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The ultimate guide to commercial fleet management: TCO vs. TCO+ unveiled

4 min to readTotal cost of ownership
In today’s ever-evolving landscape of commercial fleet management, comprehending the financial intricacies of vehicle ownership and operation has never been more critical.
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Fleet managers and decision-makers find themselves juggling a multitude of factors that directly impact the overall cost of running a commercial fleet. Two key concepts guide these considerations: total cost of ownership (TCO)and total cost of operation (TCO+). These concepts, while seemingly similar, diverge in their focus and depth of assessment. In this comprehensive guide, we unravel the complex world of fleet management by examining TCO and its advancement to a TCO+ way of thinking.

Evolution of financial analysis

Our journey begins with the inception of TCO, which traces its roots back to 1987 when Bill Kerwin, an analyst at Gartner, introduced it as a ground-breaking tool for assessing the complete financial implications of vehicle ownership. Since then, TCO has become a cornerstone in the corporate fleet market, influencing how vehicles are priced and included in tenders. However, in contrast, the SME sector often relies on headline rental figures with upfront payments and specified mileage to attract customers. But as we’ll soon discover, this approach offers only a fraction of the bigger picture.

Traditional TCO and its modern challenges

Traditional TCO analysis comprises factors like capital costs, operating expenses, fuel outlays, and resale values. Yet, the automotive landscape has undergone significant changes, notably the emergence of electric vehicles (EVs) and the escalating demand for sustainability. To accommodate these shifts, TCO has evolved to encompass energy costs, taxes, incentives, insurance, and charging solutions. This expanded analysis equips decision-makers with precise insights when weighing internal combustion engine (ICE) vehicles against their electric counterparts.

While traditional TCO remains an invaluable tool, it often falls short in accounting for operational costs that can profoundly affect fleet efficiency.

TCO+: a comprehensive approach

Delving into a multitude of factors often omitted in standard TCO calculations. Let’s explore some of these critical aspects.

Assessing correct vehicle selection, downtime costs, and the in-life performance of the local dealership network, specifically in regions where your fleet operates will be key factors. This involves evaluating the average time required to repair your vehicles compared to the broader Ayvens fleet and discerning the pros and cons of one vehicle manufacturer’s (OEM’s) dealerships over another’s. The ultimate goal? Minimising downtime for both drivers and your company.

Fleet managers must scrutinise the service levels provided by different vehicle brands. Consider this scenario: if one dealership offers quicker, more cost-effective service than another, a switch might be warranted, especially when factoring in vehicle off-road time. Choosing the wrong vehicle based solely on TCO figures could result in additional operational costs exceeding €1 million for a fleet comprising hundreds of vehicles. Extending an olive branch by offering the chance to proactively collaborate with OEMs and their dealerships to resolve lengthy vehicle off road (VOR) times, a reassuring prospect for customers.

Operational impact: the journey profile

A journey profile calculation could take centre stage here. Meticulously assessing a myriad of elements, including ambient conditions, the necessity for public charging, charge type, charging speed, associated charger costs, and downtime expenses. For instance, depending on the distances covered, daytime public charging may become a requirement. In such cases, the price and charging speed must be factored into the equation. But that’s just the beginning.

Public charging has far-reaching consequences, affecting downtime, increasing range anxiety, necessitating investments in routing and scheduling technology, and influencing overall driver satisfaction. Excessive downtime directly chips away at business productivity and revenue, a realm where TCO+ shines as it calculates these crucial impacts.

As part of the comprehensive TCO review between ICE and electric light commercial vehicle (e-LCV) models, fleets must undertake one final comparison: a deep dive into cents per kilometer, in-life comparisons. This analysis transcends theoretical OEM calculations, identifying the weekly energy requirements, the share that will be fulfilled by public charging, the average public charging cost, and the associated charging duration.

Navigating this complex terrain

Effectively navigating this intricate terrain demands a combination of tools and insights. Foremost among these is a tool that dives deep into the intricacies of operating commercial vehicles. Accounting for factors like operating temperatures, which can profoundly impact a vehicle’s range and battery life. Additionally, evaluating the necessity for public charging, factoring in mileage, driver behaviour, and charging speeds will be key, as it’ll have direct bearings on downtime and operational costs.

The infrastructure landscape adds yet another layer of complexity. The availability of charging infrastructure varies significantly from one country to another. Recent research reveals that only six European Union countries have fewer than one charger per 100kms of road[1]. This staggering variance in charging infrastructure becomes a pivotal consideration when making the transition to electric vehicles

Evolving perspectives

In essence, the evolution from TCO to a TCO+ mindset marks a shift in fleet management. Recognizing the considerable benefits TCO+ offers to commercial fleets, it's essential to understand that its practical implementation remains a subject of ongoing exploration and is not universally accessible across all markets for the moment.

As we navigate the realm of fleet management, our dedication lies in exploring and refining the conceptual aspects of this innovative approach. Embracing a philosophy of holistic cost assessment provides fleet managers with a broader perspective for making well-informed decisions, guiding their organizations towards a greener and more efficient future.

[1]Electric cars: 6 EU countries have less than 1 charger per 100km of road; 1 charger in 7 is fast - ACEA - European Automobile Manufacturers' Association

Published at December 15, 2023
December 15, 2023
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