As of March 2014, the total U.S. federal debt was more than $17.4 trillion and growing. Independent of the national debt, the U.S. is also running a projected Social Security funding shortfall of $23.8 trillion for current participants above projected revenues from their payroll and benefit taxes and a $27.3 trillion deficit in obligations for current Medicare participants above projected revenues from their payroll taxes, benefit taxes, and premium payments. Everyone knows this level of deficit spending is unsustainable and cannot continue ad infintum. Either government spending must be curbed or taxes increased. The most likely future is one of much higher taxation. What impact will this high taxation environment have on a future fleet market? To answer this question, it is necessary to look outside the U.S. fleet market.
Traditionally, U.S. fleets have relatively low taxation levels compared to other global regions. In high-tax environments, such as Europe and South America, there are a multitude of taxes tar-geting fleet vehicles, such as a value-added tax, vehicle excise duty tax, company car tax (benefit-in-kind), country-specific taxes, aftermarket equipment (batteries, tires, etc.) sales tax surcharges, and environmental taxes, such as engine displacement size and CO2 taxes. Corporate fleets are an easy target to generate tax revenue and every government always needs additional revenue sources to counter budgetary shortfalls.
Company Vehicle as Compensation
If you think fleet is big in the U.S., it is even bigger in Europe, where the company car reigns supreme. In fact, almost 60 percent of new cars sold in the Europe are company cars. One reason for the high market share of company-provided vehicles is tax avoidance. Starting in the 1960s, the number of fleet vehicles in European and UK companies increased dramatically to circumvent government taxes and income policies. Rather than offer employees higher wages – which would be heavily taxed – European employers offered fringe benefits, such as company-provided vehicles. This approach has worked well not only for European corporations and their employees, but it has also benefitted the Continent’s domestic automotive industries.
If this was the reaction in the European fleet markets, could the same occur in a future U.S. market operating in a similar high-tax environment? In my mind, it’s not a far-fetched scenario. I can envision internal and external political and economic pressures that could prompt the U.S. fleet market to migrate to a European fleet business model offering company-provided vehicles as a form of compensation. As history illustrates, the greatest changes occur in fleet when tax policy changes, new government regula-tions are mandated, and new technology, such as the Internet, are incorporated in day-to-day operations. If we envision the emergence of an even more onerous high-taxation environment, could the same future unfold for the U.S. fleet market as it did in Europe? I believe the trend toward higher taxation will trigger dramatic changes that will transform the U.S. fleet market. For decades, the U.S. commercial fleet market has been a flat (albeit, stable) market. However, if this scenario becomes reality, then the U.S. fleet market will quickly transition to a growth market, which, concomitantly, will demand ever-greater in-house fleet management expertise, similar to what is presently seen in Europe.
Exposure to Global Best Practices
In partnership with Bobit Business Media, Nexus Communication, the publisher of Fleet Europe magazine, will hold the second annual Global Fleet Management Conference, June 16-18 at The Square in Brussels, Belgium. (For more information, see www.globalfleetconference.com.) Our annual global fleet conference venues will alternate between Europe and North America, where it will return in 2015 to Miami.
The Global Fleet Management Conference is extremely im-portant to multinational fleets, because many of the challenges facing U.S. fleet managers are identical to those facing their counterparts managing fleets elsewhere in the world. These universal challenges include vehicle downsizing, fleet rightsizing, cost containment, sustainability imperatives, procurement sophistication, fleet standardization, and compliance with governmental regulations and taxation. In many ways, Europe is more advanced in fleet management than the U.S. As a result, best practices and new fleet trends often emerge in Europe, which is good reason to be familiar with global fleet markets. The Global Fleet Management Conference is designed to provide fleet managers an opportunity to network and learn from other fleet managers from around the world. In addition, the conference will provide a venue to network with key representatives from major global fleet suppliers. A forum to share best practices is extremely valuable, as was demonstrated this past October by the numerous testimonials we received from fleet managers attending inaugural Global Fleet Management Conference held in Phoenix.
Fleet challenges are truly universal and effectively networking with other fleet professionals can lead to quicker problem resolu-tion and creative solutions by adopting the best that the world has to offer. In a prior era, an American refrain was to look West. Today, I would say to look East and do all you can to attend the upcoming Global Fleet Management Conference in Brussels.
Let me know what you think.
Originally posted on Automotive Fleet