David Madrigal
President of Element Fleet Management Corporation
Element Fleet Management Corporation
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Insight

Adapt to the Client, Do Not Make the Client Adapt to You

Sat, 09/01/2018 - 09:59

While other companies have tried to transform the market and push companies out of their comfort zone, David Madrigal, President of Element Fleet Management Corporation, has found that the best strategy for success is to adapt to what the market demands, not the other way around.
“In Europe, approximately 70 percent of all corporate fleets are managed and leased through a third party,” says Madrigal. “In Mexico renting fleet management has only reached 20 percent of the market.” This presents a natural opportunity for companies in the fleet management sector like Element. However, these players must be aware that not all companies have the same cost objectives, which means that not all companies will be open to adopting the same business model.
Today, there are two options for fleet management solutions available in the market: a renting solution and what Madrigal likes to call a pay-as-you-go model. With renting, on the one hand, companies lease their fleet and outsource its management, all through the same company that takes care of everything related to the vehicle, its maintenance and repairs. A product such as this ensures clients they will have payment stability throughout the duration of their contract, thus offering more long-term certainty. According to Madrigal, the main users of this model in Mexico are European companies with presence in the country because this is the preferred option in their homeland.
The pay-as-you-go model, on the other hand, targets strategic savings and efficiencies through modular solutions. Companies that do not mind monthly cost variations but are looking for overall annual cost reductions are more interested in this scheme according to Madrigal, since it can make the service up to 20 percent cheaper. These are also companies that normally own their own fleets and contract providers such as Element to manage different aspects of their fleets without actually relinquishing control over them. Madrigal says this model is still largely used in the US, which has influenced Mexican clients to adopt it. “Element prefers to offer the pay-as-you-go service because it more effectively caters to the needs of an evolving Mexican market,” he says. “We manage over 1.5 million vehicles through the pay-as-you-go scheme globally and a total of 3 million in 50 countries thanks to our relationship with BNP Paribas’ fleet management subsidiary Arval.”
There is still much room for growth in Mexico according to Madrigal, both in the pay-as-you-go and the renting offering. “I think there is potential for us to manage a total 50,000 or 60,000 vehicles up to 2023,” he says. The company has already built a name for itself in the country and currently manages over 40,000 vehicles. Looking ahead, Madrigal points to predictive analytics as the next step to solve clients’ logistics issues. “We are already in the preliminary phase of doing predictive analytics, which eventually will provide us with more robust information to share with our clients,” he says.
Element Financial Corporation has put data analysis at the core of its strategy to understand clients’ needs. “Vehicles today are computers on wheels that offer a lot of information we can use,” says Madrigal. The company’s consultants analyze a client’s fleet, gather the information they need and create reports that contain insights on how to improve operations. “Data is contrasted against industry averages for similar fleets and models,” says Madrigal. Element experts can then tell clients whether they are spending more than they should be on fuel, for example, compared with their industry’s average.
Due to the importance of data-driven decisions, Element Financial Corporation has also set itself the objective of developing digital platforms to improve fleet operations for its clients, thus making management easier. “Element decided to invest over US$100 million in developing its Xcelerate digital platform after acquiring GE Fleet Services,” says Madrigal. The first part of this investment involved the creation of a digital platform where clients can obtain reports on their fleets’ performance and monitor factors such as location online. Now, the company is working on a second stage involving advanced analytics and connected vehicles, through the release of an app for drivers that will provide information on gas station locations, service shops and similar services directly on their smartphones.