Mobility solutions will drive next wave of leasing consolidation, say experts
Owned by banks or OEMS, major international leasing companies are now strategic assets for their shareholders, but future mobility trends could lead to new partnerships and alliances.
ALD Automotive’s acquisition of LeasePlan is unlikely to trigger similar mega takeovers in the leasing sector in the short term, but the arrival of mobility solutions and autonomous vehicles could lead to new alliances and consolidation, according to two industry experts.
Philippe Bismut, former CEO of Arval (pictured below), said leasing companies on the acquisition trail prefer an environment of economic stability.
“An increase in interest rates, for example, is a problem, because client lease prices tend to rise and it’s an uphill battle to raise prices,” he said.
Similarly, fluctuations in residual values can deliver additional profits or unanticipated losses.
Acquisition vs organic growth
And while many large leasing companies would seize the opportunity to buy the assets of a competitor as a quicker and easier way than organic growth to increase their fleet size, Bismut sees few significant changes in the aftermath of ALD’s purchase of LeasePlan.
“I don’t think this deal will impact much the sector. There is an opportunity to grow and achieve economies of scale, but these tend to plateau and I don’t think there will be a dramatic change in the landscape,” he said.
Lease co's are strategic assets
Europe’s top 10 vehicle leasing companies are now owned either by car makers or major banks, and appear to be considered as key strategic assets for their shareholders, said Bismut. Unless there is a dramatic urge from a shareholder to dispose of assets, such as GE’s decision to divest of its fleet services division (acquired by Arval in 2015), there is little incentive for owners to sell their fleet leasing businesses.
“Car makers need a service arm, selling subscriptions and services around the vehicle,” said Bismut.
He does, however, view potential for significant alliances or consolidation between leasing companies and other travel and transport providers as mobility solutions develop.
“It may make sense to join forces to pre-empt this market if possible. Everybody wants to lead the conversation with clients and be the mobility aggregator. I see alliances or mergers between different sectors.”
Autonomous vehicles drive consolidation
The arrival of autonomous cars will dramatically accelerate this trend, undermining the need and desire of employees for a company car, according to Colin Tourick, a consultant and one of the four founders of LeasePlan UK (pictured above).
“Once we get to fully autonomous cars, a lot of the people who are in company cars and live in urban areas will ask why they are paying thousands of Euros, pounds or dollars per year in tax for a depreciating asset that spends most of its time parked, when they can summon an autonomous, Uber-type car to take them from A to B for a few cents per km, and they won’t have to worry about maintaining, parking or insuring it,” he said.
Tourick sees the rapid expansion of city bike and scooter share schemes as a model of how the car market will develop, with a small handful of autonomous ride-hailing companies engaging in a massive landgrab to secure market share.
OEM and leasing relationship
“What is required is money to pay the manufacturers for building vehicles, and IT infrastructure to manage them, while the vehicles will report when they have faults or need recharging and will drive back to base when they need work. The winner in this market will be on scale, offering the cheapest cost per mile,” he said.
Giant leasing companies will have the resources to compete in this sector, with the funds to acquire vehicles and develop the software to manage them, but other leasing companies will have to focus on serving specialist fleets, such as light commercial vehicle operators, and businesses that require vehicles in rural environments, said Tourick.
“There will still be a place for leasing companies, but not for as many,” he said.
Images: Shutterstock, Colin Tourick
This article is part of the ALD & LeasePlan merger story.
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