Briefing: Findings from The Leasing Forum 2018

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Whether it is the ownership vs usership debate or the overall concept of mobility as a service (MaaS), the leasing industry needs to be ready for change in the automotive sector. By John Challen.

Moovel by Daimler is among the novel solutions that are reframing the future of mobility.

The leasing sector has enjoyed continued growth for many years now, with those who use it being happy to take advantage of flexible and manageable routes to vehicle acquisition. Many of the signs are pointing towards this trend continuing but, in the ever-evolving automotive industry, nothing can be taken for granted. When terms such as ‘future of mobility’ and ‘Mobility as a Service (MaaS)’ start appearing with increased regularity, it can lead to  companies taking stock, but also thinking about their future vehicle fleets and how to make them more cost-effective.

This particular angle was one of those discussed at The Leasing Forum 2018, held in March in Warsaw, Poland. The event brought together a range of stakeholders to discuss the impact of evolving mobility trends on the fleet and leasing industry, including Frost & Sullivan, which was one of the partners for the event.

A presentation by Mubarak Moosa, director of Central and East Europe (CEE) at Frost and Sullivan, on the ‘Future of Mobility’ focused on the ways in which new mobility business models and digitisation are set to unleash innovation and disruption across the B2B ecosystem.

These are the top six key takeaways from Moosa’s presentation:

1. Integrated mobility has evolved as a response to customers demanding intuitive services in both B2C and B2B environments. Acknowledging this, many actors are making significant investments towards delivering the ‘killer’ proposition and promoting a seamless user experience. In the process, a new ecosystem of integrated mobility is emerging. Company car leasing is one among many mobility solutions available in the market. Quite a few innovative and flexible mobility solutions are posing fierce competition to the fleet leasing industry.

While undoubtedly challenging, such developments should be treated as an opportunity for transformative growth by industry participants. Mobility Mixx from LeasePlan, Moovel by Daimler and Moovit from BMW are among the novel solutions that are reframing the future of mobility.

2. Digitisation is changing the way vehicles are financed by making the process faster, safer and more user-friendly. Companies like DocuSign and AutoFi are in the vanguard of such trends. Financing arms of OEMs are actively leveraging digital platforms, working on cutting-edge Fintech, Blockchain and P2P solutions.

3. Electric vehicle leasing has been gaining traction in Europe in recent years and has progressed to a stage where it is not only about offering customers the lease of an electric car but, equally, offering them an integrated solution comprising battery and charging infrastructure as part of the package.

In Europe, EV leasing is expected to grow at a rate of 15.4% in 2018 hitting a sales volume of 142,000 units. While OEMs will have the chance to shine as they focus on selling EV lease contracts directly to customers rather than selling outright, for lease companies this will represent an opportunity cost. Tesla Leasing, BMW (i3) and Mercedes Benz (B Class) are riding on the momentum toward EV leasing.

4. Shared mobility is another big game changer for the car leasing industry. AlphaCity from Alphabet, for instance, offers a unique, customised approach to mobility solutions. A recent corporate mobility survey By Frost & Sullivan showed that, although the concept of the company car will continue to dominate in the short term, the highest levels of future interest amongst businesses will be for shared modes of mobility like corporate car sharing and carpooling.

5. Private leasing has been amongst the most recent and successful developments in the car leasing market. It originated with OEMs putting their surplus stock on the market without disturbing the retail sector. Started as a financial lease, it is now offered as a full-service operating lease product. The demand for private lease cars is increasing, especially in Europe, influenced by factors such as mobility budgets and customers opting for cash in lieu of company cars.

6. Data monetisation represents a proverbial goldmine for leasing companies and car manufacturers. With access to over 200 data points from a car, there is both the ability and the opportunity to create new revenue streams by monetising such data. Business models based on data monetisation—like bartering, brokering and business intelligence—are already widely used in the automotive domain.

Revenue generation can be further accelerated through the customisation of business and pricing models according to use case and data type. For example, Renault Nissan alliance partnered with technology firm The Floow to deliver vehicle generated data to insurance companies, enabling user- based insurance premiums.

MaaS Facts:

There was more talk of MaaS at the recent BVRLA Fleet Technology Congress, specifically what impact it might have on the UK market. “14% of UK consumer spending is on transport. It’s bigger than food, clothing and more – it’s the single largest sector,” said Paul Campion, CEO Transport Systems Catapult. And of course all that food and shirts have used transport to get to shops before we buy them in the first place.

Despite this fact, a word of caution is due when discussing MaaS as it can be a confusing all-encompassing term. Ashish Khanna, partner at L.E.K. Consulting, said: “On the one side we have the public sector view; that the consumer has a seamless journey and a mass transport link. And at the other end of the spectrum we have the automotive OEMs: subscription services, car share services, car rental companies.”

Although relatively new to the market, car sharing and other new transport business models are themselves at risk of disruption. Khanna continues, “As soon as robo cars appear, car sharing goes away.” Despite many manufacturers including Jaguar Land Rover recently launching Liquid car rental service and Volkswagen announcing WE (its electric car sharing service due to start in Germany in 2019), there’s a real risk these business models won’t survive in the long term because it is difficult for companies to see a return on investment when technology is moving quicker than a typical five-ten year business plan. A key takeaway is that disruptive technology can itself be disrupted. “Uber today, is worried about being disrupted by Waymo,” Khanna added, “and Waymo will crush Uber’s business model.”

The knock-on effect of these far-reaching disruptive models comes when government tries to plan infrastructure. If governments are tempted to adopt potentially flash-in-the-pan technologies, they risk pointless and short-lived expenditure.

Conversely, MaaS puts urban planning right at the centre of policy making and is an exciting area that fleets can participate in, says the BVRLA. The question of how to get people to transition from vehicle ownership to MaaS, however, isn’t quite as clear. For one thing, consumers aren’t yet pushing for MaaS, but rather service companies are.

Challenges include changing the mind-set of the millions of car drivers and people being used to changing them regularly, or every three years for fleets. Scrappage schemes are often promoted as a means to rid our roads of the higher-polluting vehicles, but the BVRLA says this isn’t necessarily a wise approach. Instead, Gerry Keaney illustrates the idea of mobility credits – a means whereby people aren’t swapping a car with yet another car – particularly when that car is not yet likely to be electric – and instead credits could be used on any feature of the transport system, from rental cars to trains, taxis and buses.

Autonomous vehicles are often touted as one answer to the future too, and this would likely mean cars are built to last longer, not fewer years as is the current model and mind-set of consumers. KPMG’s Justin Benson says cars may be required to last two life-cycles, or around 15-years time. And beyond 30-40 years’ time, it’s even possible to envisage that it may even be illegal for humans to drive at all.

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