In the automotive sector, Italy is one of the ‘Big Five’ countries within the EU with the largest consumption of light vehicles, along with France, Germany, Spain and the UK. The country suffered badly during the European financial crisis, with high levels of national debt seriously affecting the economy. This started to ease in 2013 and the debt has begun to reduce slowly. It now looks as though the country will return to GDP growth by the end of this year or early 2016.

In 2014, Italian car registrations reached 1,359,616, up from 1,304,648 in 2013, an increase of 4.2%, according to data from the European Automobile Manufacturer’s Association (ACEA). The increase has accelerated in 2015, with registrations up 13.5% in Q1 to 428,464, compared with 377,629 for Q1 2014. Alphabet International expects growth to be around 5-6% for 2015.

Not surprisingly that growth is reflected in alternative fuel vehicle (AFV) registrations for Q1 2015. Italians buy the highest number of alternative fuel vehicles in the EU, with 60,952 registrations in Q1 2015, an increase of 18.1% on the 51,616 registrations in Q1 2014. Just 758 of these are electric vehicles, representing an increase of 172.7% over Q1 2014’s total of 278. The market for hybrid vehicles is far healthier with 6,587 registrations in Q1 2015, an increase of 27.8% over Q1 2014 when 5,156 hybrids were registered. It is gas-powered vehicles, natural gas and liquefied petroleum gas that account for the bulk of AFV registrations though. In Q1 2015 these reached 53,607, a 16.1% increase over Q1 2014, when 46,182 registrations were recorded.

Commercial vehicle registrations enjoyed greater growth than in the passenger car sector in Italy last year, growing by 13.9% during the year to 132,349 compared with 116,166 in 2013. Light CVs made up the bulk of these figures with 117,709 registrations during the year, up 16.4% on the 101,131 recorded in 2013.

Growth has continued in Q1 this year with total CV registrations climbing 7.0% compared with Q1 2014 to 34,487. Light CV registrations accounted for 86.6% of the total with 29,850 registrations for light CVs in Q1, an increase of 6.1% compared with Q1 2014, showing a solid basis for continued growth.

Business car registrations have shown more positive growth than in the sector as a whole. According to Alphabet International, business car sales reached 250,915 in Italy in 2014 – representing growth of 18.4% over 2013. Dataforce predicts that this figure will remain approximately the same in 2015 at around 250,017 registrations. Alphabet notes that the business car sector in Italy has shown a much higher increase than overall car registrations at around 8.4%, roughly double the market growth in total. The company puts this down to a need to replace cars that are ageing and suggests that rental has also benefitted from this need. Alphabet has noted other developments too:

“The concept of ‘mobility’, both private and business, has begun to change in Italy too, paving the way for alternative options (car sharing, car pooling, etc) that have a weaker link with the traditional ownership of the car, especially in the bigger cities. These trends have been strongly helped by a huge diffusion of smartphones and tablets.”

LeasePlan estimates that overall there are 5.5m business cars on Italian roads. The company’s estimate of the size of the business car market is smaller than Alphabet’s at around 11.9% of the total new car market, representing around 162,000 in 2014, but this will depend on how the two companies have measured the size of the sector.

Alphabet is more specific about the size of the Operational Lease running fleet. This is given as 546,047 in 2014, an increase of 3.1% on 2014. The company reckons that this represents 1.23% of the total running fleet in Italy. Overall, Alphabet estimates that the turnover for the Operational Leasing market in Italy is €5.45m, made up of 73.6% rental contracts, 0.7% in pre-leasing activities and 25.7% in used car re-marketing. Altogether Alphabet reckons that total business car registrations in Italy represent a smaller proportion of the total new car market than in any of the other Big five EU countries. In Italy, this represents 36.2% of the total market compared with 62.1% in Germany, 43.6% in Spain, 44.5% in France and 52.5% in the UK.

Since Italy is home to a number of car brands, mostly in the Fiat Chrysler Automobiles (FCA) group, it is hardly surprising that Fiat tends to dominate the car market. Alphabet ranks the manufacturers as indicated in the table below. LeasePlan also includes the same four manufacturers in the top four companies. Adding the share of FCA companies in the table together gives the company a total market share of 40.3%.

Among the top choices for business car users in Italy, LeasePlan lists the Audi A3, A4 and A6 as well as the BMW 3 Series, VW Passat and Golf, Ford C-MAX and Lancia Delta.

Alphabet provides a breakdown of business vehicle types in the operational leasing sector as indicated in the table:

Italy may be best known for producing small cars, but the country’s profile of business cars is fairly similar to the other ‘Big Five’ EU markets, according to data from Alphabet, which breaks the number of business cars down into sectors.

Italy is also home to commercial vehicle manufacturers, mainly in the FCA Group. This includes Fiat’s light CV range sold under the Fiat Professional brand and the company’s truck division Iveco, which is now part of the FCA Group’s agriculture and machinery division Case New Holland (CNH).

Alphabet provides data for the LCV operational leasing sector, which suggests that of the total of 120,899 LCVs shown above, the total is made up of 73,060 vans, 46,946 LCVs less than 3.5 tonnes and 893 LCVs more than 3.5 tonnes.

This suggests that small vans make up a large part of the operational leasing van market, whereas in some other European markets, it is the larger vans that are acquired under operational leases. Many Italian cities have narrow streets and the popularity of small vans in the operating lease sector may be reflected in demand for smaller vehicles.

Rental, operational leasing and fleet management companies are represented in Italy by ANIASA. Alphabet notes that the tax system in Italy seems to be a strong barrier to the development of the business car sector. The company quotes ANIASA’s view of the tax system as: “An incredibly hindering tax system compared to other European countries, which has become more and more unfair since 2013”.

Alphabet explains, “In Italy, deductibility has been reduced from 40% to 20% in 2013, unlike some countries where it is 100%. Deductibility caps for companies and professionals have not changed since 1997. Moreover, VAT is deductible only by 40%, compared to 100% in all main European countries, a limit that has been postponed until the end of 2016.”

The long period of recession in Italy and high national debt may explain the tax position, but must also serve as a deterrent for companies conducting leasing business in Italy. Alphabet provides a table comparing the tax position across the ‘Big Five’ European markets.

LeasePlan also notes that the rate at which VAT can be recovered is lower than the EU average. The company also says that from the customer’s perspective the income tax allowance on company cars depends on the use of the vehicle and the connection with the business.

LeasePlan suggests that in terms of business vehicle financing, operational leasing is not the preferred method in Italy, accounting for around 10% of vehicle financing, which is well below the EU average. The company says that the method of financing tends to depend on the segment the business operates in, with a bigger percentage of outright purchase among small businesses, while larger companies and corporate business use a higher proportion of operational leasing. Banking and finance are the main sources of funding, reckons LeasePlan.

Looking ahead, both Alphabet and LeasePlan expect growth and change in the Italian business vehicle sector. Alphabet points to some expected trends from ANIASA:

• Fleet administration companies have strengthened their role as the primary interface between companies and operational leasing, thanks to a growing knowledge of the market.

• Operational fleet management (‘Full service’: maintenance and repair, roadside assistance, courtesy cars) is still the core business, but ‘360°’ services leading to better performance in terms of efficiency, innovation and flexibility are more and more relevant. Technology (such as online and mobile services), consultancy, smarter procurement processes and CO2 emissions reduction are all keywords to succeed in this market.

• An international dimension along with a stronger consulting approach and high-quality standards for ‘traditional’ operational and administrative management will be key factors for the future business, to meet an increasingly demanding audience, both clients and prospects.

LeasePlan expects to see annual car registrations reach the 1.5m threshold in the next five years. In the immediate short term, operational leasing registrations and the market are still growing and as a result the company says that all the main competitors have confirmed their intention to adopt a growth-focussed strategy. The company also expects to see a different approach that is more focussed on whole mobility services and also to see new players, such as Google approaching the market.