“Everybody looks at us now and goes, ‘it must be great, Karl,’ and I say, ‘yeah. let me remind you there are some dark days and weeks when you set up a business in a pandemic’.”
If you ever dealt with the senior crew at what is now Stellantis, then you may well remember Karl Howkins. As bluff as they come, he trained for management when he worked at a Vauxhall dealer, then hopped over to the manufacturer side with British and international positions – deputy MD of Fiat-Chrysler among the former – then capped his OEM stint as managing director of Citroen UK between 2018 and 2020.
He teamed up with retail heavyweight and Cambria boss Mark Lavery for a long-awaited fleet venture in 2020, which became Sogo. As he admits, the timing was unlucky, but what the company actually sells arguably had its upside in the shaky immediate aftermath of the Covid pandemic.
Shorter-than-average, flexible leasing is its thing. It does not do industry-standard three- or four-year contract hire (though Howkins says it will write longer terms if customers want it to) rather month-by-month contracts that allow the customer to tweak, change, or ditch the vehicle accordingly. Its average lease time is nine months.
“Everything is month-by-month,” says Howkins, “you get a few people who change the car every month, but it’s under 1%. I guess the positive part of us setting up in a pandemic is for companies that don’t know what they’re going to do for their workforce or themselves. Are you going to get furloughed? Are you going to get made redundant? Are you going to scale your business up? Are you going to scale it down? It kind of enabled us to fit into that space without interfering with the daily rental sector or the contract hire and leasing sector.”
The firm initially focussed on the private market to get the ball rolling, but 80% of its fleet of just over 4,000 vehicles is now with businesses. Howkins positions it as a company that “does the basics well,” and as a counter to what he believes is a chronic lack of good service among rental and leasing companies.
“Everybody forgets about the customer, and I mean that sincerely. if somebody rings [us], they always get a phone call back. If there is an email on Saturday afternoon, they get a phone call back. If a chairman of a corporate cracks his windscreen, you don’t have to ring up and press 1,2,3,6, and 7 to get through to someone. You just ring us, and we respond. We spend very little on advertising – we do more word of mouth – and most of the relationships are long-term.”
He has a similar open-all-hours approach to the types of vehicles the company offers, and stresses that its fleet comprises a mixture of vehicle types, sizes, and powertrains.
“A lot of people came out and said, ‘we’re going to be a super-green fleet and only buy electric vehicles’. Our view was a bit different. We buy petrol, diesel, hybrids, electric, and panel vans, tippers, small EVs, and big hybrids – because that’s what the customer wants. They don’t all want to be shoehorned into a product.”
Despite its non-committal, rolling contract approach to vehicle supply, Howkins is adamant that what the company offers is not subscription, which he considers little more than a trendy industry buzzword. “I’ve got no interest in being a subscription business. I think everybody is trying to be the next Apple or Netflix. That’s not what we’re about. It gets back to what the customer wants.”
He is also keen to point out that, though it offers them, the firm is not fixated on EVs.
“I’m very much against this green washing,” adds Howkins, “when you go to a customer and they talk about wanting to reduce their carbon footprint, one thing they say is, ‘I need electric’. It’s a bad example, but if you’ve got a sales rep down in Cornwall, they can’t charge their car up, so they probably want a petrol or a diesel.
“Pure electric is 11% of [Sogo’s] fleet mix, and if you combine hybrid and electric together, it’s about 36% across the total fleet. If you just apply it to cars, it’s nigh-on 48% hybrid and electric, but we buy diesel Sprinter and Transit vans, and, to give you an example, we also buy diesel A4s and BMWs.”
You could argue some of this is contrary to Sogo’s broader statements. The eco-friendly page on its website talks about “driving the green transition,” while the directors’ report in its statement of accounts for the year to 31 August 2021 says the company’s purpose is “to combat climate change”.
However, the firm is attempting to cut emissions by means other than simply pursuing plug-in models. It has an arrangement with BP whereby it pays into the petroleum giant’s carbon reduction scheme for every non-zero emission vehicle it leases. Howkins says that cost is not passed onto Sogo’s customer and qualifies as a carbon reduction initiative for corporate social responsibility purposes.
The broader rationale is its model of swapping vehicles more frequently than the average fleet is a faster way of reducing emissions than a traditional three-year lease, as you end up with a cleaner model sooner.
“The consensus was that they [fleets] might have kept cars and vans for three, four years. Now, most new products that are launched have a lower carbon footprint. what we’re trying to say to fleets is, ‘don’t hold onto your vehicles for three, four, five years’. If we change them every year for you then, consequently, that’s going to bring your carbon footprint down, because they are lower-emission vehicles.
“It’s kind of. ‘let’s not go with what everybody said before’, more ‘what’s the bridging solution from, say, a petrol or a diesel car to electric?’. Sort of try before you buy.”
Short- and medium-term leases are typically more expensive than like-for-like contract hire of three years or longer. By contrast, Howkins claims that Sogo’s offering could work out cheaper than a conventional three-year lease when the bundle of add-ons on top of the standard rate is accounted for. According to its website, these include servicing, breakdown cover, road tax, and delivery and collection.
“As an example, I had some mates who said to me when we first set up, ‘you’re going to charge me £450 [a month]; I’m paying £390’. I said, ‘how much did you put down?’ and they normally put down six months or three months. Then, ‘how much is your road tax every year?’ ‘£150,’ then, ‘what do you pay for maintenance?’ ‘£250’.
“Then I said, ‘divide your three months by 36, add that to your monthly price, multiply your road tax by three, add your average maintenance bill, then divide the whole thing by 36.
“By the time you’ve worked it out, you’re probably cheaper being in a mobility solution, and you know you are getting a new car or van all the time.”
Howkins says the firm has so far avoided defleeting vehicles into auction, because its relatively small size and motor trade connections have allowed it to sell them directly to franchised dealers.
“We don’t do anything through auction,” he says, “everything goes back into franchised dealers. and we have several brands where we buy the vehicles directly from them. We fund through their finance companies, and we remarket back to their franchise network. They seem to like that.
“I don’t mind saying it: we’re not cheap. We charge reasonably well for our used product, and it’s probably because we are not a daily rental company. Most of these cars and vans have probably only had one bum on them.”
Howkins believes that the quick turnaround of the vehicles also works in the company’s favour from a used perspective, because it can be more reactive.
“If, 12 months ago, we decided we were going to write a load of long-term contracts – and they were for electric vehicles because that’s what everybody wanted – I’d be blooming nervous. Honestly, I wouldn’t want to write a three-year residual value. Our business is based on a maximum of 15 months. We don’t operate anything over that [and] I think it gives us a little bit of an ability to track the market”.
The company’s year-end accounts had not been published at the time of writing, but they were due in January. Howkins describes them as “much better than we anticipated” and points to lofty aspirations.
When pressed on how big he would like Sogo’s fleet to become, he says, “it could be 25,000, it could be 50,000, it could be 21,200 [but] it’s got to keep making a profit. We do make a profit, and I’m not embarrassed to say that.
“We’ll probably have a look outside the UK in a couple of years as a next step. We will go where it makes sense and maybe where we’ve got a bit of experience.”
