The Belgium automotive industry got off to a quiet start in 2015. Ford had closed the Ghenk factory in December 2014 after 50 years of production, leaving Audi in Brussels and Volvo Cars in Ghent as the two surviving volume manufacturers in the country. Ford production would have contributed to the 481,642 cars that were built in the country in 2014.

In addition commercial vehicle production takes place with DAF cab and axle production at Westerlo. The plant is due to receive around €100m investment in a new paint shop, due to come on stream in 2017. Volvo Trucks also builds trucks at the Ghent plant. ACEA data shows that in 2014 1,823 medium trucks and 29,760 heavy trucks were produced in Belgium.

The country is relatively new, having gained independence from the Netherlands in 1830. It is relatively small with a short (66.5km) northern coastline and borders France, Germany, Luxembourg and the Netherlands.

Data from the European Automobile Manufacturers Association (ACEA) shows that the car market in Belgium is enjoying steady growth with the January to September car market growing by 1.1% to 392,522, compared with the same period in 2014. According to FEBIAC, the Belgian motor industry body, there were 7,146,473 vehicles on the roads of Belgium in 2014 and of these some 5.5 million are cars with around 680,000 light commercial vehicles.

Outright purchase popular

According to ALD general manager for Belgium, Miel Horsten, around one million of these cars are used for professional purposes and of these, around 330,000 supplied on operational leases. LeasePlan puts the number of cars in the business sector higher, at around 1.5 million. Data from FEBIAC shows how company car registrations changed between 2009 and 2014 and also the share of the leasing sector they represent.

As the data suggests, this means that there is still a trend of company car ownership among companies in Belgium, leaving sizeable growth potential for the leasing sector. LeasePlan breaks the 2014 data down in a slightly different way and says that retail buyers bought 50.4% of new cars in 2014, while 3.4% were bought by the self-employed with 46.3% acquired by companies.

Arval sees that pressure is growing on suppliers like leasing companies to deliver cost savings. At the same time, clients also require lower CO2 emissions and fuel consumption. Arval also believes that lease companies will have to adapt to the different needs for mobility.

Alphabet takes the data analysis a stage further and shows the proportion of new registrations that have entered the leasing market since 2011, using data from FEBIAC and the Belgian Rent and Lease Federation (RENTA).

Based on this data, the leasing sector has accounted for between 15 and 20% of new car sales, but the trend appears to be upward, at a small rate of growth, quite similar to the rate of growth in new car registrations.

Arval suggests that the leading players in the Belgian leasing market are LeasePlan, ALD Automotive, Alphabet, Arval, Athlon Car Lease and KBC Autolease. Arval says that LeasePlan is the market leader, but KBC is close behind with a similar share of the market. Arval also says that leasing companies are now focusing attention on the SME sector and LeasePlan has started to offer private leasing.

Premium models a growing trend

When it comes to choosing cars for business use, LeasePlan suggests that small family cars are the most popular such as the Peugeot 308, Ford Focus and Renault Megane. The company also sees demand for premium compact models such as the Volvo V40 and BMW 1 Series. Among larger models, the Opel Insignia and Ford Mondeo are popular with compact executive models such as the Audi A4 also in demand. Alphabet sees a similar demand pattern with the Volkswagen Golf the most popular model in 2015, followed by the BMW 3 Series and Audi A3. Volkswagen is also the favourite for Arval customers, followed by BMW and Audi.

Quoting the Belgian Groenlicht website, Arval suggests that the top 10 brands for leasing companies are:

1. BMW (18.6%)
2. Volkswagen (14.7%)
3. Audi (13.3%)
4. Mercedes (8.3%)
5. Volvo (6.8%)
6. Renault (6.7%)
7. Peugeot (5.7%)
8. Skoda (5.1%)
9. Citroën (4.5%)
10. Opel (3.9%)

This suggests a similar pattern to that in other developed fleet markets where premium models are in high demand, probably because the strong residual values mean they carry a competitive leasing price compared with models from the volume manufacturers.

Low dealer profitability?

Horsten at ALD thinks that the situation in Belgium remains quite difficult for most manufacturers. “Some were doing reasonably well, but dealer profitability, by international standards, is extremely low and the market remains quite difficult. It’s not in such a bad shape as the Netherlands, for instance, where there have been two years of sharp decline. It is stable in Belgium, but we’re still in rough waters.”

Horsten also sees the leasing sector as a premium market in Belgium, with Audi, BMW Mercedes and Volvo accounting for over 50% of the ALD fleet. Jaguar Land Rover and Tesla are also brands that are starting to grow.

Diesel decline?

Alphabet sees a slight decline in the number of diesel-powered models, but overall, diesel cars remain popular in Belgium.

Where Alphabet’s own fleet is concerned, some 97% are diesel powered, but the company says that it has noticed a shift towards petrol and electric vehicles because the total cost of ownership (TCO) is often more favourable.

LCV registrations have remained stable for the past few years. Smaller vans appear to be the most popular with Renault Kangoo and Fiat Doblo in demand from most of our respondents. The popularity of smaller vans is not surprisingly also the pattern where operational leasing is concerned. Data from FEBIAC shows that the Fiat Doblo is the most popular van in the operational leasing sector with 22.25% market share, almost twice the volume of its nearest competitor the Renault Kangoo. The Renault Trafic is the most popular larger van with the Ford Transit close behind.

Taxation

Vehicle taxation in Belgium is not as straightforward as it may seem. In recent years, there has been a degree of devolution between the Flemish speaking region in the North – Flanders and the French-speaking region of Wallonia. The two regions have also devised different forms of vehicle registration tax.

In simple terms the registration tax in Wallonia is based on CO2 emissions and in Flanders it is based on CO2 emissions as well as the Euro emissions standard, type of fuel and age. That is the position for private cars, but it is different again for lease companies. The reasoning here, as Horsten from ALD explains, is to stop lease companies from moving to the region with the most favourable tax regime. So for lease companies both the registration and road tax are based on cylinder capacity and engine output.

Employees are liable for ‘Benefit-in-Kind’ taxation on their company car, it also applies when the car is also used for private purposes. As Alphabet explains, employers are also taxed. “A non-deductible expense for company cars is to be paid by employers (17% of the taxable benefit). The taxable benefit is calculated as follows: [the list price x correction coefficient x 6/7] x carbon percentage rate.”

Alphabet also explains the VAT regime: “Lessees who are eligible to reclaim VAT can recover up to a maximum of 50% of the monthly lease rental on passenger cars, in proportion to the professional use, and 100% on commercial vehicles. If the company is involved in the sale or supply of cars, 100% of the VAT is recoverable (e.g. short-term rentals). VAT on car-related expenses (e.g. service costs, insurances, car fluids, etc.) when using the vehicle for business purposes is deductible based on the CO2 emissions of the car, allowing companies to deduct up to 100% in case of CO2 efficient cars.”

Private leasing a future trend?

Finance options follow a familiar pattern for Western Europe too and include financial leasing, credit, operational leasing, outright purchase and rental. Arval provides a breakdown of the market in 2015.

LeasePlan suggests that operational leasing is growing in popularity. Renta suggests that ease of fleet management and a fixed price format are helping to fuel the growth.

“I think operational lease is fairly stable and becoming more popular in Belgium,” says Horsten at ALD. “What is new, is that LeasePlan has recently launched private leasing. That is going to be the big trend in the coming months. We are getting ready for that as well. It’s not certain how popular it is going to be. We’ve already seen it in the Netherlands where it is already doing 100 orders per month on private lease.

“There’s a lot of interest from some manufacturers because if they put cars into a private lease schedule, they can increase the rotation of their cars and build up numbers, even if they have to sell them at a discount.”