Diamond Leasing Philippines: "We see a stronger trend towards outsourcing"
It’s always a pleasure to discuss the corporate fleet topic with Quincy Buenaflor, VP Operations at Philippines number 2 leasing company. Quincy is the “guy to talk to” for all matters leasing in the Pearl of the Orient Sea, a denomination referring to the country’s exceptional natural beauty. Today however, both of us in a chatty mood, we’re talking about fleet, obviously, but also about how people end up where they are; in case of Quincy, at the head of a leasing company.
The early days
Quincy explains: “Mom was a nurse at the Philippine Heart Centre and dad was a professor at the De La Salle University right in the centre of Manila. My dad actually had a grant for a scholarship to study in the Netherlands and was guaranteed a post at the National Telecommunications Centre, which I guess you can say was the less risky path. Then, out of the blue, came a small business opportunity: someone needed a car, proposed my parents to buy that car for him and he would lease it back from them. This sounds like a pretty regular business model for people in the fleet industry, but we’re talking Philippines 1977. Leasing didn’t exist.”
“My parents agreed. They bought the car and monthly instalments started to come in – until the client stopped paying! So here were my parents, having discovered an entirely new business model and already left with an idle car! They had to make a choice: scholarship or leasing business… The rest is pretty much history. Hard work, a sober life and a good sense of doing business and here we are, managing 1500 leased cars and over 4000 cars in outright purchase for international clients… It’s been a journey!”
“Naturally, the type of services had to evolve with what clients are looking for. We’re now offering full service operating lease as our core product. As our clients are international, we had, and still have to make sure that we did the job up to European and American standards. We’ve been quick to include mileage in our lease contracts, which is still not the standard in the South-East Asian countries. Besides mileage, we include all maintenance, insurance, relief, tyres, roadside assistance, call centre, account management – very comparable to what the big leasing companies would offer.
Next to operating lease, there’s Fleet Management for purchased vehicles, shuttle services as a more comfortable and safe alternative to public transport and short term rental.”
Perception of leasing
Diamond has over 3 times the number of cars in Fleet Management than it has in Operating Lease. Quincy explains: “Leasing is not yet perceived as the mainstream choice for corporate vehicles. Unsurprisingly, the local clients buy their cars cash and pay on use for maintenance, tyres, etc. You would expect however that international companies are keen to lease, but here as well, many of them buy and manage internally. In a complex country as the Philippines, this means freeing up a lot of time and resources to do a job that’s so far away from the company’s core business.”
“For the last 5 years we’ve seen a strong trend towards outsourcing though. This is how it usually works: the client understands that a small insourced fleet operation doesn’t have enough knowledge or capacity. They’re basically burning cash, missing out on savings opportunities and the drivers are not happy because they don’t receive the service that they deserve. The client wants to solve the operational issues first and outsources the Fleet Management to companies such as Diamond. Once the operations are stable, the client has time to consider further optimisation, especially to improve their cash flow and reduce the remarketing risks; this is where leasing comes to the surface.”
“Let’s start by saying that we’ve achieved double digit growth on the leasing business for 5 consecutive years now, following the strategy that we described before. Having said this, competition becomes bigger and more difficult. Some of the big guys are coming to Philippines, but also smaller players are starting to understand that leasing is becoming more popular.”
And how is Diamond dealing with an increasing number of competitors in a small market? Quincy continues: ”It’s not a surprise that many of the new players are buying market share by offering low prices and often a limited service scope. Those who understand this business know that this will lead to a situation where the supplier cannot become profitable and can’t give the service that the client deserves. Philippines is a vast country with a complicated supply chain; it’s impossible to build up in a couple of years the quality and experience that has taken us over 40 years to achieve.
But in the meanwhile, in an immature market, we’re confronted with price battles that are not supportive of maturity and growth on the long run. But just like my parents used to do, we continue doing what we do well: delivering service at the right pricing.”