APAC Fleet and Leasing forecast 2019
Asia’s fleet sizes continue growing, as are the revenues of local and foreign companies located in the East. The growth of the Asian economies is slowing down in some countries, as demonstrated by China’s GDP growth forecast of 6.2% (versus 6.6% in 2018), partially due to the trade disputes with the US, impacting not only the largest APAC economy, but the entire region.
The slowdown effect is also due to a shift in economic models across the region; China has shaken off its high volume/low cost/low quality image and is confirming its goals to become the global high-tech hub. This has led to several high-impact initiatives, such as the Made In China 2025 strategy. Consequently, China has to change large parts of its industry, an effort that takes time and investment.
Especially in the South-East Asian countries, GDP growth forecasts remain positive, except for Malaysia and Myanmar, where, due to political instability, the growth forecast has been readjusted downwards. The Philippines and Vietnam will lead the growth pack amongst the larger economies.
Japan’s growth is predicted to slow down and analysts seem to agree that growth will be below the dramatic 1% threshold. The country’s conservatism towards innovation, its ageing population and consequently an increased cost pressure keep growth low; interest rate forecasts by the Bank of Japan also remain on -0.1%, which has been the case since 2016.
Australia as well will be slowing down; 2019 growth is forecasted at 2.77% versus 3.34% in 2018.
Asia’s growth might be slowing down, but is still far from becoming critical. Across the region, middle class is growing, education and healthcare are improving significantly and large infrastructure investments are being made (e.g. Duterte’s “Build, Build, Build” initiative in the Philippines, extending highways, metro lines, public transport coverage).
On the corporate fleet side, a very slow shift of awareness towards the region has started: Asia is catching the attention of the Global Fleet Manager. As the revenues of Asian subsidiaries of European and American businesses are rising, so are the number of staff and the number of vehicles or cash allowance expenditures. This trend is bound to continue in 2019,
Leasing versus mobility
For many reasons, a car might be what most Asians want, but necessarily what they need or end up with. Low per capita GDPs imply that not everyone can afford cars (hence the large number of motorcycles in countries such as Vietnam – 45 million). A growing middle class however means that people want to upgrade from motorcycles or public transport. In addition, the Asian population are keen users of smartphones and used to on-demand services (food, groceries, laundry,…).
Mobility is one of the services that are typically ordered through applications and is perceived as more comfortable than public transport. The growth of GRAB, Go-Jek, Didi, Ola and the others will continue in 2019.
For corporate fleets, another factor intervenes: employee efficiency. Due to insufficient road infrastructure, many Asian megacities are almost constantly congested. As a result, solutions such as Grab Business (ride hailing via a business account) are gaining popularity. Except for mature “fleet” countries (Japan, South-Korea, Australia, New Zealand), it’s likely that the trend, skipping leasing and adopting mobility solutions instead, will continue.
With over a million leased cars, Japan is by far the largest corporate fleet country in Asia, but the golden years are over. The fact that Japanese leasing companies (led by the 2 giants, Sumitomo and ORIX), have, far too long, not been innovating, is one part of the explanation. The other part is the development path of the Japanese industry: digitisation is replacing manpower and as a result, less cars are needed.
An new trend in Japan is mobility. The rest of the world might have become familiar with Didi, Uber, Lyft, Taxify or GRAB, none of these are available in Japan (except for Uber, which can be used as a taxi booking app in some cities). For the first time (the Tokyo 2020 Olympics definitely play a role here), mobility is on the agenda. Toyota and Nissan are leading the way in autonomous, Sony, Softbank and DoCoMO are investing in on-demand platforms, Tencent is looking over their shoulders.
Australia and New Zealand
The ANZ leasing ecosystem is recalibrating after the merger between salary-sacrifice leader McMillan-Shakespeare and leasing company Eclipx. The merged company is now on paper the largest corporate lease/novated lease supplier in the region. It seems to be that other Fleet Management Organisations or FMOs (the Australian denomination of a leasing company) are not giving up though. Rumours have started of some FMOs venturing in the mobility arena. Definitely more to come on this topic.
The trend of digitising fleet management is also continuing in Australia. The logistics sector has led the way – Australia is a big country and GPS tracking has been a necessity for years – and now we’re seeing spiced up versions appearing that help the Fleet Managers control and manage their fleets. Local software builders are successful and ambitious; we’re bound to see a new type of fleet management happening in Australia.
Change is the only constant factor in the world’s second largest economy. Urbanisation is continuing, so is the growth of the middle class. The Chinese Government has opened up the regulations for foreign companies (for sectors such as EVs, aviation, high tech), now able to create a company in China without a local partner. Despite all the trade war threats, the Chinese economy is booming and mobility needs are increasing.
At the same time, the Chinese Government is conscious of limiting the number of cars, especially those powered with a combustion engine. Electric is today’s way forward for China, hydrogen is on the agenda for tomorrow.
Corporates however are starting to realise that their employees are facing more trouble than ever before, to reach the office or visit customers. Congestion, lack of parking space, public transport that is perceived as not being comfortable enough for the middle class,… are factors contributing to the success of flexible solutions. OEMs are adopting new strategies whereby mobility solutions will be, in a first stage, an additional revenue stream, but ultimately the way forward. In 2019, this trend will most probably hit full speed on the supplier side and start gaining corporate traction.
For the Fleet Manager
Looking at Asia is no longer optional. If your company is global, its focus on Asia will increase. Count on your fleet or mobility expenditure to raise, your Asian counterparts to ask you for solutions that go beyond cash and to play a true role in increasing employee efficiency.