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October 26, 2009updated 25 Jan 2022 2:40pm

Leaseurope convention 2009: Still many opportunities

Asset finance and leasing professionals from across Europe gathered in Prague in early October for Leaseuropes annual convention, where long-term strategy was high on the agenda for the motor finance industry.

By Jason Hesse

Long-term strategy high on agenda as industry professionals gather in Prague for annual convention

Jason T Hesse and Fred Crawley

Asset finance and leasing professionals from across Europe gathered in Prague in early October for Leaseurope’s annual convention, where long-term strategy was high on the agenda for the motor finance industry.

In contrast to 2008’s Madrid event, held immediately in the wake of the Lehman collapse, the focus this time around was very much on predicting the shape of the industry over the next five years.

In response to a poll at the start of the academic programme, one-third of delegates said they did not expect the market to return to pre-recession conditions until mid-2011 at the earliest; while 26 percent thought this would not happen until 2012 or beyond. Only 19 percent of attendees expected the market to return to “normal” by the end of 2010.

Despite a shorter programme than usual – to reflect the difficult economic situation – the annual convention was very well attended, with over 300 industry figures present.

Among them was Piero Biagi, managing director of Italian leasing company Nolè and chairman of Leaseurope’s statistics and marketing committee. Biagi introduced the newly-launched European Car Leasing and Rental Report, published in association with strategic management consultancy AT Kearney.

Motor finance companies attending the seminar were presented with key trends in the automotive industry, which also identified some of the mid-term challenges and opportunities for the car leasing and rental sector.

“Clearly, car leasing and rental firms are facing a difficult environment,” said Biagi, one of the report’s authors.

“Customer behaviour is changing, the supply side is becoming increasingly complex, and automotive-related businesses are generally perceived as being more ‘risky’ than in the past.

“But there are still many opportunities out there for the sector.”

Indeed, the seminar highlighted four main market opportunities for car leasing and rental firms (see box, right).

According to the seminar leaders – which included high-profile speakers from LeasePlan, Hertz, Volkswagen Financial Services and Arval – the industry is faced with some important challenges, too: low growth, a substitution-driven market, high manufacturer concentration, geographical enlargement, eco-friendly vehicle boom, product portfolio fragmentation, brand proliferation and market segment polarisation.

“These existing and emerging trends could lead to a reshaping and rethinking of the current car leasing and rental business model,” said one participant.

“[The trends] must be carefully considered and integrated into the development of any leasing or rental strategy over the next two to three years.”

Later in the convention’s programming, ALD Automotive CEO Gianluca Soma gave his own company’s forward-looking observations, in his presentation, “A strategic vision for operational leasing business”.

The presentation began with a snapshot of the current market, with metrics showing a long-awaited (if fragile) increase in new orders and deliveries as of May this year, along with a flattening of the decrease in used car sale prices. Corresponding to this was a drop from the second quarter’s peak in contract extension rates.

In a SWOT analysis of the industry, exposure to residual values and the capital-intensive nature of the business were marked as weaknesses, mitigated by the cost benefits driven by increasing use of outsourcing, and by the global reach and economies of scale achieved by many companies.

Funding cost volatility, new IFRS rules, demand for used cars and government-led environmental tax policies were identified as threats.

In Soma’s opinion, mature economies will be unlikely to see operating leasing grow until 2012, and even then will only experience single digit growth rates.

The Brazil, Russia, India and China (BRIC) countries, by contrast, were highlighted as a major opportunity, with greater proliferation of new vehicle offerings and quicker recovery in used car markets expected to lead to single digit growth by 2011, and double digit-growth soon afterwards (see box, below).

Market opportunities – BRIC countries to lead way

 

Mature countries

BRIC region & emerging markets

2010

• Leasing market still shrinking

• Concentration of players, with reallocation of market shares

• Used car market improving in second quarter

• Car mix evolving, gradually

• Leasing market recovering

• Credit risk alert

• New vehicle offerings on market

• Used car market recovering

2011

• Leasing market stabilising

• Return to profitability

• Used car market stabilising

• New market segments developing

• Leasing market growth (single digit)

• Product offering adaptation

• China: anticipation of new vehicle fleet mix

2012-2015

• Leasing market back to growth (single digit)

• Right level of profitability vs risk management

• Significant evolution of car mix on market

• Consumer market growth

• Double-digit growth

• Used car market structuring

Source: Leaseurope, ALD Automotive

Market opportunities

Leasing/rental well positioned to meet client demand As businesses are strapped for cash, the demand for all financing, leasing and rental products is likely to increase. Leasing and rental firms are well-placed to benefit from this situation compared to traditional lenders

Providing solutions addressing customers’ call for flexibility Variable contract terms; adaptive fleet compositions; innovative transport solutions; tools allowing clients to manage their fleets in a cost-effective way

Leveraging growth opportunities The penetration of leasing/rental products still remains relatively low in some geographical markets and customer segments

Development of partnerships By building partnerships where each party leverages its own expertise, leasing and rental firms can create innovative go-to-market channels

Source: Leaseurope, AT Kearney

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