5.2.2024

Manufacturers are changing their model strategies. Is your fleet ready?

More EVs, more SUVS: as market demands change, so do the model strategies of car manufacturers. For corporate fleets, that’s not necessarily good news. It narrows their choice of cars that are both appropriate and affordable – particularly in the D segment. What exactly is changing? And how should fleets react? Let’s examine.

For D segment cars, think large family cars (or in American parlance, ‘mid-size cars’) like the BMW 3 Series, Škoda Superb, and Toyota Camry. This is a relatively small segment, with no more than 25 models available across all brands in Europe in 2023. Nevertheless, D segment cars are a popular choice for company executive cars.

Perfect balance

Why? Because for corporate fleets, they strike a perfect balance: higher in status than the C segment (small family cars, or ‘compacts’, like the VW Golf, Ford Focus, or Citroën C4), and more cost-effective than the E segment (the Mercedes-Benz E-Class, Porsche Taycan, Audi A7 and other luxury cars). The problem is: the D segment is rapidly evaporating under the twin pressures of electrification and ‘SUV-ification’.

Data: JATO Dynamics (*data until October)

In the space of just 10 years, from 2013 to 2023, the market share of D segment cars has declined from 10% to 6% (see top graph). So have nearly all other segments; with the collapse of MPVs (from 14% to just 1%) as the most dramatic example.

Emphasizing SUVs

The sole exception, and the reason for the other segments’ decline, are the SUVs, which have conquered the market. They went from 18% share of all new registrations in 2013 to 54% in 2023. In absolute numbers, SUV sales increased from just under 1.7 million cars in 2013 to more than 5.5 million in the first 10 months of last year alone.

Manufacturers have adjusted their model strategies accordingly; there is an increase of the number of models available, we can clearly see the emphasizing of SUVs over non-SUV models, in all segments (see bottom graph). In the space of just one year, SUVs have increased their lead over non-SUVs across all major model segments from just eight models more, to 32 more.

Data: JATO Dynamics (*: data until October)
Data: JATO Dynamics (*data until October)

Narrowing options

And that’s taking into account that there are no SUVs in the A segment, the category of the smallest cars. Because of the SUV’s higher costs, larger size and (generally) bigger carbon footprint, SUVs are not an ideal fit for company cars. But SUVs are not the only trend narrowing the options for corporate fleets. There are plenty of use cases and countries – especially in Central and Eastern Europe – where petrol or diesel vehicles remain a more practical and cost-effective choice than EVs, and indeed often also a more sustainable one.

However, manufacturers are increasingly replacing ICE models with electric ones (either PHEVs or full-electric BEVs). This is happening in all segments, but moreover in the high-end, including the D segment. Without significant government and/or corporate incentives, leasing these electric model versions may be unsustainably more expensive for a driver in D-segment – let alone impractical to manage in all circumstances that you need them for.

Don’t ignore

So, what to do? The first thing to realize is that these trends – more EVs, more SUVs – will continue, and can’t be ignored. That is why fleets should monitor and periodically review (say, every six months) their car policies, to ensure those policies favor the most practical and cost-effective model choices available in the market. Without those reviews, you risk a growing divergence between your car policy and the automotive market, which could lead to vehicle choices that are not fit for purpose and/or not cost-effective.

Unfortunately, there is no one-size-fits-all solution to this issue. All of this depends on the specifics, which vary for each individual fleet:

  • on whether cars are selected by user-choosers, or under the cafeteria model
  • on the jobs the drivers do and the mileage they accumulate
  • on the degree to which these cars fulfil private needs
  • on the mobility strategy of the company

Market realities

That gives fleets plenty of variables to work with, and plenty of potential solutions: other vehicles from the same segment, similar vehicles from another segment, partial electrification, other mobility solutions, and more.

Except that exactly this variety of options and solutions makes it difficult to see the forest for the trees. Fortunately, help is at hand. Business Lease has extensive experience in and intimate knowledge of the leasing and mobility markets of Central and Eastern Europe. As your trusted partner, we can regularly consult with you on vehicle eligibility, based on the specific needs of your fleet. It is part of our DNA and included in our account management.

As OEMs adapt their model and segmentation strategy to new market realities, the job of finding the right models, and/or the right mobility solutions to get your employees to where they need to be will get more and more important. Is your fleet ready?

Read this related article about how Business Lease helps their customers to choose the right models to include in their Car Policies: How to index your car policy

Or contact our team today to discuss your Car Policy enquiries.

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