Market consolidation: VW & Logpay accelerate the convergence of fuel, fleet and T&E offers

Many ears will have pricked up at the news that Volkswagen Financial Services has taken a 51% stake in LogPay. It comes as no great surprise - but it marks another stake in the ground in a market whose structure is beginning to change dramatically.

Europe's (and the globe's) leading automotive leasing firms have for some time been uncomfortable with the large, downstream oil company-sized boots which have been on their heads when it comes to marketing a fuel management proposition as part of their full service package. It was only a matter of time before they got fed up trying to engineer more imaginative ventures in partnership with the majors, and decided to go their own way. And here we are....

This specific transaction may look like it's all about commercial road transport. After all, VW owns both MAN and Scania and can therefore build on some considerable synergies, as well as channels to market. And the partners will, indeed, embark with a big head-start in CRT....

The likelihood, however, is that this alliance is as much about CRT as Edenred's stake in UTA is (i.e. not very much). Take a look at the VWFS presence in automotive leasing - alongside LogPay's suite of T&E products - and this starts to look far more like a Fleet game. When you consider the impending introduction of tolls in Germany for passenger cars, it looks even smarter.

If I were a major fuel card issuer with a significant volume sold through VW Leasing, I would be having a few sleepless nights right now.

Forgive the pun, but initiatives like these have been on the cards for some time now, and seem to show a real blind spot on the part of the oil majors. The major issuers' insistence on retaining "customer ownership", using the leasing company as a glorified sales agent rather than a strategic channel partner, demonstrates a fundamental misreading of the fleet customer and the prevailing market dynamic.

Why? For an average fleet customer involved in a manufacturing, retailing or service industry and running a fleet of, say, sales reps or service engineers, fuel will make up somewhere between 3% and 5% of the overall operating cost profile. It's marginal - and the overwhelming customer pull has been for integration of the fuel, fleet and driver management bundle. Running a fleet of 100 sales reps is a single cost centre: so manage it for me with a single interface.

This may be unpalatable to the major fuel card schemes, but the natural integrator of that bundle is not the fuel supplier, it's the vehicle management provider. The brand stretch from asset financing to fleet management to fuel provider is not great: yet try it the other way round, and you are in nomansland. That's why a more imaginative and promising fuel card strategy would be to proactively select full service leasing as a primary sales channel - investing customer ownership and support with the leasing company, and actually encouraging the convergence of fleet offer elements.

What will be even more fun as 2017 progresses will be observing how driver expense management starts to play a role in integrated fleet offers . Sodexo and Edenred have already taken the first steps into the fuel world in Europe, and will - without any doubt - be seeking to drive further offer convergence through the integration of T&E and expense management platforms.

Perhaps the smart fuel card strategy is to surf this wave. Wasn't it King Canute who tried the alternative?

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