Western Europe is a mature market so far as operational leasing and major fleets are concerned, but there are still opportunities for growth. They lie with small to medium‐size businesses (SMEs) that are becoming increasingly attuned to the benefits that full‐service leasing can deliver, says Pascal Serres, deputy chief executive officer at ALD Automotive.

In emerging markets however, such as those in South America, there is still plenty of scope for expansion with big corporate clients’ he believes. ALD has already detected a trend in Brazil for example to move vehicles off company balance sheets and switch to operational leasing instead.

Growth in emerging markets

“As a consequence we’re witnessing an increase in the demand for operational leasing of well above 20% on a yearly basis in some emerging countries,” Serres reports.

“The new and emerging leasing markets provide the most growth potential as the benefits of leasing rather than purchasing vehicles take hold,” says LeasePlan in its 2014 annual report.

“Additionally, large multinational organisations operating in these countries are increasingly looking for co‐ordinated, global fleet management.

“In the mature markets additional growth will come from enhanced services and insurance offerings around the core leasing contract, as well as from the SME sector,” it continues. “Further consolidation in the mature markets is also expected.”

SME is key sector

“SMEs offer major potential that has yet to be fully realised if indeed it has been realised at all,” says Carsten Kwirandt, head of marketing and business development at Alphabet International. “Private leasing is another area of potential growth.”

Attuned to the growth opportunities afforded by SMEs in certain key countries, Arval reports that its SME Solutions operation leased out 150,000 vehicles in 2014. Dedicated to international corporate accounts, its International Business Office achieved exactly the same level of success.

Even troubled Russia generated growth for Arval in 2014, a year that saw its worldwide leased fleet expand by 6% to 725,000 vehicles. It saw its Russian activities grow by 13% while at the same time enjoying increases of 18% in Brazil, 21% in Hungary and a healthy 27% in Turkey.

Arval’s Turkish business has been boosted by the cross‐selling of other financial products to the corporate sector in conjunction with BNP Paribas, its owner. The same policy has been adopted in Morocco and Poland as well as in more‐mature France, Belgium and Italy.

Building on existing business

Following clients you already have a relationship with as they expand around the globe can pay dividends too.

If Serres and his colleagues work with a company in a mature market and become aware that it also has an operation in a market that is rather less mature then they will seek to persuade it to let them service that operation too. Having established a bridgehead in the country concerned they will then seek to persuade other, locally based, fleets to use their services as well.

Sounds easy? “We’ve got around 20 countries on our global shopping list,” says Serres – but in reality it can be tough going with many years of hard work required.

For a start, operational leasing requires a comprehensive support network of franchised dealers, well‐equipped independent workshops with trained technicians, and fast‐fit tyre, exhaust and battery operations. Such support is patchy in sub‐Saharan Africa with the exception of South Africa, which is one among many reasons why operational leasing has yet to gain a foothold there.

“Some of the countries next‐door to South Africa are starting to show potential though,” he says.

Cultural differences

Then there are differences in cultural attitude to be borne in mind, not to mention local rules, tax regimes and the challenge posed by indigenous leasing companies that may not welcome outside competition.

Japan and South Korea cannot be classed as emerging markets, yet there ought to be potential in both countries. Incomers may find it difficult to unlock however, says Serres.

“They are dominated by strong financial and industrial groups that take 70% to 80% of the available business,” he points out. Their complex web of interlocking share‐holdings is difficult for third parties to cut through.

“China is the biggest car market in the world, it cannot be ignored and we’ve been active there for eight or nine years,” Serres continues. “It is still the case though that company cars tend to be the preserve of top executives and have to be provided with a driver. You have to deal with some demanding regulations, there are constraints on the availability of licence plates and overseas organisations like ours have to work with a local partner.

“You’re also competing with cheap public transport, and that includes cheap taxis,” he continues. “As a consequence we only have a comparatively‐modest 3,000 cars in China and we’re close to being the operational leasing market leader.

“There are now Chinese companies that are considering supplying ordinary members of staff with cars but it may take time for the idea to become accepted.”

Emerging markets bring challenges

Neighbouring India is a more mature market and an easier one to operate in says Serres but it is one that throws up its own challenges.

“Finance leasing dominates and if anybody has a car and wants to dispose of it they tend to sell it to family and friends,” he says. “We’re introducing products there but it is slow going and there are all sorts of different local state taxes you have to contend with. “That said it is an easier market to compete in than China.”

ALD saw double‐digit growth in India in 2014 adding 1,500 new contracts, an increase of almost 15%. Overall ALD grew its worldwide fleet to over 1.1m vehicles last year, a boost of 9.8%, so in percentage terms India was one of the company’s star performers.

Other stars included Mexico, which experienced a 25.6% rise in business last year. ALD’s Brazilian operation expanded by nearly 30% with 4,400 vehicles added to the fleet despite the ups and downs of the country’s economy.

“Inflation is an ongoing problem in Brazil, sticking stubbornly above target levels and growth prospects face constraints in the form of tight labour market conditions, weak investment and a burdensome regulatory environment,” says White Clarke Group executive vice president, Brendan Gleeson.

“Tax regulations, high tax rates and bureaucratic red tape have been persistent barriers to investment.”

Local competition

Staying with emerging markets, Turkey has the advantage that it is familiar with the concept of the company car but incoming leasing companies face stiff competition from local rivals who occupy the top five slots.

“They tend to set the rules,” Serres remarks. “It’s a complicated country.”

Incomers are making some headway however. February saw LeasePlan become the 100% owner of LeasePlan Turkey having acquired the minority 49% stake in LPD Holding AS, LeasePlan Turkey’s holding company, from Dogus Group.

“We are becoming increasingly successful in promoting the advantages of operational leasing in Turkey and will continue to introduce new products and services to the market,” says LeasePlan Turkey managing director, Turkay Oktay.

“Looking ahead, we aim to grow our market share further, maintaining a strong focus on customer satisfaction.”

Last year saw LeasePlan expand its global footprint even further with the opening of LeasePlan Canada through its Canadian partner Foss National Leasing.

Like ALD, LeasePlan believes that SMEs represent a valuable opportunity for growth, while stressing that there are still some major companies in key European markets that have yet to appreciate the benefits operational leasing can bring. Its expanding SME portfolio now embraces over 235,000 vehicles and it has set up a specialist team tasked with developing, implementing and managing global SME strategy.

Central and Eastern Europe

Arval’s growth in Hungary last year highlights the opportunities that still exist in Central and Eastern Europe.

Those opportunities are not lost on Netherlands‐based Business Lease Group, which acquired Fleet Management Services (FMS) in Romania late last year. One of the pioneers of operational leasing and car fleet management in its home country, FMS has over 3,000 contracts in place which makes it Romania’s largest independent provider according to Business Lease. “With a strategic location, a growing economy, a large market and an educated workforce with excellent language skills, Romania offers great potential for international companies,” says Business Lease director of business development, Philip Aarsman. The company is active in Slovakia, Poland, Hungary and the Czech Republic too.

“Eastern Europe is proving to be one of the leasing industry’s high spots,” says a White Clarke spokesman.

Mobility solutions

Just as younger drivers in Western Europe appear to be as interested in mobility solutions which involve public transport, car‐sharing and modes of sustainable travelling such as cycling as they are in exclusive use of a company car, the same may be the case with at least some of their counterparts in emerging markets.

That could work to the advantage of companies such as Alphabet, which has made AlphaCity, its leasing‐based corporate car‐sharing solution, available in ten European countries. AlphaElectric, its eMobility solution, has now been rolled out to 14 – Australia, Italy and Austria all joined the party in 2014 – and Alphabet aims to integrate electric vehicles into AlphaCity.

Companies can also opt for the Alphabet Mobility Budget. Currently available in the Netherlands, it allocates a set sum to employees that they can spend flexibly on the mode of travel of their choice: everything from carsharing to train tickets. It is a concept that Alphabet proposes to roll out in other markets. “We are moving away from the classic company car and towards holistic corporate mobility solutions,” says chief executive officer, Ed Frederiks.

It is a trend confirmed by LeasePlan. Embracing 20 countries worldwide, its MobilityMonitor survey shows that nearly 10% of company car drivers whose vehicles are leased are interested in corporate car sharing.

Sharing brings administrative challenges embracing everything from cleaning (who left the vehicle dirty?) and damage (who put a dent in it?) to responsibility for fines (who rocketed past a speed camera at twice the speed limit?) and keeping track of the keys. In response, LeasePlan will be launching a new car‐sharing programme later in the year.

Car or smartphone?

“We see that younger generations are relatively more willing to share cars. And with more and more people living in cities, the interest will increase in the coming years,” LeasePlan’s chief commercial officer, Nick Salkeld says.

“When I was 18 I wanted a car and a motorcycle but today’s 18‐year‐olds want an iPhone,” observes Alphabet’s Kwirandt. “And what many businesses want nowadays is much more mobility for all of their employees, not just those who are allocated a company car.

“As a consequence we’re now dealing with the corporate social responsibility manager and the human resources manager as well as the chief executive officer, the chief financial officer and the fleet manager.

“It does not mean all the company cars are being got rid of but what it does mean is that there is a move away from assets and towards services; and we’re positioning ourselves as a one‐stop‐shop.”