as a result of the legislative changes and targets described above. 90% of a group of 300 fleet managers surveyed by Wakefield and Samsara believe that electric is the inevitable future of commercial vehicles\u2078.<\/span><\/p>We believe electrification will transform the US fleet segment, and the new EV-only players are betting the same: car rental chain Hertz has ordered 100,000 Teslas for its fleet, electric SUV and pick-up maker Rivian plans to supply delivery vehicles to Amazon and Cox Automotive has set up a new mobility division to provide data, insights and technical expertise for fleet services and operations, and EV battery solutions. A further notable fleet opportunity in future will be self-driving electric cabs, already being trialed in San Francisco, for example.\u00a0<\/span><\/p>Two of the biggest incumbent players, Ford and GM, also have ambitious EV fleet expansion plans:<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\t\tCase Study 1: Ford<\/h4>
Ford aims to grow its fleet revenues from $27bn in 2019 to $45bn by 2025, through sales of both commercial vehicles and related services including charging points. The automaker\u2019s strategy is to build on its 40 percent market share in the vans and light trucks segments with the Transit and F-150, and its existing 125,000 fleet customers, through a separate business unit called Ford Pro\u2079.<\/p>
![\"\"](\"https:\/\/www.berylls.com\/wp-content\/uploads\/2022\/02\/1200px-Ford-Motor-Company-Logo-300x115.png\")
<\/p>
Ford Pro will supply commercial vehicles and offer charging, telematics and aftersales services, as well as financing and fuel cards. The division also plans to roll out 120 additional service hubs and 1,200 fleet service vehicles by 2025. To persuade small and medium-sized businesses to switch over to electric minivans and the electric F-150, due to come to market in 2022, Ford Pro aims to work with customers along the electrification journey, from identifying incentives to charging installation consultation.<\/p>
Ford\u2019s Pro software for managing EV fleet charging can also be used for non-Ford vehicles. A look across the pond may provide some indication of where Ford\u2019s fleet plans are heading. In Europe, Ford has a partnership with ALD to offer full leasing and fleet management solutions.<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
\n\t\t\t\t\n\t\t\t\t\t\t\tCase Study 1: Ford<\/h4>
Ford aims to grow its fleet revenues from $27bn in 2019 to $45bn by 2025, through sales of both commercial vehicles and related services including charging points. The automaker\u2019s strategy is to build on its 40 percent market share in the vans and light trucks segments with the Transit and F-150, and its existing 125,000 fleet customers, through a separate business unit called Ford Pro\u2079.<\/p>
Ford Pro will supply commercial vehicles and offer charging, telematics and aftersales services, as well as financing and fuel cards. The division also plans to roll out 120 additional service hubs and 1,200 fleet service vehicles by 2025. To persuade small and medium-sized businesses to switch over to electric minivans and the electric F-150, due to come to market in 2022, Ford Pro aims to work with customers along the electrification journey, from identifying incentives to charging installation consultation.<\/p>
Ford\u2019s Pro software for managing EV fleet charging can also be used for non-Ford vehicles. A look across the pond may provide some indication of where Ford\u2019s fleet plans are heading. In Europe, Ford has a partnership with ALD to offer full leasing and fleet management solutions.<\/p>
\u00a0<\/p>
<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
\n\t\t\t\t\n\t\t\t\t\t\n\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\t\tCase Study 2: GM<\/h4>
![\"\"](\"https:\/\/www.berylls.com\/wp-content\/uploads\/2022\/02\/Untitled-design-300x300.png\")
<\/p>
GM is similarly embracing the promise of commercial vehicle growth as a result of electrification. The company is particularly focusing on the delivery segment with its Brightdrop commercial EV startup, and fleet tracking (telematics) with OnStar. Both ventures seek to capitalize on the macro trend of increasing home delivery.<\/p>
Through Brightdrop, GM is also helping fleet customers to go electric with a commercial vehicle charging service called Ultium. As well as charging facilities, Ultium\u2019s services include helping customers from the start of their EV decision-making, including choosing utility providers\u00b9\u2070). Like Ford, GM aims to offer its services beyond its own vehicle customers – OnStar\u2019s telematics can also be used with non-GM vehicles using an adapter, for example.<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
\n\t\t\t\t\n\t\t\t\t\t\t\tCase Study 2: GM<\/h4>
GM is similarly embracing the promise of commercial vehicle growth as a result of electrification. The company is particularly focusing on the delivery segment with its Brightdrop commercial EV startup, and fleet tracking (telematics) with OnStar. Both ventures seek to capitalize on the macro trend of increasing home delivery.<\/p>
Through Brightdrop, GM is also helping fleet customers to go electric with a commercial vehicle charging service called Ultium. As well as charging facilities, Ultium\u2019s services include helping customers from the start of their EV decision-making, including choosing utility providers\u00b9\u2070). Like Ford, GM aims to offer its services beyond its own vehicle customers – OnStar\u2019s telematics can also be used with non-GM vehicles using an adapter, for example.<\/p>
\u00a0<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
\n\t\t\t\t\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\t\tFleet management consolidation will also transform the market<\/b><\/h3>
Managing large vehicle fleets made up of many different models and brands, plus vehicle financing, is complex, and is treated as a non-core part of the business by many US corporates. As a result, they frequently outsource the task to specialized fleet management companies (FMCs).\u00a0<\/span><\/p>These companies typically make around 50 percent of their profit from financing and the other 50 percent from vehicle and driver-related services such as procurement, maintenance, and telematics. Economies of scale are key, with the US market dominated by a few large players (<\/span>Figure 4<\/span><\/i>). The biggest, including ARI, Enterprise and Donlen, typically have links to dealerships or rental companies, or like Element, have been created by large mergers.\u00a0<\/span><\/p>Similarly, the European market is also dominated by a small number of FMCs. Some have ties to financial institutions, such as ALD, partly owned by Soci\u00e9t\u00e9 G\u00e9n\u00e9rale, and Arval, part of BNP Paribas, and some are owned by OEMs, such as Alphabet, part of BMW, and Athlon, owned by Daimler. Consolidation among FMCs is further ahead in Europe than in the US, where (as we set out below) a new wave of mergers has begun.<\/span><\/p>We believe US OEMs and their captive financing arms should consider the fleet management market as a future key capability in a world of autonomous vehicles. With the current round of consolidation, the hurdles for OEMs to enter this market as late followers might become even higher:<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\n\t\t\t\n\t\t\t\t\t\t<\/span>\n\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\n\t\t\t\t\t\t\t![\"Bar](\"https:\/\/www.berylls.com\/wp-content\/uploads\/2022\/02\/Slide1-1024x576.jpg\")
\t\t\t\t\t\t\t\t<\/a>\n\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t
arket dynamics<\/strong> have created a sweet spot and OEMs must position themselves to capture their share of the growth story.<\/p>\n\n <\/div>\n\n \n\n <\/div>\n \t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t US automakers have typically seen the fleet segment as a volume driver, rather than treating it as a strategic channel to pursue. This is mainly due to its relative importance to the overall car market \u2013 in the US, fleet vehicles accounted for 12 percent of total light vehicle sales in 2020\u00b9<\/span>. By comparison, in Europe the share was around 55 percent, driven by tax incentives for companies supplying vehicles to their employees.<\/span><\/p> Supply challenges resulting from Covid-19 and vehicle shortages have certainly clouded the medium-term outlook. However, we believe there are two significant drivers of growth that will make the fleet segment significantly more attractive to OEMs in the coming years. The first is the transition to electric vehicles (EVs) in both corporate and government fleets. The second is the M&A wave among fleet management companies, which will further consolidate the access to corporate fleets.\u00a0<\/span><\/p> So how can OEMs capitalize on this period of transformation? Below we look in detail at the market opportunities created by the two forces of change, and three possible business models for OEMs and their captive financing arms to pursue.\u00a0<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t In the US, the vehicle market is dominated by light trucks, which accounted for 75.6 percent of new vehicles sold in 2021 (<\/span>see Figure 1<\/span><\/i>). Best-selling models include<\/span> the Ford F-150, RAM 1500<\/span><\/i>, and the Chevrolet Silverado. The light vehicle category, which includes cars as well as light trucks, made up 97 percent of the vehicle market last year.<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t Figure 1<\/em><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t As described above, corporate fleets account for a smaller share of the overall vehicle market in the US compared with Europe. However, with 1.68 million light vehicles sold to corporate fleets in 2020, it\u2019s still an important market segment for OEMs\u00b2<\/span>.\u00a0<\/span><\/p> Pre-pandemic, the fleet segment was also growing ahead of the overall market, and we expect that trend to resume as the US vehicle industry overall recovers from the ca. 15 percent decline in sales in 2020. In 2019, the last full year unaffected by Covid-19 disruption, fleet sales grew by 8.6 percent compared with 2018, while overall vehicle sales fell by 1.8 percent. Within the fleet market, we expect a particularly strong recovery in commercial and government fleet vehicles. In 2020, around 887,000 vehicles were sold in those two strands of the fleet segment (see Figure 2<\/i>).\u00a0<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t Christopher Ley<\/p>\n Principal<\/p>\n christopher.ley@berylls.com<\/p>\n <\/div>\n Martin French<\/p>\n Principal & MD (US)<\/p>\n martin.french@berylls.com<\/p>\n <\/div>\n Henning Ludes<\/p>\n Senior Associate <\/p>\n henning.ludes@berylls.com<\/p>\n <\/div>\n Philipp Enderle<\/p>\n Senior Associate <\/p>\n philipp.enderle@berylls.com<\/p>\n <\/div>\n Florian Tauschek<\/p>\n Senior Associate <\/p>\n florian.tauschek@berylls.com<\/p>\n <\/div>\n Yue Zhou<\/p>\n Associate<\/p>\n yue.zhou@berylls.com<\/p>\n <\/div>\n Figure 2<\/em><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t We expect growth to be driven by the Biden administration\u2019s commitment at the end of last year to accelerate the transition to electric vehicles (Berylls\u2019 detailed insights into the EV revolution in the US are set out <\/span>in this recent study<\/span><\/a>). Both commercial and government fleets will need to replace internal combustion engine vehicles with new zero emissions models. Under <\/span>an executive order signed in December 2021<\/span>, all light duty vehicles purchased by federal government agencies must be zero emissions by 2027, and the entire fleet by 2035\u00b3<\/span>. To give a sense of the scale of the change that is coming, in 2021 the federal government bought 643 EVs, equivalent to less than 1 percent of its total vehicle stock\u2074<\/span>.<\/span><\/p> Meanwhile, commercial fleets will be impacted by the EV targets set by states and large corporations. California, for example, has set a target that only zero-emissions new cars and light-duty trucks will be sold by 2035\u2075<\/span>, while Walmart has pledged to reach zero emissions from its operations by 2040\u2076<\/span>.\u00a0<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t Fleets account for an average of 10 percent of OEMs\u2019 sales in the US, but for the big three US automakers, that proportion increases to closer to 20 percent: fleets accounted for 18 percent of Ford\u2019s US sales in December 2021, 17 percent for GM, and 19 percent for Stellantis, the parent company of Chrysler. In absolute unit terms, Ford is the largest fleet supplier, followed by GM and then Stellantis (<\/span>see Figure 3)<\/span><\/i>.<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t Figure 3<\/em><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t In line with the US vehicle market overall, fleet sales are currently dominated by light trucks such as the F-150, Silverado and RAM 1500. Electric vehicles are still a very low proportion of total vehicles produced in the US, at between 4 and 5 percent\u2077.<\/span> However, we expect the mix to change significantly as a result of the legislative changes and targets described above. 90% of a group of 300 fleet managers surveyed by Wakefield and Samsara believe that electric is the inevitable future of commercial vehicles\u2078.<\/span><\/p> We believe electrification will transform the US fleet segment, and the new EV-only players are betting the same: car rental chain Hertz has ordered 100,000 Teslas for its fleet, electric SUV and pick-up maker Rivian plans to supply delivery vehicles to Amazon and Cox Automotive has set up a new mobility division to provide data, insights and technical expertise for fleet services and operations, and EV battery solutions. A further notable fleet opportunity in future will be self-driving electric cabs, already being trialed in San Francisco, for example.\u00a0<\/span><\/p> Two of the biggest incumbent players, Ford and GM, also have ambitious EV fleet expansion plans:<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t Ford aims to grow its fleet revenues from $27bn in 2019 to $45bn by 2025, through sales of both commercial vehicles and related services including charging points. The automaker\u2019s strategy is to build on its 40 percent market share in the vans and light trucks segments with the Transit and F-150, and its existing 125,000 fleet customers, through a separate business unit called Ford Pro\u2079.<\/p> Ford Pro will supply commercial vehicles and offer charging, telematics and aftersales services, as well as financing and fuel cards. The division also plans to roll out 120 additional service hubs and 1,200 fleet service vehicles by 2025. To persuade small and medium-sized businesses to switch over to electric minivans and the electric F-150, due to come to market in 2022, Ford Pro aims to work with customers along the electrification journey, from identifying incentives to charging installation consultation.<\/p> Ford\u2019s Pro software for managing EV fleet charging can also be used for non-Ford vehicles. A look across the pond may provide some indication of where Ford\u2019s fleet plans are heading. In Europe, Ford has a partnership with ALD to offer full leasing and fleet management solutions.<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t Ford aims to grow its fleet revenues from $27bn in 2019 to $45bn by 2025, through sales of both commercial vehicles and related services including charging points. The automaker\u2019s strategy is to build on its 40 percent market share in the vans and light trucks segments with the Transit and F-150, and its existing 125,000 fleet customers, through a separate business unit called Ford Pro\u2079.<\/p> Ford Pro will supply commercial vehicles and offer charging, telematics and aftersales services, as well as financing and fuel cards. The division also plans to roll out 120 additional service hubs and 1,200 fleet service vehicles by 2025. To persuade small and medium-sized businesses to switch over to electric minivans and the electric F-150, due to come to market in 2022, Ford Pro aims to work with customers along the electrification journey, from identifying incentives to charging installation consultation.<\/p> Ford\u2019s Pro software for managing EV fleet charging can also be used for non-Ford vehicles. A look across the pond may provide some indication of where Ford\u2019s fleet plans are heading. In Europe, Ford has a partnership with ALD to offer full leasing and fleet management solutions.<\/p> \u00a0<\/p> GM is similarly embracing the promise of commercial vehicle growth as a result of electrification. The company is particularly focusing on the delivery segment with its Brightdrop commercial EV startup, and fleet tracking (telematics) with OnStar. Both ventures seek to capitalize on the macro trend of increasing home delivery.<\/p> Through Brightdrop, GM is also helping fleet customers to go electric with a commercial vehicle charging service called Ultium. As well as charging facilities, Ultium\u2019s services include helping customers from the start of their EV decision-making, including choosing utility providers\u00b9\u2070). Like Ford, GM aims to offer its services beyond its own vehicle customers – OnStar\u2019s telematics can also be used with non-GM vehicles using an adapter, for example.<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t GM is similarly embracing the promise of commercial vehicle growth as a result of electrification. The company is particularly focusing on the delivery segment with its Brightdrop commercial EV startup, and fleet tracking (telematics) with OnStar. Both ventures seek to capitalize on the macro trend of increasing home delivery.<\/p> Through Brightdrop, GM is also helping fleet customers to go electric with a commercial vehicle charging service called Ultium. As well as charging facilities, Ultium\u2019s services include helping customers from the start of their EV decision-making, including choosing utility providers\u00b9\u2070). Like Ford, GM aims to offer its services beyond its own vehicle customers – OnStar\u2019s telematics can also be used with non-GM vehicles using an adapter, for example. \u00a0<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t Managing large vehicle fleets made up of many different models and brands, plus vehicle financing, is complex, and is treated as a non-core part of the business by many US corporates. As a result, they frequently outsource the task to specialized fleet management companies (FMCs).\u00a0<\/span><\/p> These companies typically make around 50 percent of their profit from financing and the other 50 percent from vehicle and driver-related services such as procurement, maintenance, and telematics. Economies of scale are key, with the US market dominated by a few large players (<\/span>Figure 4<\/span><\/i>). The biggest, including ARI, Enterprise and Donlen, typically have links to dealerships or rental companies, or like Element, have been created by large mergers.\u00a0<\/span><\/p> Similarly, the European market is also dominated by a small number of FMCs. Some have ties to financial institutions, such as ALD, partly owned by Soci\u00e9t\u00e9 G\u00e9n\u00e9rale, and Arval, part of BNP Paribas, and some are owned by OEMs, such as Alphabet, part of BMW, and Athlon, owned by Daimler. Consolidation among FMCs is further ahead in Europe than in the US, where (as we set out below) a new wave of mergers has begun.<\/span><\/p> We believe US OEMs and their captive financing arms should consider the fleet management market as a future key capability in a world of autonomous vehicles. With the current round of consolidation, the hurdles for OEMs to enter this market as late followers might become even higher:<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\tMarket Overview: EVs will transform US fleet\u00a0<\/b><\/h3>
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\t\t\t\t\t\t\t\t<\/a>\n\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\tInsight download and author information\n<\/h2>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
Authors<\/h2> <\/div>\n \n
\t\t\t\t\t\t\t\t<\/a>\n\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\tOEMs in focus: Impact of the EV transition<\/b><\/h3>
\t\t\t\t\t\t\t\t<\/a>\n\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\tCase Study 1: Ford<\/h4>
<\/p>Case Study 1: Ford<\/h4>
<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\tCase Study 2: GM<\/h4>
<\/p>Case Study 2: GM<\/h4>
<\/p>Fleet management consolidation will also transform the market<\/b><\/h3>
\t\t\t\t\t\t\t\t<\/a>\n\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t