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The European car fleet sector is recovering from the
severe battering it received when the
global economy went into meltdown. Growth is already being seen in
Sweden, Norway, Finland
and Denmark, writes Claire Hack.
Recovery in the car fleet sector remains relatively uneven in
Europe, as some markets return to health more quickly than
others.
Yet an uneven recovery could still
be considered fairly remarkable, given how badly the segment
suffered as the global economy went into meltdown.
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By GlobalDataJuha Saaranen, head of Nordea
Fleet, which operates in the Nordic and Baltic states, said: “The
Baltic countries were hit hardest. Car sales took a nosedive and
the market almost disappeared.
“Fleet business also collapsed.
Customers wanted to postpone new investments and they preferred to
extend old fleet agreements.”
Now, as the market slowly heads
towards stability, growth for Nordea is especially visible in
Sweden, Norway, Finland and Denmark.
“We have had the biggest growth in
Sweden, which currently has some of the best GDP growth in Europe,
and Norway, which survived the credit crunch better than others.
Also Finland and Denmark are improving nicely,” Saaranen said.
“Danish business is partly
supported by new car registration tax law, which is favourable for
leasing.”
Car sales have also enjoyed some
major growth in the Baltic countries, rising between 90 and 100%
year on year, from a low base, Saaranen added.
“The fleet market is also
recovering, but mainly it is about replacement investments by
existing customers rather than new customers,” he said.
“Generally, the Baltic’s total
market is relatively small.”
In the Nordic countries, recovery
has also been hindered by a number of other factors, including
heavily discounted new car prices in Denmark, which have caused
used car prices to suffer, as well as longer lead times for fleet
delivery across Nordea’s geographies.
“New fleet business might face
difficulties, because of longer delivery times of some cars and
models – there are some, for example, that you cannot get any more
of this year,” Saaranen said.
“The reasons behind this are the
demands for favoured models, combined with the Japanese earthquake,
which decreases car and car parts supply.”
The proposed changes to lease
accounting will also create challenges, he added, but there are
also opportunities for savvy fleet funders to take advantage of the
importance of the ever-expanding green agenda.
Saaranen said: “Environmental
awareness in companies has created new possibilities to act as a
consultant when companies are updating their car policies to make
them more environmental friendly.”
Business on the
increase
Elsewhere in Europe, BNP Paribas
fleet subsidiary Arval has also seen mixed trading, with
significant differences in growth rates between European
economies.
Arval deputy managing director
Philippe Noubel said: “As far as new business is concerned, if we
consider the figure [in the four months to] the end of April 2011,
we see significant recovery of activity in deliveries.
“We have an increase of 20%
compared with last year, but we can see some differences between
countries.”
Arval’s northern European business,
which includes Austria, Belgium, Germany, Luxembourg and
Switzerland, saw a 24% rise in new business.
Italy remained stable, but the
increase in new business in France stood at 25% for the first four
months of the year, and 40% in the UK, while in Spain, despite its
ongoing debt crisis, the increase was 80%.
“We have to consider the fact that,
at the end of last year, we bought the renting activity of La
Caixa, which is one of the main banking institutions in Spain,”
Noubel said.
“They had an in-house contract hire
business and decided to sell. We were chosen to buy it and to enter
into a long-term partnership with La Caixa and its network.”
The Japanese tsunami and earthquake
had disrupted the delivery of cars, Noubel said, but added car
manufacturers had been struggling before the tragedies.
He said: “Before the tsunami, they
were having problems delivering cars in Europe because of worldwide
demand increasing significantly.
“As far as Arval is concerned, we
can see recovery in 2011 and we expect it to continue for the rest
of the year. We are quite optimistic.”
However, Noubel also acknowledged
the impact during 2010 of the increasing tendency among companies
to extend existing fleet agreements, rather than make new
investments.
In certain geographies, he added,
Arval has struggled.
Noubel said: “A certain number of
customers have also reduced the number of cars in their fleets
because they have been obliged to reduce the number of
employees.
“Germany has been quite a difficult
country, and of course, Greece, for obvious reasons.”
Germany, he said, is currently
dominated by large captive funders, meaning competition is fierce,
and there is little room for other players to join the market.
Germany doing
well
Fleet
management company Fleet Logistics, on the other hand, which has a
significant presence in Germany, continues to thrive there.
CEO Peter Soliman said: “Germany is
clearly doing well. As an economy, it is booming – companies there
are having a hard time finding employees – while in Spain there is
30% unemployment.
“That mirrors the demand for
company cars, because they are often used as a benefit and they are
very tax efficient.”
While Spain and Portugal continue
to languish under the weight of their respective debt woes,
countries like Germany, as well as Poland and the Nordics, are
beginning to flourish again, leading to greater investment in
fleets.
In May, Fleet Logistics formed a
partnership with international technical services corporation TÜV
SÜD.
“It is actually a fairly large
operation,” Soliman said.
“It is a bit like the MOT in the
UK, but with a bit more depth, and larger in terms of certification
of vehicles.”
The partnership means Fleet
Logistics will have access to TÜV SÜD’s offices around the
world.
Soliman said: “It is important for
us in terms of global reporting. We see more and more customers
looking to get transparency on their fleet globally and that
infrastructure helps us to do that.”
There have, however, been a number
of changes in the fleet management market, he added, including an
increase in demand for “unbundled” solutions.
Soliman said: “There are two
approaches to reducing cost for a large fleet, and the one that
Fleet Logistics represents is the so-called ‘bundled’ multi-bid
approach.
“The logic is to go the market with
a vehicle on a given day and ask for prices from different leasing
companies, who might differ by as much as 10% in price.”
The “unbundled” approach, he
explained, means all the services included in a leasing arrangement
are bought individually.
“For example, you would only pay
for tyres when you need them,” Soliman said. “The multi-bid
approach is appropriate for large heterogeneous fleets. The other
approach lends itself to large service fleets.”
The partnership with TÜV SÜD
subsidiary Fleet Company will allow Fleet Logistics to offer this
type of solution, he added.
See also – Case
study: epyx
Cost-cutting boosted by
downturn
Despite the essentially positive
outlook at Fleet Logistics, certain market trends, in place before
the global economic crisis hit, have been accentuated by the
downturn.
Soliman said: “The first is
outsourcing. Fleet management isn’t a core capability at Microsoft
or IBM or Nestlé, so it has been outsourced.
“The second trend is consolidation
of purchasing in Europe. A lot of companies centralised purchasing
into one location. Consequently, fleet management is run by one
person or one team.”
This, he said, has in fact been
good news for companies like Fleet Logistics, who offer
pan-European coverage.
“Some companies are also
experimenting with mobility options – for example, if you take the
bus, they sub your ticket,” Soliman said. “This is being done
through CO2-cutting schemes, which makes it all sound
very green, but ultimately, it is about cost reduction.”
As part of this effort to cut
costs, the responsibility for accident cover has also been shifted
from the company to the driver.
“This means for the first accident,
the company will pay, but for the next one, the driver has to pay”
Soliman said.
He added that some companies are
also looking at car sharing – can employees share cars and can cars
be shared between legal entities within one larger corporation?
The need to share vehicles could
also increase as growing demand from Asia, and especially China,
increases delivery lead times for a number of major
manufacturers.
“China is sucking up German cars,”
Soliman said. “What was a buyers’ market is becoming a sellers’
market. A VW Passat can have a lead time of 9-10 months.”
UK gets
flexible
Meanwhile, in the UK, Jonathan
Evans, UK commercial director at vehicle financing company GMAC,
has witnessed a shift towards shorter-term and flexible hire for
fleets.
Evans said: “As a funder into the
UK market, it appears that, with the recent reduction in capacity,
the daily hire and flexi hire market is a relatively good place to
be at present.
“Utilisations are strong across all
the market sectors we deal with and disposal profits are also
supporting the rental companies.”
Evans also said a lack of new
entrants to the rental market will mean rates may be set in favour
the rental company, instead of the renter.
“The one real dark cloud within the UK market appears to be the
recent reduction in the number of funders, and the remaining
funders’ desire to continue to write business or pick up the
capacity shortfall from those that have left,” Evans added.
See also – Case study:
epyx
