From cars and vans to e-bikes: SG Fleet broadens mobility offer (video)

Three into one is the magic formula at SG Fleet, the 2023 Fleet News Awards leasing company of the year (up to 20,000 vehicles), sponsored by Aston Barclay. 

The Australian-listed business launched in the UK in the late 2000s on the back of its Novalease salary sacrifice scheme, a unique novated product which is based on a direct agreement with the employee.

In 2016, it broadened its offering with a double purchase - Fleet Hire and Motiva - which fast-tracked it from the FN50 mid-40s into the top 20. Fleet Hire added lease cars and a more traditional salary sacrifice offering while Motiva’s strengths were in vans, rental and retail, with its own used car dealership.

The enlarged group pulled together these three areas of expertise under the leadership of Fleet Hire chief executive Graham Hale for cross-fertilisation of ideas and best practice. Following his retirement in 2018, former Motiva managing director and founder Peter Davenport took the reins to begin a new chapter.

“I was reducing my workload to four days and was planning to go to three days but was asked to stay on as managing director when Graham left,” says Davenport at the company’s head office in Hampton In Arden.

“I’d worked on the integration and felt there was unfinished business, so I agreed to say for a couple of years. Then, before I knew it, I was driving home with three packs of paper and a printer - Covid had hit!”

While many businesses retreated into furloughing and survival mode, SG Fleet won and implemented its biggest ever deal. Awarded in March 2020, within three months the 3,000-car contract was fully up and running.

“A lot of our success is about getting close to people and understanding their issues and challenges,” Davenport says. “But you also need a great team, and we have that at SG Fleet.”

Its team spirit was never better exemplified than in the weeks following SG Fleet’s first ever Fleet News Awards win in March 2023, when it was named leasing company of the year, up to 20,000 vehicles.

Davenport had polo shirts made for every member of staff with ‘leasing company of the year’ printed on them and he also gave everyone miniature replicas of the awards trophy. They are, he points out, the reason for the company’s success and deserved their own memento from the night.

Gap in the market for mid-size leasing companies

A key member of the leadership team is commercial director Chris Salmon, whom Davenport met for the first time at the Fleet News FN50 dinner just a month before SG Fleet acquired Motiva.

Salmon had himself been at SG Fleet for just five months, having joined from Arval in June 2016.

He believes the repeated rounds of M&A activity over the past decade have left “a gap in the market for a mid-size contract hire business”.

“We’ve also been building our links with benefits providers to offer salary sacrifice to their client bases,” Salmon adds.

The current cost of living crisis fuelled by rising interest rates have created an additional salary sacrifice opportunity for SG Fleet thanks to its Motiva Direct used car dealership.

Davenport explains: “It gives us scale in used cars so when the interest rates rose, we had a counteroffer for salary sacrifice which saw us introduce used cars to the scheme. We’re doing around 10-40 per month, with another 30 sold to the private market as well.”

Its salary sacrifice contracts give SG Fleet access to around 250,000 employees, but conversions have been hampered due to cost of living concerns. This is where the used car proposition comes into its own, but it is also utilised to counter long lead times, as an interim car or for trial purposes, such as an electric vehicle.

“It has certainly helped us to understand electric vehicles, including the second-hand values and how we sell them,” says Davenport.

The used car sal/sac contract is generally over a similar two- or three-year period as the new car offering. While the employee’s benefit-in-kind is still based on the new P11D price, the rental calculation is based on the written down value which makes it a cost-effective option.

“We are seeing others looking to go into used cars, but we have a lot of experience that gives us the edge,” says Davenport.

While a large proportion of the salary sacrifice business is on the Novalease product, SG Fleet is about to relaunch an improved version of former Fleet Hire’s Car Salary Exchange (CSE) product.

The benefits are now the same, such as maternity cover, but it enables a customer to have the choice about whether they want to liability to be on them as the employer or on their employee.

Novalease is a contract with the employee; CSE is with the employer.

“We see lots of smaller companies attracted to the CSE product,” says Salmon. “It will widen the market for us.”

Video: Fleet News interviews Peter Davenport

Electric van learnings

A recent contract win which involved the supply of electric vans has given SG Fleet a much deeper level of understanding about how these vehicles can work in a fleet environment.

Among the learnings are tyre wear and choice.

“Some vans have limited brands of tyres that can be used on them,” says Salmon. “We had to stockpile in key sites to reduce downtime.”

Davenport adds: “The tyre sidewalls are stronger because the vehicle is heavier which results in less damage, but you have to be careful when driving, especially with regenerative braking. We have found that two-wheel drive EVs are where the tyre wear issues are because all the torque goes through those two tyres.”

Organic growth with van success

SG Fleet’s funded fleet is growing, according to the latest figures supplied for the 2023 FN50 (due to be unveiled on November 1), with particular success in the van sector on the back of its track record for maximising uptime.

The strategy is centred on further organic growth, but SG Fleet remains acquisitive, a fact well known in the leasing sector.

“If the right thing came up, we would look at it,” Davenport says. “But it’s difficult in the current climate because of the volatile residual values that makes us cautious on profits and disposal versus pre-disposal.”

However, the growth opportunities are not restricted to cars and vans. In 2022, SG Fleet took a stake in Zoomo, the eCargo bike brand which offers two-, three- and four-wheel funding options for last mile distribution in city centres.

“It has opened up a new avenue for us,” says Davenport. “The business is now about moving people and product about.”

It is still early days, but the company has done a lot of trials and enjoyed success in airports, hospitals and university campuses.

“We are working with customers on how their fleets might transition over the next five-to-10 years into alternative mobility such as e-bikes,” Davenport says.

However, he doesn’t believe alternative mobility options will replace the company car due to the convenience factor, particularly in adverse weather conditions. They will, though, be complementary.

“Over the next five years, we see multi-modal mobility taking off and we won’t be selling leases, we will be selling a mobility solution costed by pence per mile or people/assets moved per day. A lot of customers have their own sustainability targets, and they are driving us that way.”

SG Fleet is already testing alternative solutions with the launch of a taxi service for single destination trips whereby people book a taxi rather than a one-day hire, which works out cheaper.

The service uses a network of taxis booked via an app and is popular with people who are travelling into city centres. The pence per miles rates are built into the system with the booking going to whoever meets the tariff for the journey.

In Australia, it has a car sharing business called GoGet where a driver swipes for access to the car. Such concepts have yet to take off in the UK, though.

How can I help?

Eighteen months ago, SG Fleet introduced its ‘How can I help’ programme. Davenport describes it as a “mindset piece”, the first thing staff ask customers.

“From that flows everything that we do,” he says. “It has had a massive impact on us.”

Salmon explains: “Where we are in multi-supply deals, the feedback was that service levels were slipping, especially by the bigger leasing companies. So we took a conscious view to go the opposite way with named contacts and proper transfers within the business.”

He adds: “Our customer scores have gone from six out of 10 to eight out of 10.”

Any score of six or below is escalated to Davenport who contacts the customer to find out what has gone wrong. “This really resonates with customers,” says Salmon.

Data is going to be at the centre of the fleet-leasing relationship in the coming years. It’s one reason why SG Fleet has invested heavily in a new digital platform that will transform the way it interacts with fleets and their drivers.

Due for launch in Q1 2024, “it will be revolutionary for us in the UK”, says Davenport.

“The future is all about data and how we manage the movement of people and assets,” he adds.

The internal discussion now is how this extends to areas such as charge points and how home charging is included in the lease, billing for electricity and, if electricity becomes a taxable benefit, how that is managed.

Salmon says: “We will continue to find solutions to meet our customers’ problems.”

With Davenport putting off retirement to steer SG Fleet through Covid, success at this year’s Fleet News Awards aligned to the company’s growth aspirations have given him another reason to stay at the business for a little while longer: “We want to get the 20,000-plus leasing company of the year award!”