In my last column I talked about the challenges of residual value forecasting and management in the Middle East and how that contributes to limited use of TCO as a management tool in the region.

In this column I want to talk about the contribution of SMR to the TCO equation. In many respects, SMR is a relatively straightforward component of the TCO calculation and the differences to mature markets are much smaller. However there are some differences and whilst they don’t change the fundamentals they are worth consideration.

Labour costs are relatively low compared to Europe or North America, which helps drive down SMR costs. On the other hand the arduous operating conditions tend to shorten service intervals that drive up costs. The 5,000km service interval is very common in the region for many brands. Compared to the not-unusual 30,000 km in Europe this is quite striking, not least because a typical fleet car might need servicing every couple of months. If nothing else it will certainly challenge you to plan ahead with booking services!

One example of the tough conditions relates to the high concentration of very fine sand particles in the air. Although many brands have an auxiliary air intake filter, especially on 4×4 vehicles that may operate off-road, it still increases regular service content and cost. On the other hand, changing the oil every 5,000km may reduce the need for expensive fully synthetic oils.

Another factor is the significant share of 4x4s in the region. This is less a function of fashion than it is elsewhere in the world, as it is clear that many vehicles have a business need to be used off-road. For those fleets running 4×4 units it’s important to understand the SMR implications of this off-road usage. 

Equally, many drivers also choose to go “dune bashing” at the weekend and companies must determine whether such “recreational” usage should be permitted. If it is allowed, the potential SMR cost implications of such usage must be considered and responsibility for repairs clearly established. Whilst many vehicles are clearly engineered for such use – the ubiquitous Toyota Land Cruiser being the most common locally – drivers heading into the desert in less-competent vehicles may be risking a sizeable maintenance bill for under-body or suspension damage. Dropping tyre pressures to a few psi for sand driving is essential but will have a detrimental effect on the life of the tyre when it then has to be driven on road, with the same pressure, to return to the nearest re-inflation point.

This specific point aside, tyre costs can be different for other reasons. Legally, tyres in the UAE must be changed every four years – irrespective of wear – due to deterioration caused by constantly high operating temperatures. So it’s well worth checking the age of the tyre on a new vehicle as the regulation is related to the age of the tyre, not the vehicle! And whilst road surfaces in the cities and on the highways would be the envy of many more developed countries, once off the beaten track road surfaces can be a severe test of a tyre’s quality. In normal daily driving it is clear that tyre failure is not uncommon. Each day I see several failed tyre carcases on the faster roads – something that should focus fleet managers’ minds on the needs for an effective safety policy encompassing tyres.

The heat itself may also increase SMR costs. Vehicles sat idling for extended periods are a common sight – with the driver staying cool – something that clearly increases wear and tear, not to mention fuel consumption. And whilst you might tolerate an air conditioning unit operating a little below 100% efficiency in a milder climate it’s something that isn’t acceptable when daytime temperatures are consistently in the mid-40s with high humidity. Recharging a/c units is therefore much more common in this region, especially as summer starts – budget accordingly!

So, whilst none of these factors is individually a “game changer”, collectively they are worth considering as another of the elements needed to develop a TCO perspective on a fleet in the Middle East. 

In my next column I’ll be covering acquisition costs and fuel costs whilst in the meantime I’ll be sheltering from the heat of summer as best I can!