The economic ramifications of the COVID-19 pandemic have caused a negative impact on growth in the transportation and logistics sectors. This has consequently inhibited the growth rate of the fleet management market for 2020 to 8%, nearly 1.5% lower than the previous year. However, the economic crunch being felt by businesses also results in the need to cut transportation and logistics costs and risks in the long run, which will lead to fleet management systems gaining traction. As a consequence, the market, which is currently valued at US$10.1bn, is expected to triple and reach nearly US$29bn by 2030.
Growing need for fleet management systems
Fleet management systems help businesses increase efficiency, productivity and safety by allowing them to track various parameters that affect individual and collective performance of vehicles through real-time updates. These include fuel usage, route optimisation, vehicle maintenance and driver behaviour. Technologies such as telematics, data analytics and radio frequency identification (RFID) are the key enablers in fleet management.
During the COVID-19 pandemic, businesses that rely on vehicle fleets suffered due to lockdowns and extended restrictions on transport of non-essential goods and personnel. Moreover, supply chain disruptions in procurement of automotive components caused operational disruptions and affected vehicle maintenance. As a result, all professional services offered by players in the fleet management market saw a negative growth of -1.9% in 2020, with support and maintenance services faring the worst at -2.2%. Notably, the growth figures for 2019 had stood at 4.2% and 4.5%, respectively.
However, the pandemic has also proved an opportunity to showcase the benefits of effective fleet management systems, especially when seen in the context of the ecommerce boom. Businesses that could deliver better when contactless and remote tracking of consignments was the need of the hour have fared better than their competitors. Thus, the demand for fleet management and telematics software has continued to grow at a rate of 10.6% and 9.9%, respectively. The growth is expected to reach the pre-pandemic growth rates of approximately 11.5% and 11% by 2021, before further picking up.
In future, the fleet management software segment is expected to breach the 12% mark in 2023, even as the telematics software segment reaches a high of 11.8%; moreover, this growth rate is expected to remain steady until 2030.
Where is the technology headed?
Predictably, the technology dependency of fleet management systems has traditionally influenced the decision-making process that goes into deploying these systems on a fleet of vehicles.
Besides voluntary adoption by businesses, various governments have also formed regulations over adoption and enforcement of fleet management systems. In fact, it is largely due to these regulations that the European regional segment has seen double-digit growth rates in the past few years and is expected to account for a third of the market share by 2030 after surpassing North America in 2027 (Europe’s current share is 24.4% to North America’s 30.5%; it overtook the East Asian segment in 2016). As a result of these factors, pricing of hardware and software components has often been a keen interest area for consumers.
The general trend with pricing is that as a technology becomes more accessible it becomes more affordable: the market’s landscape favours competitive pricing and volume-based profits. This trend is clearly observed when the adoption of global positioning system (GPS) tracking devices and dashboard cameras are compared. The growth rate of GPS tracking devices, which have progressively become more accessible and affordable than dashboard cameras, has been in the range of 10-10.5%, while the growth rate of dashboard cameras hovers at around 8%; in 2020, these figures went down to 8.9% and 6.6% respectively.
As a result of this technology dependency, developments in telematics, data analytics, RFID and predictive maintenance are expected to be dominant drivers of the fleet management market. In terms of application, fleet tracking and geofencing is likely to be one of the strongest gainers from developments in RFID technology, with the segment’s market value more than tripling from the current US$4.5bn to US$13.9bn by the end of the decade.
Similarly, strengthening of predictive maintenance is expected to launch the vehicle maintenance and diagnostics segment from its current value of US$2.9bn to US$6.3bn by 2030.
On the flipside, the fuel management segment, valued at US$1.7bn currently, gains comparatively lesser traction from technological innovations and is hence expected to witness a modest growth curve, ending at a value of US$3bn by 2030. This means that the driver behaviour monitoring segment, which is currently valued at US$1.2bn and powered by developments in telematics software, will surpass the fuel management segment by 2025; furthermore, it will rapidly extend this margin and is likely to be valued at US$4.8bn by the end of the decade.
While data analytics lies at the core of nearly all fleet management systems given that increasing data generation is leading to emergence of the Big Data phenomenon in the transportation and logistics industries, the developments in data analytics need to be read with the growth in value of data loggers being employed in vehicle fleets.
While accounting for a modest value of US$332bn in 2015, this hardware component had registered a steady growth rate between 11% and 12% until 2020, when it came down to around 9% and was valued at US$543m. It is expected to breach the 11% growth rate mark by 2022, after which it will follow an upward trajectory and breach the 15% mark in 2028; by 2030, it is estimated to reach a value of US$1.9bn.
An assessment of technology trends driving the market points towards an increase in demand for vehicle tracking systems that can help businesses optimise resources. This is in consonance with broader economic assessments which state that businesses in the post-pandemic era will be keen on economising. Tracking vehicles and driver behaviour allows businesses in the transport and logistics sectors to reduce waste and effectively mitigate risks through actionable intelligence.
Close on the heels of cost reduction in operations is the need to effectively manage, deploy and maintain fleets. Notwithstanding the slump in value of services in 2020, technological developments in the hardware and software segments preclude growth in the services segment. As a result, nearly all sub-segments under services are expected to match or surpass their pre-pandemic growth levels by 2022. Overall, the services segment had been growing by an average 5 % to 5.5% between 2016 and 2019.
This growth rate is expected to reach 7% by 2024, 8% by 2027, and 8.5% by 2029 even as growth in the hardware and software segment stabilises. Thus, market growth for fleet management systems is underpinned by the ability of technological innovations to optimise operational and maintenance costs for consumers.
About the author: Sudip Saha is the Managing Director and Co-founder of research and consulting firm Future Market Insights (FMI). The insights presented here are based on a study by FMI on Fleet Management Market