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FCA focuses on improving vehicle TCO figures

Total cost of ownership (TCO) is a key metric for a fleet decision-maker when considering which car or van to buy. Including factors such as depreciation and service and maintenance costs, TCO gives an organisation the most accurate picture of how much a vehicle will cost to operate over its lifecycle.

It is an area FCA Group has focused on in recent years.

“Price is a key factor when someone chooses a vehicle,” says Neil McNicholl, wholelife cost and fleet programmes manager. “It’s not necessarily the price tag of a car, it’s the monthly cost of PCH or PCP, for example, which people are transacting on.

“We can’t affect the price of the fuel that goes into a car, but we can influence things like the depreciation – which is the biggest contributor to TCO – and the maintenance, so those are the areas we’ve been working on to get values as strong as possible.”

A key focus in strengthening residual values (RVs) has been exerting greater control of the sales mix of new cars. FCA has reduced the number going into short-cycle business, such as rental, as over-supply in this market has a detrimental impact on RVs.

“In 2017, our short-term rental business was about 16% of our overall mix, then in 2018 it was 8% and last year it was 5%, so we have been able to reduce the impact of short-cycle vehicles coming back on to the market, which has bolstered our RV position,” says McNicholl.

As these tend to be on a buyback agreement, FCA is then able to control how and when they are sold through its dealer networks, further improving RVs which, simultaneously, reduces the TCO for owners.

FCA has also introduced a comprehensive benchmarking tool where it compares its scheduling and costs to ensure it is aligned with best-in-class for servicing and maintenance.

“What we do slightly differently to some other manufacturers is that when we look at an SUV, for example, while that SUV will naturally compete with other SUVs, a hatchback may also potentially be on that buyer’s shopping list so we also take a range of those vehicles in our comparison to ensure we are positioned correctly,” says McNicholl.

He says another part of building stronger RVs is fitting the right – and generous levels of – technology and equipment. For example, Alfa Romeo is a brand associated with a racing heritage and sporty image which may not necessarily be associated with class-leading safety features.

However, its MY20 Giulia and Stelvio ranges have features such as autonomous emergency braking, adaptive cruise control, active blind spot indicators and lane-keeping assist. “From a wholelife cost viewpoint, these will actually reduce cost as they will reduce the incidence of impacts,” adds McNicholl.

“It’s also about consumer choice. They will realise that there’s an awful lot of spec on these vehicles and they may not have associated that with performance vehicles before.”

FCA’s connected car technology, Mopar Connect, is a further example of how the manufacturer provides added value for customers.

Using a smartphone app, this allows the driver to access a range of information, including vehicle location, fuel level, tyre pressures and servicing schedules.

It also allows a fleet manager to access information about the vehicle and how it is being driven, to help them make more informed decisions about issues such as maintenance work and driver behaviour.

FCA’s TCO work has seen it develop closer relationships with RV price guide setters and leasing companies to ensure its products are placed correctly in the market.

This has put FCA in a strong position ahead of the launch of its new range of electrified vehicles: the fully-electric Fiat 500 BEV, Fiat Professional E-Ducato and the Jeep Renegade 4xe plug in-hybrid.

“We may not be the first to market with electric products, but we are not going to have to play catch-up – we are launching with the best-in-class product,” says McNicholl.

“Renegade 4xe, for example, will be the most capable electrified PHEV in the small SUV segment.

“The E-Ducato, too, is going to be a best-in-class proposition in terms of both its charging capability and its range. That’s also got a five-year/75,000-mile warranty, a 10-year warranty on the battery and comes with a five-year service and maintenance package as well, and that will give people confidence in our product.”

He adds: “It’s also key that people understand the cost of servicing and maintaining a fully-electric vehicle is much less than for a petrol or diesel one.

“BEVs only have around 20 moving parts compared with an ICE (internal combustion engine) vehicle which has more than 2,000, so we have to educate retailers and fleets about how these vehicles are going to be much more affordable to run.”