Driven to distraction

• Josh Mehlman
• 19 August 2008
• Page 1 of 2 : single page

If you’ve read a newspaper or turned on a  television in the last few months, chances are you’ve noticed that petrol prices are a topical issue. But for many small businesses, fuel prices are much more serious than the sinking feeling you get at the bowser as you watch the numbers crank upwards.

The May 2008 Sensis Business Index survey of small and medium-sized businesses reported a 16% drop in business confidence on the previous quarter, the lowest level since May 2001.

The Sensis report cited increasing fuel prices as a major cause of concern among regional small businesses and a high-level worry generally. Along with interest rates and the increasing cost of living, fuel prices were also a major cause of gloom in households across the country, according to the June 2008 Sensis Consumer Report.

“Small businesses don’t consider it, but their vehicles are one of the highest costs they have, often second behind wages,” says Paul Elliott, marketing and product development manager at leasing and fleet management company Custom Fleet. “Worse still, most of them don’t have any way to control it.

“Small businesses typically run their vehicles into the ground, which means maintenance costs are very high, they get very poor resale value and it costs them a fortune in administration.”

One thing is certain: there is no easy way to make fuel prices lower. But there are plenty of ways small businesses can reduce the costs of running a vehicle, or a whole fleet of them.

Replace cars with bicycles

Bicycles are cheap to buy and consume no fuel. Australia Post has used bicycles for deliveries since 1891. Police forces around the country have introduced bike patrols for congested city areas. Bicycle couriers were once common around central business districts, although numbers have dwindled since the widespread use of email and broadband internet connections.

The City of Sydney’s Cycle Strategy and Action Plan 2007–2017 aims to increase the number of bicycle trips made in the CBD and inner city from less than 2% in 2006 to 10% by 2016. Government agencies and local councils in other areas have similar plans.

Nett was unable to locate any businesses planning to replace company cars with bicycles. This may be because executives who are used to plush company cars are unlikely to be impressed with spokey dokeys on the wheels or larger baskets on deluxe models.

Buy smaller cars

The cost of fuel has convinced Australians to buy smaller cars, and fewer of them. In the year to April 2008, national vehicle sales fell around 7%, according to the Australian Bureau of Statistics. In the same period, sales of sport utility vehicles (SUVs) fell 15%.

“We’re talking to a range of clients who are migrating to products that are a better fit for purpose, cost and emissions,” says Mitsubishi Motors Australia’s national manager of fleet sales Iaen Paul. “Small cars and small SUVs are growing in volume.” Paul sees this as a significant cultural change.

“With green being such a big focus for corporates and government, they recognise you can only improve emissions by going to a smaller vehicle,” he says. “There’s a swing away from large cars to small and medium. People are starting to understand they can get the same performance, features and safety specifications in a smaller package.”

Car makers such as Mitsubishi are attacking the fuel consumption issue from three angles.

“For petrol engines, we’re looking to improve the performance and economy, and reduce CO2 emissions,” Paul says. “In the longer term, we’re working on clean diesel engines that will come into the passenger segment in next 12–18 months. We have some electric cars running around Japan at the moment, but they won’t reach consumers for 2–3 years.”

Fleet management and leasing

Time-strapped small business owners don’t have a lot of time to worry about choosing, buying and maintaining vehicles. There is a significant and competitive market for fleet management and leasing solutions.

“Most small businesses look at vehicles as a capital expense, but they can turn them into an operating expense through leasing,” says Elliott. “It preserves capital and is more tax effective. The rentals are fixed for the term of the lease so business owners know exactly what their lease costs them. We purchase the vehicle for them and negotiate the price. They just need to tell us how long they’d like to lease it and how many kilometres they’d like to travel.”

Leasing arrangements can be drawn up to include running costs such as servicing, registration and insurance. Fleet management agreements provide the same services, but customers keep ownership of the vehicles.

Fuel cards

Large companies often use fuel cards as a way of extracting loyalty or volume discounts from fuel companies. While small businesses are not eligible for these cost savings, fuel cards can provide efficiencies in other areas.

“Fuel cards make your company’s spending more transparent and visible to you,” says Ryan Wade, marketing coordinator of B2B cards at BP. “If you have a fleet of 20 vehicles and give each one a fuel card, when they make a purchase at a fuel station or get a car serviced, you can get an online report and see each transaction.

“Most fuel card companies offer a GST-substantiated statement. It saves you a lot of time and accounting. You can keep track of staff purchases and make sure they are spending it all on business vehicles.”

Fleet tracking

The growing popularity of navigation devices based on the Global Positioning System (GPS) presents another opportunity to reduce costs by improving the efficiency of routing and navigation.

“A lot of mobile devices are now connected over high-speed data networks such as 3G and HSDPA and come standard with GPS,” says George Deligiannoudis, director of technology services firm Mobilise IT. “Organisations can create efficiencies within their fleets by getting drivers to use more efficient routes.

“They can subscribe to mapping services such as Microsoft Live Maps and have the GPS devices send coordinates back to head office at set intervals, say every five or 30 seconds. The office can plot those coordinates on a map and see where the vehicle has travelled. They can also optimise the route and calculate the most efficient way to the next job.”

New Zealand-based Navman Wireless sells fleet tracking systems for service-based industries such as plumbing and electricity as well as utilities and the transport sector. The company’s Asia-Pacific regional marketing manager Darryn Faulkner says vehicle tracking can also have safety benefits and other flow-on effects, as it discovered while running a trial project with a local transport company.