Year of growth

2013 saw ALD Automotive add the one millionth vehicle to its fleet, reaching a total of 1,008,840 vehicles by the end of the year.

For the past 10 years, the company has seen its compound annual growth rate exceed 8% on average. The company purchased 221,000 vehicles in 2013 and counted 4,350,000 short-term rental days during the year.

The company saw over 30% growth outside Europe. The fastest growing markets were Mexico, which grew by 67%, Brazil which grew by 43% and China where ALD’s business grew by 33%.

Growth brought the company a total of some 14,700 vehicles in Russia, 14,625 in Mexico and also 10,043 in Turkey by the end of the year.

‘That’s partly because those economies are better on average,’ Mike Masterson, CEO of ALD International told IFW. ‘And it’s partly because the penetration of full service leasing in those countries is lower. So where in the UK or the Netherlands it’s above 50% of the corporate car parc for full service leasing, in China or Russia it’s single digits, with massive growth potential. We’re in 37 countries; we’re well positioned to take advantage of that.

‘Looking back we took a gamble five years ago when we went into 37 countries and it wasn’t obvious sometimes to the market, the competition, sometimes to ourselves, because you ask yourself questions about whether an investment in China or India or Mexico makes sense at this point in the cycle, but today it looks like a very good move because we’re well positioned in these markets.’

Even so, Mr Masterson sees a lot of growth still in Europe: ‘Although deliveries are down in southern Europe by 50% from the peak, the corporate sector is holding up much better than the retail sector.

'And within the corporate sector, full service leasing is holding up better than other means of financing vehicles.’

ALD’s main business areas are Western and Northern Europe, with strong growth in Finland, where the company has over 18,000 vehicles. The company has also made inroads in Eastern Europe. ‘There are a number of countries more distressed than the likes of France for example,’ says Mr Masterson. ‘I’m thinking of countries like Ukraine, Hungary, Romania, but actually we’ve grown quite well in these countries with reasonable results. Obviously the fourth area is the BRIC (Brazil, Russia, India and China) and emerging markets where we have grown very fast.’

Even in southern Europe where the economies have been hit particularly hard by the European financial crisis and ALD’s deliveries are around 50% of what they were at the peak of the market, it seems that economies are stabilising and there are some opportunities for further growth.

Global player

Because ALD’s growth has not been wholly dependent on Europe, with particularly strong growth in South America, Mr Masterson says that has helped to insulate ALD from the more difficult economies.

‘We’ve always had a view that in order to keep our level of growth, and in order to follow our customers, we need to expand geographically,’ says Mr Masterson. ‘We want to be a partner of our customers, which means sometimes to go into some markets which from a standalone perspective, we wouldn’t necessarily invest in. But if we have a number of our customers there, we will go there, or at least we will take that into account as a key factor in the business case to expand. That’s probably one of the reasons we have expanded much faster geographically than other companies.

‘So you might have a business case that looks very marginal, or even slightly negative, but you might have a lot of key international accounts there, who want you to go, who will ask you to support their business development and that weighs very heavily in our rationale. That means that sometimes we have gone into countries that might not be obvious to some of our competitors or to anyone from the outside, maybe.’

Belarus and Bulgaria are examples, where ALD has just opened subsidiaries. ‘Eastern Europe is probably one of the most difficult areas, in terms of growth, at the moment, so they are not obvious markets,’ says Mr Masterson. ‘But we have a lot of customers there, we want to follow our customers and we think there’s an opportunity to do that.’

Even in countries where there has been large growth, doing business may still require a great deal of investment.

‘In China, for example,’ says Mr Masterson. ‘People talk about going into China.

'We’ve got offices and capacity in 28 regions of China. It’s not a case of turning up and putting 10 people in an office in Shanghai and starting to distribute the product.

'These countries are very complex and take a big investment. You need to be in every single region, to register cars, to meet the local tax requirements, licensed in every area.’ With high levels of pollution in parts of China and with CO2 emissions regulations, licenses in China are tightly controlled.

Looking ahead, ALD would like to maintain or increase on its 8% average growth in 2014, taking the total fleet to around 1.1m. ‘It’s not size for the sake of it,’ says Mr Masterson, ‘What we really want to do is make sure we’re in the top three in all countries, so we’ve got a competitive product, we’re efficient in the back office and we’ve got enough volume to have the right investment in services.

'We’re pretty close to that now because most of our subsidiaries are mature and we believe we can offer the same quality of service in all the countries.’

At a glance:

Mike Masterson has been CEO of ALD International since 2011. Prior to that he was ALD’s Chief Financial Officer for 8 years, having joined the company in 2002 after

12 years as Finance Director with Hertz Lease. He began his career with PriceWaterhouseCoopers.