PRESS RELEASE: Fleet Industry Faces A 'Massive Revolution' As Connected Car 'Big Data' Takes Hold

  • Leasing companies to transform into analytics businesses that hire vehicles
  • Leasing firms to become ‘Mystic Megs’ as ‘big data’ enables future fleet forecasts
  • Traditional fleet business model to change as drivers ‘control lives’ from their car
  • Employers must take action to protect themselves in new world of ‘big data’
  • The advent of ‘big data’ increases pace of fleet management change, says ACFO
  • Fleet insurance premiums to reduce as connected cars make roads safer
  • Audi focuses on “simplification and consistency” with range revisions

The fleet industry is set to undergo a “massive revolution” with the introduction of the connected car and the arrival of so-called ‘big data’, while contract hire companies will transform into analytics businesses that lease vehicles.

Those were two of the predictions at ACFO’s spring seminar, ‘Big Data - Big Seminar’, sponsored by insurer AIG, Audi and Lex Autolease, the UK’s largest vehicle leasing and fleet management company.

Held at Whittlebury Hall, Northamptonshire, around 80 fleet decision-makers, heard Nick Mitchell, Audi’s service and technical manager, say: “The arrival of the connected car will result in massive changes in the way people use cars and the application and provision of cars. Technology will be updated before our eyes. It is a massive revolution that we are about to go through and the pace of change will never be as slow again.”

For contract hire and leasing companies the arrival of ‘big data’ means “transformational change”, with Craig McNaughton, corporate director, Lex Autolease, forecasting that it will enable them to “predict the future” in terms of vehicle service, maintenance and repairs and driver behaviours as a result of data analysis thus taking away fleet operation uncertainty.

That journey is already starting with the piloting and ultimate roll out by Lex Autolease to clients of operational benchmarking across a raft of in-life areas of vehicle expenditure and risk to enable fleet improvements and cost savings to be made.

Ultimately, Mr McNaughton told delegates: “Connected car data will fundamentally change our industry. We have a long way to go, but we must change from a rear-view mirror perspective to using data to predict the future and move from a leasing company that provides management information to a data company that leases vehicles.”

However, the transformation will not be without its challenges and behind the scenes policy makers, vehicle manufacturer and leasing company representative organisations are discussing numerous issues around data ownership and accessibility.

The key challenges faced from a leasing company perspective included, said Mr McNaughton:

  • Liability around data breaches with company car drivers not currently covered by leasing companies’ Masterhire agreements, which were contracts with fleet customers
  • Manufacturer determination of “who is the customer” - contract hire and leasing companies, end-user fleets or company car drivers
  • The addition of new functionality to cars and software downloads by drivers during a vehicle’s life meant monthly lease rates would change during a contract period and that presented a ‘logistical challenge’
  • The ability to continue to direct vehicle SMR work into the location of choice of the leasing company and customer fleet manager - franchise dealer, independent garage or fast-fit - and not just to the garage network of the manufacturer proving a vehicle
  • The deactivation of vehicle and driver data in the car at end of contract so second hand purchasers could not access it
  • The speed at which various motor manufacturers were introducing vehicle connectivity.

 

He said: “There are real contractual challenges to overcome due to the difference between retail customers and fleet owners. The connected car will be a huge part of the data lake and the volume of information ever-increasing. Fleet customers demand information to tell them what is happening to their vehicles and to predict the future and lead them on a journey to provide cost savings and deliver safety.”

Leasing firms to become ‘Mystic Megs’ as ‘big data’ enables future fleet forecasts

Analysis of ‘big data’ will enable vehicle leasing and fleet management companies to become ‘Mystic Megs’ as they predict the future and eliminate cost and operational uncertainty for fleet customers, Mr McNaughton told delegates.

Management information currently provided to fleet customers typically reflected on what had happened to vehicles during their operating life cycle, but ‘big data’ would allow contract hire and leasing companies to “pre-empt, predict and prioritise”, he said.

Explaining that leasing companies needed to be “agnostic” in terms of accepting data feeds from multiple sources, he said they would also need to also take a multi-layered approach in analysing all the data sourced.

“We need to agree a format for data so that customers can analyse elements of their fleet performance and see where they are doing well and where they can potentially improve,” said Mr McNaughton.

Today best practice dictates a whole life cost approach to vehicle decision-making, but the new technological age and the arrival of ‘big data’ would “industrialise” the amount of information that was available resulting in a “data lake”. That meant significantly more data being fed into whole life cost calculations resulting in the more accurate determination of “optimal business mobility solutions”, he said.

The advent of the connected car will enable drivers to download functionality that physically changes a model’s characteristics and specification with a potential huge impact in numerous areas of fleet operations as well as the likely requirement of tax and legislation revisions, according to Mr Mitchell.

Cars, he forecast, would change from being a “status symbol” to a “mobile device” with new players such as Apple and Dyson joining long-established motor manufacturers as well as newcomers such as Tesla in the battle for sales.

Furthermore, Mr Mitchell predicted a huge increase in the delivery of on-demand services to drivers and also the ability for vehicle users to update their cars as manufacturers introduced new functionality.

For example, he highlighted that a company car could be sold as a 150bhp model, but on demand a driver could add a further 20bhp, which would completely change a model’s performance and thus its carbon dioxide (CO2) emission figure and therefore an employee’s benefit-in-kind tax bill.

Mr Mitchell said: “Drivers will want that functionality, but the car will no longer be the vehicle that it was. It could be that cars are sold with the lowest specification and on day two the specification is updated by drivers. That would have a massive impact on HM Revenue and Customs’ revenue. Legislation and the tax system as we know it will have to change and that will have to be dealt with.”

Many motor manufacturers, including the Volkswagen Group of which Audi is a part, have launched a mobility services brand. The Group’s is called MOIA with the spotlight on mobility, e-mobility and digitalisation and part of its focus is the delivery of paid for “functionality on demand” as manufacturers looked to maximise revenue streams.

Forecasting that numerous issues, notably around vehicle contractual terms and data ownership, needed to be resolved with the arrival of the connected car Mr Mitchell said: “People will be able to control their lives from their car. The traditional business model will no longer apply.”

Sharing and using personal vehicle user data is a huge issue and a leading lawyer has advised businesses to update employment contracts, terms and conditions and codes of conduct to reflect the new world of ‘big data’.

Employers are bracing themselves for the 25 May, 2018 introduction of the General Data Protection Regulation (GDPR), which will have a potentially significant impact across organisations, and particularly for fleet introduction of connected cars.

The Information Commissioner’s Office (ICO), which is responsible for enforcement of the law and is currently consulting on aspects of GDPR, has already undertaken some initial work with organisations, which include the Society of Motor Manufacturers and Traders (SMMT) and the British Vehicle Rental and Leasing Association (BVRLA) “in order to develop its understanding of the data protection and privacy risks arising from the deployment of connected and autonomous vehicle technology”.

GDPR builds on existing data protection legislation with a particular focus on digitalisation and technology. Core to the 1998 Data Protection Act are eight data protection “principles” and GDPR reforms those and introduces new “principles” of transparency and accountability with the ability to “prove consent” a significant pillar of the new regulations.

Alex Ktorides, head of ethics and risk and a partner at law firm Gordon Dadds, told delegates: “‘Big data’ is all about having an ethical approach and that means transparency. Connected cars will generate huge amounts of data and the question is what happens to that data. It is crucial to make sure it is being ethically handled.

Calling GDPR a “big sea-change” and explaining that the ICO was aiming to ensure that the law kept up with the pace of technological change, Mr Ktorides said with regards to connected cars and ‘big data’: “Some of the information will relate to employees and their behaviour so employers need to consider being completely transparent and hatch an ethical and transparent plan. Fleets need to plan how they will use that information and tell their employees.

“Businesses must be clear about what data they are gathering and why, where it is going and how it is being used and gain people’s consent.”

That, said Mr Ktorides, meant updating contracts of employment, employee terms and conditions and codes of conduct and he suggested anonymising data was a “very effective tool”.

He told delegates: “If information is personal and identifies who a person is and how that employee is using their car and their behaviour then it impacts on their privacy and requires sign-off.

“There is huge value in gathering data, but that must be balanced against people having a right to privacy. Employers must put people’s rights at the forefront and show good governance and gain consent.”

Penalties for breaching the core “principles” of GDPR are potentially huge with a maximum fine for companies of €20 million or 4% of total worldwide annual turnover of the preceding financial year, whichever is the higher.

What’s more, while the financial cost of data breaches was potentially huge Mr Ktorides highlighted that the reputational damage of businesses misusing data or losing it must not be under estimated.

Fleet management is changing at a pace never seen before and the arrival of ‘big data’ was one of the biggest steps, ACFO chairman John Pryor told delegates.

Introduction of the connected car and the generation of so-called ‘big data’ was set to change the long-established fleet management model, he said.

And that change had to be managed, while fleet decision-makers grappled with the impact of numerous other issues including: the viability of diesel as a fleet fuel amid air quality concerns, the impact of Brexit, government consultations on many issues including currently on business expenses - including potentially employee mileage allowances - the forthcoming arrival of a new real-world driving vehicle MPG and emissions testing regime and a “spectacular increase” in fleet administration.

What’s more the recent hacking of NHS computer systems in the UK and other organisations’ systems worldwide had put security fears around vehicles and the data collected front of mind, suggested Mr Pryor.

Commenting on vehicle and ‘big data’ cyber security, Dave Tanner, operations manager at Lex Autolease, which has 372,000 vehicles on its books, said: “People should be worried and not just assume that they are safe.”

Meanwhile, Mr Pryor continued: “We are currently at the tip of an iceberg. The arrival of ‘big data’ will have a major impact on fleet operations and company car drivers.

“Today’s connectivity is the start of the journey towards the autonomous car and while the secure exchange of data builds the foundations for new business activities and applications, there are significant risks and challenges regarding safety, security and privacy that need to be addressed.”

Supporters of ‘big data’ point to benefits that include reduced fleet vehicle downtime, safety and duty of care improvements and the early detection of faults and wear and tear before components ‘break’ thus reducing fleet service, maintenance and repair costs so aiding improved budgeting

Furthermore, the advent of ‘big data’ and connected vehicles will fundamentally change the relationship between motor manufacturers, the vehicle leasing and fleet management industry, fleet decision-makers and company car drivers.

Mr Pryor concluded: “Fleet managers want clarity on what the issues are; they want to understand how suppliers such as vehicle manufacturers and contract hire and leasing companies will access and use ‘big data’; and, critically, they want to know what the law is in respect of managing and using ‘big data’ sourced directly from ‘intelligent’ vehicles.”

Ken Needham, director (fleet and logistics) at London-based estate agents Foxtons, which operates a 1,200-strong vehicle fleet, said data that gave him an “overview of a vehicle” was critical.

Every fleet is unique and how user-chooser and job-need fleets use and interpret ‘big data’ will potentially be different, believes ACFO, but Mr Needham said his demand for information was “not Big Brother”, but a requirement for assistance.

“I want our employees to concentrate on their day job, while I make sure their car is safe and roadworthy,” he told delegates. “We will continue to use manufacturer application platforms because we see them as business tool: they tell us when the car is not well; we don’t use applications for end users.”

Mr Needham added: “We understand our responsibilities with regards to data and looking after it,”, while he called on leasing companies and vehicle insurers to “address your customers”.

Connected cars will make the UK’s roads safer and ‘big data’ will enable insurance companies to become predictive in assessing fleet risk delivering premium savings.

That’s the view of Julien Combeau, industry services lead Europe, client risk solutions at insurance giant AIG, who said the more technologically advanced cars became with the addition of numerous sensors and cameras resulted in the delivery of a raft of valuable data.

“With more and more data we can be more focused on individual drivers rather than the fleet portfolio,” he told seminar delegates. “Traditional claims data analytics highlights lagging trends and targeted action can be taken to reduce risk.”

However, with onboard vehicle sensors and motor manufacturers capturing data in real time, onboard cameras monitoring driver behaviour, well-being and performance and the advent of ‘intelligent highways’ would see collected data being allied to knowledge about how cars were being used individually and meant insurers would better understand the risks posed by individual drivers.

“As more and more technology is deployed and we capture real-time data, accident risk will be avoided, insurers will become better at pricing risk and premiums will reduce,” forecast Mr Combeau. “Crashes that happened five years ago will influence insurance premiums less because we will have the information available to look forward with more predictive pricing. Ultimately, the introduction of connected cars will result in safer roads.”

Audi focuses on “simplification and consistency” with range revisions

Audi has unveiled a new “simplified and consistent” approach to its vehicle model ranges that includes line-up rationalisation and fewer option choices.

Matt Rance, Audi’s A6 and A7 product manager, told the ACFO seminar that the brand wanted its product range to be “easier to comprehend”.

With the advent of 2018 model year cars from June 2017, he said the fleet favourite A4 model would be repositioned with specification enhancements, while cruise control and rear-parking sensors would be standard across the Audi range from A1 upwards.

Meanwhile, range rationalisation would start with the A4 and A6 and more than 200 standalone options across ranges would be removed “to make choice easier”.

Furthermore, he anticipated that any new vehicle price rises would be offset by residual value enhancements.