Extended Fleet Replacement Cycles a Major Opportunity for Kwik Fit

One result of the recession is that fleet operators are prolonging the time they hold onto their vehicles. This is not such great news for used car dealers that previously snapped up the steady stream of three year old ex-fleet vehicles entering the market, but Kwik-Fit says lengthening fleet replacement cycles are providing it with a major business opportunity – tyre consumption rises and an increasing volume of MoTs and service and repair work is required as vehicles move into their fourth year of operation. Yet simultaneously, one of the biggest challenges facing Kwik-Fit Fleet and fleet decision-makers is cost management and the recent, unprecedented increases in the price of tyres.

Kwik-Fit Fleet has reported a 3.9 per cent rise in sales in 2008 – up to £184.4 million from £177.4 million in 2007 – on the back of huge increases in fleet car and van servicing (up 89.8 per cent year-on-year), fleet vehicle repair work (up 41.5 per cent) and brake repair and replacement work (up 13.8 per cent). In addition, demand from small and medium enterprises for Kwik-Fit Fleet’s Business Drive Card means that a record number of 40,671 cards are currently in circulation – which Kwik Fit reports is an all-time high.

“With an increasing number of businesses extending their fleet replacement cycles into a fourth year we expect to not only fit more tyres to fleet company cars and vans, but also expect to undertake more MoTs and vehicle services as well as fast-fit maintenance repairs such as on windscreens and air conditioning unit recharging,” said Kwik-Fit Fleet head Mike Wise. “With a rising number of company cars and vans staying on the road beyond the benchmark three years, as the country’s largest independent car servicing and MoT provider, we expect double digit growth in this area in 2009.

“Time is money, and for that reason fleets want a fast and efficient service that is convenient for their company car and van drivers,” Mr. Wise added. “Kwik-Fit’s seven-day-a-week extended hours opening and its ability to offer a service promptly rather than the 14-day wait for some franchised dealers makes vehicle MoTs, servicing and repairs very attractive to fleet operators and drivers.”

But, the increasing price of raw materials last year resulted in significant tyre price increases. In the second half of 2008 further tyre price rises were caused by the rising cost of crude oil – tyres contain oil – while, more recently, the plunging pound-euro exchange rate has also hit tyre prices. The triple whammy saw the cost of tyres increase by around 20 per cent, and according to Mr. Wise: “Both Kwik-Fit Fleet and our customers are suffering from the unprecedented tyre price increases so far. We are now waiting to see what the likely tyre price increases are in February and March. We expect considerable price increases, which we will be forced to pass on to customers.”

Meanwhile, tyre manufacturers are cutting back production due to a reduction in global demand for tyres. “The colossal worldwide reduction in new vehicle production means that tyre makers have also reduced tyre production. This could result in shortages of some tyre sizes,” said Wise. Previously, he added, any reduction in vehicle manufacturer production has seen tyre makers shift supply to the aftermarket, but the cutbacks this time were so severe that the switch in market sector supply may not occur.

Kwik-Fit Fleet also expects demand for its Business Drive Card to continue increasing in 2009. It is designed to improve fleet efficiency and give companies with smaller fleets the benefit of discount levels on motoring goods and services normally only applicable to major fleets. With the Business Drive Card, which can be used at more than 24,000 outlets across the UK, a single weekly invoice details all transactions undertaken by company vehicle drivers wherever and whatever has been bought using the card. This removes the burden on fleet administrators of multiple invoicing from a variety of suppliers.

“Companies that use Business Drive Card see the costs associated with purchases and administration reduce,” Mr. Wise concluded. “As an increasing number of companies recognise those benefits we expect demand for Business Drive Card to rise throughout 2009.”