Industry Insight (Part 1) - What aspects of 2022 are shaping the future of automotive industry

Prior to any strategic planning for the year ahead, it is critical to understand the most impactful trends of the last year. This is only possible with deep industry knowledge and a strong connection to ones customers. We spoke with the two experts, Toomas Loik & Ivar Vilmer both of FleetGuru to learn more about the automotive industry.

Please introduce yourselves and tell us what is Fleetguru?

Toomas Loik (T): I am the CEO of Fleetguru, which offers fleet management software. Our target group is all companies who use vehicles in their everyday work.?

Ivar Vilmer (I): I lead and coordinate all our sales operations. At the moment we are operating in Estonia, Latvia, Lithuania, Poland and Finland. We try to understand the pain points in our clients’ fleet management and once we’ve done that, we try to ease that pain.

What about your clients?

T: Our clients are companies with various profiles and there is no such thing as a typical client. Using vehicles might be tied to our client’s main business process, for example taxi company or security company. Or a client might be in a whole different business not tied to vehicles directly such as a wholesale company, who uses vehicles to provide transportation for their employees to see their clients. Our clients could also own a lot of construction machinery. So in conclusion, they can be all very different companies, but they have one thing in common - they use vehicles in their everyday business processes.?

Which trends did you notice in the car industry in 2022?

T: Well first off we can only speak about our view and our view extends to Estonia and its nearby countries where we operate. Our knowledge comes from two inputs: our own gut feeling and feedback from clients or partners.?

One big part of everything that happened in 2022 already began in 2021. As we know, 2021 brought us a shipping crisis and shipping crisis in the automotive industry as well. Decisions made in 2021 are the ones that affected the automotive industry in 2022. 2021 was extraordinary for many of us and so all kinds of decisions were made: some became extremely careful, some decided to stock up, some rebuilded their strategy from zero. In 2022 we saw that the shipping crisis didn’t go anywhere and it impacted the business client quite a lot.?

Business clients didn’t get to buy all the cars they hoped for. In the last few months clients have become more careful, while in the beginning of the year they were more demanding towards the car sellers (they wanted new cars that sellers couldn’t deliver).Today the situation is that clients postpone their financial decisions, prolonging their old contracts and continuing with old cars.

I: Shipping period has become longer. Promised delivery times are more often than not inaccurate. Prices are rising and for a client, they will rise after the shipment has been placed.?

T: client ordered a car and the price was X. Car is delivered and now the price is X + 6000€. These kinds of surprises have occurred quite a lot recently and this is something totally new.?

I: this coefficient is hard to determine that how much the price changes from placing the order to delivery. You cannot rely on ordering online, because supplier is “floating” and price is “floating”. Interest rates are rising and taking casco and traffic insurance prices with them. It is quite difficult to budget a car park.?

T: talking about car models: it can be deduced from the statistics that some car models have been more popular than others. It is not about the specific models though, some models are just available and their prices are reasonable.

Which trends did you notice in the auto industry in 2022?

T: Well first off we can only speak about our view and our view extends to Estonia and its nearby countries where we operate. Our knowledge comes from two inputs: our own gut feeling and feedback from clients or partners.?

Big part of everything that happened in 2022 already began in 2021. As we know, 2021 brought us a shipping crisis and shipping crisis in the automotive industry as well. Decisions made in 2021 are the ones that affected the automotive industry in 2022. 2021 was extraordinary for many of us and so all kinds of decisions were made: some became extremely careful, some decided to stock up, some rebuilded their strategy from zero. In 2022 we saw that the shipping crisis didn’t go anywhere and it impacted the business client quite a lot. Business clients didn’t get to buy all the cars they hoped for.?

In the last few months clients have become more careful, while in the beginning of the year they were more demanding towards the car sellers. There was a demand for new cars that sellers simply couldn’t deliver.Today the situation is that clients postpone their financial decisions, prolonging their old contracts and continuing with old cars.

I: We can see that the shipping period has become longer. Promised delivery times are increasingly less accurate. Prices continue to rise and for clients, they will often rise after the shipment has been placed.?

T: Essentially we are seeing that, a client ordered a car and the price was €X. Car is delivered and now the price is €X + €6000. These kinds of surprises have occurred quite a lot recently and this is something totally new. As a result, some car models have become more popular due to their reasonable prices and basic availability and less about the model itself now.

I: This coefficient is hard to determine how much the price changes from placing the order to delivery. You cannot rely on ordering online, because the supplier is “floating” and price is “floating”. Interest rates are rising and taking casco and traffic insurance prices with them. It has become very difficult to budget.?

Have you noticed any changes in buying behaviour with companies?

I: Business clients today still want to buy new cars, because these are predictable. Used cars are not. But, in some cases business clients don’t have any other choice but to buy a used car, because they have a void that needs to be filled. Additionally with rising interest rates, the used car sales cycle has become longer.?

T: I agree, we haven’t noticed that business clients would prefer used cars. But, as a lot of businesses have adapted more careful strategies, they use the cars at hand longer, so the mindset about used cars has changed it that sense.

When thinking about the environment, is there a positive benefit when businesses use their cars longer?

T: Yes, I guess you’re right. The environmental factor is definitely becoming more important, but it’s not a key point in buying vehicles yet.

I: We can sense that a car’s CO2 emissions are playing a bigger role day by day. Turning to electric cars takes time, because businesses are usually tied to their vehicles for 4 years or more because of the deal they have chosen for their fleet. After this period, it is possible for a company to become greener, if the pressure to do so is there. Usually the pressure comes from partners or owners, who wish to be “green and beautiful”.

T: We see there are three types of companies: companies that really try to be green, companies that just try to show they’re green and companies that really don’t care.

Do you expect to see more of these “Greener” companies this year?

I: It is our job to help them on that path. We measure our clients’ CO2 and draw a lot of attention to it. If before meeting us they didn’t think about this, then after meeting us they most definitely did.?

T: It really depends on the region where our client is located. We can see clearly how in Finland the CO2 emissions are a main topic of discussion when talking about our product. If we go South from Finland, the less this topic speaks to people.

We have clients whose main automotive strategy for upcoming years is to measure how green they are and also progressively become greener. They want to know what their CO2 footprint is today and how to decrease it or if possible get it near to zero. Currently we have only a few of these kinds of clients, but there are definitely more coming.?

We’ve had cases where clients tell us that “measuring CO2 is nice to have”, but later they’ve been asked “What is your CO2 footprint?” and luckily, they had the right number on hand.?

What steps could companies that are tightly tied to cars take to decrease their CO2?

I: The first question would be “where their miles are coming from?”. The sharing economy has become more popular for companies, with it they have a car sharing pool. This is where people can use vehicles for work trips and afterwards drive home as well. Companies therefore can decrease the number of cars, but still cover the miles required by the team.

T: Yes, implementing car sharing in a company is one step towards decreasing CO2. Another step would be to actually look deeper into where the CO2 comes from.?

Are the CO2 emissions even or does some part of the fleet produce most of the CO2??

If there’s a majority in some part of the fleet, we should first look into it. For example, if there are two identical trucks, but one truck driver has heavier wheels than the other, then this truck will burn more fuel and emit more CO2. Like they say “the devil is in the details”. Before making any decisions, companies need to dig into this topic, but in the long run, a successful strategy is all about planning. If you know which part of your car park produces the most CO2, then you can make better decisions when buying new vehicles.?

Today we measure a car, its driver (behaviour) and a supplier. Based on data, companies can make better decisions. These decisions don't need to be something tragic like replacing all cars with new electric cars. It could look good though, but it also could paralyse your business processes. You could be carbon neutral, but your business could go downhill, because these trucks need charging every 150km, but for your business to survive your truck would need to drive 400km a day. To decrease your CO2 footprint, you don’t need to go full electric. It might be wiser to have hybrids: short drives in the city with electricity and longer drives on an economic diesel engine.?

We often offer this simple recipe to become greener;?

1. Drive economically,?
2. Keep your vehicles in a good condition (all the way up to correct tire pressure) and,
3. The vehicle itself should be environmentally friendly.

A really interesting first part recapping some of the most impactful trends of 2022. In our next article, we speak with Toomas and Ivar about their insight on how these trends will impact 2023.