Hitachi eyes place in FN50 top five ‘but not at any expense’

Jon Lawes has something on his mind. We’ve only just taken a seat when the Hitachi Capital Vehicle Solutions managing director is brandishing an article from the May issue of sister magazine Commercial Fleet which calls for single-source funding for vans and trucks.

According to Lawes, there is a company already offering this breadth of service – Hitachi. “You’ll have to change that article now,” he quips.

Hitachi Capital Vehicle Solutions has been funding cars, vans and trucks for a number of years, but it’s now stepping up its product offering to incorporate every element a fleet might need, including plant and equipment. It helps, of course, that parent conglomerate Hitachi has a division retailing its own power tools and equipment – a perfect case of cross-selling.

Lawes, previously MD of Hitachi Capital Commercial Vehicle Solutions, was appointed to the top operational job in the UK three months ago when Simon Oliphant was promoted to a European role, although Oliphant also becomes chairman of the UK Vehicle Solutions group.

He has already laid out part of his business strategy for the next three-to-five years; one priority is to target companies that run everything – cars, vans, specialist vans, trucks – where Hitachi can offer its full range of products.

“It’s how we can differentiate ourselves from our competitors,” Lawes says. “Specialist vehicles are mission critical to customers’ businesses and they will often lease them for seven years – some people get married for less!”

And, just like marriage, he adds: “Trust is a massive part of the relationship.”

Complex vans – typically those that require more than simple ply-lining and racking – and trucks are Hitachi’s unique selling point. Few mainstream leasing companies tread in this multifaceted area; it’s the hunting ground of smaller specialists, or banks providing asset finance.

Lawes says: “There is a lot of competition in cars and vans and, if something goes wrong, it’s easier for a fleet to transfer its business or resolve the problem. But with mission critical vehicles, their business will stop if we fail .”

However, his strategy is about more than simply looking to the relatively small pool of companies whose needs match the full scope of Hitachi’s own product line-up. A full business review is due to conclude later this year. The findings are likely to point to the potential of the SME sector.

One aspiration has already been declared: by 2018, Hitachi wants to be in the FN50 top five (it’s currently 10th). It would require a doubling of its funded fleet to breach the 100,000 threshold. Lawes is confident, although he adds that he’s “not worried” if it isn’t achieved in that timescale.

“That’s my leadership style – to put a stake in the ground,” he says. “It’s an outrageous ambition. If we get 90% there, then we will have grown. But it’s not at any expense; Hitachi is not hero to zero, it’s about profitable and sustainable growth. It’s for the long-term, not short-termism.”

Would he acquire to grow? “If there was an acquisition that supports our strategy then we would consider it. We have the funds to do it,” Lawes replies.

Last year was Hitachi’s most successful in the UK, with a 21% rise in its funded fleet. Much of the growth was fuelled by SMEs, with Hitachi continuing to reap the benefits from its acquisition of Lombard Vehicle Management’s 9,000-strong vehicle fleet in 2013.

The move changed the dynamic of a company which had previously focused almost exclusively on the large corporate market. Three years ago, 80% of its business (funded and fleet managed) was in that sector (500-plus vehicles); 20% was with mid-size fleets (50-500).

Today, large corporates account for 65%, mid-size for 20% and SMEs (sub 50 vehicles) for 15% of Hitachi’s 50,000 funded and 15,000 managed vehicles. Ultimately, the mid-size and SME fleets will each account for 25%; large corporates the remaining 50%.

However, that’s not to suggest that the large corporate business will be stagnant – Lawes is looking to expand in each of his three target groups but says that, with the appointment of a network of 35 brokers plus the launch of its own direct sales operation, smaller fleets offer the greatest potential for growth.

In each of the three segments, Hitachi is establishing the customer value propositions. In SME, it has found that companies are less bothered about compliance and downtime. They don’t want to pay for extra services and prefer to handle maintenance themselves.

“They also prefer online services so we have to understand that and tailor our proposition,” Lawes says. “They want a slick offering which is easy to use and they want the vehicle on time – that’s their priority.”

For large fleets, much of the proposition rests on a transparent relationship (as well as the ability to minimise downtime, recommend cost-saving initiatives and handle complex vehicle builds).

“It’s less about customer-supplier and more about the solutions they want and open commercial terms – they want you to make money, just not too much,” Lawes says.

And it’s in Lawes’s best interests to ensure his profits are, as he says, “fair and reasonable” rather than squeezing customers for as much as he can.

“We get measured on how long we keep customers,” he explains. “So we prefer to have a customer over 15 years with a small profit than a customer for three years that is very profitable. That’s not the Japanese way; they are big on trust, integrity and openness.”

Lawes has restructured the business to have dedicated teams for SME, mid and large customers while it has operated separate businesses for cars and commercial vehicles for some time. “You need different people to sell different propositions,” he says of the structure.

A key part of the value-added proposition is to identify ways in which customers can operate more efficiently and cost-effectively. Account managers spend a lot of time with customers understanding their businesses and making recommendations. Most are cost-related, with discussions around engine remapping, tyre management and braking technologies among the more popular topics.

For fleets operating complex vehicles, Hitachi is able to remove a lot of cost purely through vehicle design and specification, often creating new and unique solutions at its vehicle preparation centre in Trowbridge. It also has a team which is dedicated to build management and managing the suppliers – a single build could have 10-12 suppliers.

The wins can be mind-blowing, such as National Grid’s keyhole coring vehicle which reduces the time it takes to repair or maintain underground pipes and cables from days to hours. Or the £300,000 suction excavator which increases productivity by up to 16 times for the replacement and renovation of gas and water pipes. Or how Hitachi sourced, financed, modified and delivered 54 vans for medical technology provider Medequip within 10 weeks.

For Lawes, it’s simply part of the service; making it difficult for customers to go elsewhere. “We go to each customer yearly to demonstrate the savings and plan the next year,” he says. “You have to earn the right to stay their supplier.”

One-stop shop for traders

Hitachi Capital Commercial Vehicle Solutions recently updated its Trade Ready Solutions package to include new van models, racking systems and tools, plus new vehicle signage.

Trade Ready Solutions, which launched last year in partnership with Hitachi Power Tools and Bri-Stor Systems, offers customers a one-stop shop service, with the funding, maintenance and repair costs of the van and its Trade Ready equipment all covered by one single monthly payment.

Almost all makes and model of van are available, while the Hitachi Power Tools are covered by a three-year warranty and free tool refresh after three years for contacts of four or five years.

Bri-Stor offers five exclusive racking packages designed for trade professionals such as carpenters, plumbers, electricians and builders.

They include angled, multi-shelf and shelf-and-box storage solutions.

“We can manage all the equipment, test the electrical goods and do all the other checks, such as best-before dates on eye wash, in one go rather than the van having to come in several times for each supplier to do the tests,” says Jon Lawes.

“It’s another example of us working with customers to come up with new solutions.”