1. ALD Automotive has 10 years on the local market. What did they mean for the company and the operational leasing market?
Indeed, it is a very special year for us. 10 years ago, ALD Automotive was one of the first international operational leasing companies on the Romanian market. Now we are amongst the leaders of the field and our results prove that we have a major role in the development of the field. We invest in the quality of our services and we have earned the trust of our customers, as a partner they can rely on. Thus, a very big part of our clients have been with ALD Automotive since 2005, which only comes to reconfirm the quality of our services and our ability to always reinvent ourselves.
During these past 10 years we have influenced the market with our innovations, such as the eco initiatives, mobile applications, online reporting tools, customer care services and exclusive partnerships. In 2005 we started with a team of 12 people and ended the year with a fleet of 170 cars. Since then, we have continued to grow and, entering into 2015, we had a market share of 17%, 8,386 vehicles in our fleet, almost 270 clients and 63 employees. These are important results which once again proved the success of our client centred business model, based on innovation and quality. At the end of 2015, we hope to see further growth, reaching over 9,000 vehicles in our portfolio and over 300 clients.
We have constantly reinvented ourselves and developed at the same pace as the market. In the meantime, new competitors came along and this determined a growth in the quality of services, for the benefit of our clients. This competition is favourable to a healthy development of the market and makes us more attentive, more dedicated and always a step forward. We want every manager to have the ideal solution for his company and this will always be a personalised solution, adapted to the particular needs of every field.
From an international perspective, Romania still has a long way to go in order to reach the European performances. Nevertheless, it is a service that grows every day and a financing method that constantly grew in the past 10 years, no matter of the economic crisis. This shows us that a big part of the companies in Romania begin to better understand the advantages of such a service, which insures an efficient business through adaptability, mobility and cost predictability.
2. How much has ALD Automotive developed this year? How was the evolution of the operational leasing market?
The operational leasing market has registered very good results in the past 10 years, with constant positive evolution. The most recent reports show a good 16% growth in the first semester of 2015, compared to the same period in 2014, a phenomenon based on a general economic growth and development of the auto market. This climate has led to a more secure business environment and gave clients and investors more confidence which I am sure we will lead to positive results at the end of 2015.
At the same time, ALD Automotive has continued its constant development and this year we have had a 12.1% growth in the first 6 months compared to the same period last year. We remain optimistic about our end of 2015 results and, continuing this growth path, we should see an end of year fleet in excess of 9,000 vehicles.
ALD Automotive keeps developing thanks to its solid portfolio of multinational companies and also to our new focus in 2015: SMEs. For these type of companies, we have created special operational leasing programs and our sales consultants give them personalised advice according to their line of work. During 2015, we have also created the first white label operational leasing product, in collaboration with Toyota Romania. Leveraging on the international partnership, we decided to expand this operational leasing solution to Romania and we are convinced it will have a very positive influence on the local operational leasing market and, in particular, the SME segment.
3. Do local and international companies know the advantages of operational leasing? What are the benefits that can turn into investment decisions? What advantages are less known at the moment?
Operational leasing is a well-known service at an international level, so 10 years ago, when the market started to grow in Romania, managers of multinational companies already knew the benefits and thought this as the most efficient solution for their fleets. Consequently, our first clients were major companies with offices in Romania. With big fleets, they appreciate mobility, our consultancy services, the 24/7 assistance, our reporting tools that help them oversee costs and a full outsourcing of a non-core business activity. They also appreciate our international know-how and the standards of our business model.
When it comes to SMEs, we are still in the early stages, when they start to know the service and its advantages. A key finding of a study done by ALD Automotive and Nielsen last year was the desire of the operational leasing clients for full mobility and cost reduction solutions. They also choose operational leasing for the costs predictability and opportunity to operate with a fixed monthly rate. These are important advantages that help us convince our clients to choose operational leasing no matter the size of their business.
The lesser known advantages of operating leases are perhaps the fiscal ones. As ALD Automotive is the owner of the vehicles, these are recorded as assets in ALD’s accountancy, while the customers only need to record operating lease expenses rentals for these vehicles. As a consequence, the total assets value in customer`s accountancy is diminished by the value of the vehicles, thus the profitability ratio of Return on capital employed increases.
Furthermore, depreciation expenses do not arise, as the customers do not record assets, and operating lease expenses are fully deductible if they fall within one of the exceptions to limit stipulated by current regulations or are used exclusively for business purposes.
Moreover, customers save time and resources, obviating the need for additional resources to manage invoices for purchase, registration, maintenance, insurance of the vehicles, as they will only receive a single monthly invoice for all the vehicle related costs.
4. What is the profile of the operational leasing client? What are their expectations?
The results of the ALD market study in 2014 performed by Nielsen showed not only a profile of the operational leasing client, but also the benefits they appreciate.
Data shows that operational leasing is mainly preferred by clients with more than 50 cars and is primarily used for cars which, at the moment, have 1-3 years of use. Also, 10% of the respondents showed their clear intention and mentioned as probable to buy cars through operational leasing in the following 12 months, while 27% of them were not yet decided. Managers of these fleets are interested in mobility, TCO and fiscal benefits of operational leasing.
Although the study shows that most of the operational leasing clients are medium and large companies, we can foresee a new type of customer: SMEs, a segment we are very interested in this year and which opens up new development opportunities.
5. What can be made better in legislative terms for your market, so that we will see stability and long-term growth?
As any other market, operational leasing is influenced by the political or legislative and even macro-economic changes. Over the last 10 years, the market has suffered different legislative changes – which has led to complications in the operational leasing offer – such as: changes in the values of RCA and conditions for such insurance, limitations on the depreciation deductibility levels and the environmental stamp. Nevertheless, we have registered growing numbers and this trend will be visible also in the future, as companies appreciate more and more the benefits of operational leasing and the effect of this service on the efficiency of the business.
As for legislative changes in 2015 and 2016, there are two important ones that need to be considered. Firstly, there is the change in VAT levels for second hand cars and efforts made by ASLO and APIA to bring some regulations on the market, as well as subventions for eco cars. As for the evolution of second hand car trading, the two associations intend to propose hardening the legislation so that it better sanctions acts such as mileage alteration and fraud. These measures will mean a decline in second hand cars sold on the market and a new focus on new cars or second hand cars sold through authorised dealers or specialised bidding platforms.
Also, a recently approved project from the Romanian government is the one regarding the subventions for electrical cars. These subventions will be given as eco-tickets from the Environment Fund. The eco-ticket is 20,000 lei for an electrical vehicle and 5,000 lei for a hybrid vehicle. These subventions are an important drive for selling eco cars, a new trend on the Romanian market, but a very popular one in Western Europe.
6. What are your predictions for the market in 2016?
At the end of the first semester in 2015, the operational leasing market has registered a 16% growth compared to the same time in 2014. In retrospect, in the past 4 years, the market has registered a medium growth of 11%. The re-launch of investments based on the European funds absorption, economic stability, increase of the auto market, leads us to believe that we will also have good figures for the operational leasing market for next year, as well.
Also, a very important tendency in 2016 will be cost efficiency and operational leasing fits this context very well. It is a financing method which offers security and budgetary predictability and we are certain more and more managers will use it for their auto fleets.