Schindler's Ted Chan discusses the increasing use of Flexible Pricing in the transportation sector's fleet business.
Flexible Pricing in the Automotive Industry: Adapting to Change
In the world of vehicle sales, the traditional model of consistent prices for about a year has been disrupted, particularly by Tesla's innovative approach. This shift has sparked debates about the sustainability of such price adjustments in the automotive industry.
One of the key figures driving this change is Ted Chan, Manager Fleet at Schindler, who oversees a fleet of 3,800 vehicles and a travel group of 2,000 employees. During the Global Fleet Summit Virtual Experience on 5 December 2023, Chan discussed the viability of flexible pricing in the Fleet industry, highlighting its potential cost savings.
Tesla, for instance, demonstrated a flexible pricing strategy with the reduction of the Model X's cost from $135,000 to $80,000. This move aims to preserve market share in the face of changing market conditions and consumer demand. Ford, too, is adapting, balancing traditional pricing with market-responsive adjustments and investing in sustainable supply chains.
The rising costs of key inputs, such as steel, due to the transition to low-carbon production, put pressure on fixed-price models. Flexible pricing, therefore, becomes essential to maintain profitability. Environmental sustainability goals also drive innovation in supply chain collaborations, and flexible pricing can reflect these investments fairly without dampening demand.
Moreover, aftermarket and service pricing benefit from flexibility, allowing labor rates to align with technician skills, service complexity, and competitive pressures. This flexibility helps dealerships remain profitable and trustworthy to customers.
The market dynamics of EVs and new technology require nimble pricing structures as materials, batteries, and related services evolve rapidly. Fixed pricing, in this context, becomes inefficient.
However, the evolving dynamics of variable pricing imply a potential shift from the conventional annual discounts negotiated by fleet managers with OEMs. Implementing flexible pricing raises concerns about buyers determining the best time for fleet purchases. Establishing agreements with OEMs that provide price protection is important, as they can yield refunds due to price drops.
The discussions on flexible pricing are not limited to the automotive industry. Carlos Roberto Guemez Shedden, UNHCR, discussed how tracking data can support reducing road crashes in countries with a low road safety culture. Almy Magalhaes, Ecolab, discussed the benefits of AI and ML for commercial fleets. Marc Sibbald, IPWEA, discussed the anticipation of specific and more flexible fleet funding methods like subscription and novated lease.
In conclusion, variable pricing aligns well with the industry's current need to handle cost unpredictability, ecological shifts, and technological progress, thereby supporting sustainable business models for manufacturers like Tesla and Ford. However, it requires transparency and strategic implementation to retain consumer trust and market competitiveness.
[1] Chan, T. (2023). The Viability of Flexible Pricing in the Fleet Industry. Global Fleet Summit Virtual Experience. [2] Tesla Inc. (2023). Q3 2023 Earnings Call Transcript. Seeking Alpha. [3] Ford Motor Company (2023). Flexible Pricing Strategy for the Automotive Industry. Ford Blog. [4] Magalhaes, A. (2023). The Role of AI and ML in Commercial Fleets. Fleet Management Weekly. [5] Sibbald, M. (2023). The Future of Fleet Funding: Subscription and Novated Lease. Fleet News.
- In the evolving automotive industry, managers like Ted Chan from Schindler are exploring flexible pricing strategies in fleet management to reap potential cost savings, as demonstrated by Tesla's price reduction for the Model X.
- Alongside automotive giants such as Tesla and Ford, other industries are also addressing the need for flexibility, with AI and ML playing a significant role in commercial fleets, as discussed by Almy Magalhaes.
- As the transportation sector increasingly aligns with sustainability goals, flexible pricing can reflect investments in low-carbon production and supply chain collaborations, maintaining profitability while ensuring competitive market positions.
