Defleeted vehicle inventory is going to see a 50% increase over the next three years, which suggests more OEMs will get into the remarketing business, increasing competitive pressure.
“We are now in a mad rush to see who can do it most effectively,” said Kurt Cornell, general manager for dealer operations, Mercedes-Benz USA. “The OEMs who can squeeze the money out first are going to win. This pressure is not going to go away.”
Cornell was speaking at last week’s Finished Vehicle Logistics North America conference in Newport Beach, California, during a breakout session on the remarketing sector. The competitive pressures that Cornell saw on the horizon are going to be compounded by the existing costs of sending a car to auction, which are high. Cornell said it can be anywhere between $700-$1,200. Competitive pressure is also based on squeezing money out of the process to improve shrinking margins, which OEMs are expecting logistics providers to achieve.
Typically, transport companies moving vehicles do not know the ins and outs of the remarketing sector that well. According to Cornell, Mercedes is not looking for those traditional service providers any more, because selling off-lease vehicles is becoming a ‘big maths’ game that demands a different sort of service.
“We are asking the logistics companies to be data analytics companies because they are in a position to really help us get that price down and squeeze those efficiencies out of the system,” said Cornell.
Cornell also had a figure for what cost savings per unit could achieve on an annual level. “[For] every $100 that we can squeeze out of the system [it] translates to $15m for us. We expect our logistics companies to be able to help us squeeze that $100 out of the system.”
Data for savingsOver the next five to ten years it is going to be more critical for carriers and drivers to be using the latest technology supporting constant information on vehicle location.
Using the latest technology and data provides better visibility of where a vehicle is in the remarketing process, something that is crucial to making the savings carmakers are eager to achieve.
“Understanding where the car is in the process before you send the driver to pick it up is critical in reducing waste,” said Bryce Bentley, co-founder and vice-president of business development at Ready Logistics (a division of Cox Automotive). That is important to avoid wasted time in picking up the vehicle. It is also an early priority to know where that vehicle is going.
Deborah Newton, director of strategic planning, Montway Auto Transport, said it was also vital to know where a car was going from the start of the process. To do that, all parties need to work together on building industry-wide information on the process, pulling together data from multiple sources. She included vehicle data analytics, buying patterns, knowledge of competing vehicles, state vehicle registration and area dealer inventory in the mix.
“We are wasting time,” said Newton. “We need to partner with all parties involved and share information to make things quicker.”
Bentley agreed that knowing where the car was going in the first place was a hot topic.
“In the past, a lot of the commercial accounts knew the auctions and they sent the cars there,” he said. “Using the analytics that are out there now, they can make decisions on where that car will get the highest residual value. So they are starting to disrupt some of the normal lanes that existed and send these cars across the country because it is the best decision for the client.”
Cornell said data on the vehicle’s destination – ideally where it can get most money – and how it is getting there, is information that should be available following the first inspection.
“Then automatically you can have the parts [required for its reconditioning] sitting waiting, so when the car gets to the auction it doesn’t have to bounce around five times,” said Cornell. “It should come in, be immediately picked up as soon as it is ready, within two or three days, and then be ready to go back out.”
One final point made on using data and analysis to make the process more efficient comes with accurate vehicle condition reporting.
“When the asset is picked up from the dealership or out on location, we need to know the condition of that asset,” said Aaron Cervantes, remarketing manager, Hyundai. “It helps us determine [who has] the responsibility for any damage.”
Cervantes said the OEM needed to go back through the process and find the correct party responsible because the vehicle has a diminished value, which could be a time-consuming business without the right tools to verify the condition of the vehicle through the process.
That information should also be available to the transport providers, according to Cornell.
“The trucking companies should have access to the condition reports of the third party inspection,” he said. “The driver, before he picks up the car, should agree or not and take a picture of excess damage that absolves them of any responsibility for the vehicle.”
Read the full report from Finished Vehicle Logistics North America.
