The Operational Leasing Market – Prospects and Trends

The Operational Leasing Market – Prospects and Trends

SMEs are our focus in the medium and long term and, in this respect, we are going to launch dedicated products and establish new White Label partnerships.

1. Where does the operational leasing market stand in 2016 in terms of growth and prospects?

For 2016, the operational leasing market witnesses a positive trend as the ASLO results reported for the first 9 months indicate more than 57,000 units, which further translates into a 7% growth compared to the same period of last year. We have witnessed a constant growth from one year to another and this is triggered, on the one hand, by the dedicated consultancy activities of the operational leasing companies and, on the other hand, by the customized mobility solutions they develop in order to best meet customers’ expectations.

The local operational leasing market does present significant growth potential and it is our main objective to identify those perspectives in order to capitalise on this opportunity. In this respect, with our dedicated products and White Label partnerships with the producers, we approach the segment of the SMEs whose owners start considering the benefits of the operational leasing. In parallel, our efforts are focused on raising awareness considering the logistical and financial advantages that this product can bring to their business.

2. What segment of the market was more dynamic in 2016 – was it fleet management or long-term car leasing? What are the prospects for the Romanian market regarding those sectors in 2017?

At the end of 2015, 80% of the contracts between ALD Automotive and its customers were full operational leasing, and the remaining 20% were fleet management ones. Our segmentation of the business lines reflects the industry pattern since, according to ASLO, 73% of company portfolios are full operational leasing contracts, whereas 18% cover fleet management, and the rest covers operational leasing without administration services. Compared to the previous year, we are witnessing a slight growth in terms of customers’ preferences for the full operational leasing contracts, which is accounted for by the fact that they have understood and grown more accustomed to the benefits of this product versus other forms of financing – predictability and transparency, as well as by the efforts made by major companies in the industry in terms of consultancy activities.

3. Have companies understood better the advantages of operational leasing in 2016? If so, how has this improved their businesses?

2016 appears to have been a positive year for the operational leasing market, especially if the ASLO estimates are reached by the end of the year. Most players have identified and capitalised on the growth opportunities in the market, and one such business line is that of the custom solutions created for addressing the needs of SME owners.

Moreover, for ALD Automotive, besides corporate customers, one of the main focuses has been the SME segment, which accounted for 18% of our portfolio in terms of number of customers and on which we focused much of our activities. Apart from the strategic White Label partnerships which we have launched, and intend on further developing, our team has offered consultancy services to SME business owners in view of helping them get an overview of operational leasing products. Up to this point, there are positive signs as we are witnessing interesting shifts in their approach and willingness to test mobility solutions tailored to their exact expectations and needs. Operational leasing products are designed as support solutions for businesses, providing mobility, flexibility, as well as predictability of costs. Business owners ought not to be surprised by extra bills at the end of the month, as there is a fixed cost per month associated to this service, which is an important benefit both for large company fleets, and for SME owners.

4. What are the main challenges and opportunities for the operational leasing market in 2017?

In 2017, one of the main opportunities for the market will remain the segment of the SMEs and the associated mobility solutions which operational leasing companies can create for them. Taking into account the fact that Romania is among the EU countries with the highest number of SMEs that consequently generate an important contribution to the GDP, the potential in addressing their needs by custom operational leasing products remains considerable.

Innovation and digitalization also represent one of the main challenges for both main players in the market and customers. There is a clear demand from clients who need quick access to a whole set of integrated data regarding their fleets under administration, and ALD Automotive has already implemented solutions for the customers in this regard.

Moreover, given the international trends whose adoption rate is on the increase in Romania, as well, we expect the environmentally friendly trend of electric and hybrid vehicles to grow given the recent support from the authorities in granting subsidies to city councils, public institutions or economic agents thanks to which they can access up to 80% of the amount necessary for implementing power charging stations for electric vehicles. Nevertheless, this will be synchronized with the aim of the European Union that, by 2030, all Member States should have reduced by 50% the number of conventional fuel vehicles and that, by 2050, these should have been progressively removed from the cities.

Another opportunity to be considered by operational leasing companies is telematics. Telematics has the potential to generate a range of favourable changes for all those involved in the automotive industry, users and car fleet managers alike, such an example being the reduction of costs and the improvement of the relationship with customers.

5. What makes ALD Automotive a leading company in your sector?

In our 11 years of presence and operation on the Romanian market, we have been investing all our efforts and capabilities in becoming better, being one step ahead of other players and meeting our customers’ expectations by way of quality services to the highest professional standards.

Given our consistent international expertise, we, at ALD Automotive, have the know-how needed for implementing and designing up-to-date mobility solutions that bring added value to our customers in Romania. Our commitment to our customers, fleet managers and drivers can also be seen in the digitalization of our services in order to help them enjoy the experience of our operating lease products to the utmost. Thanks to our digital set of products, fleet managers have real-time access to the resources under their administration and can optimize their allocation more effectively.

We are also concerned about drivers’ safety and, in this respect, we have a partnership with the Titi Aur Academy thanks to which users can take defensive driving classes and can also learn ways in which to contribute to environmental protection during the eco driving sessions. Moreover, vehicle maintenance is performed only in authorized service workshops and the units are equipped with premium tires unless the customers specifically choose a different range.

Our constant performance in terms of financial results and market share contributes to our positioning among the leading companies in the local operating lease industry. Nevertheless, this drives us to achieve a very good quality in everything we do, to set new standards in terms of customer service and to innovate our activity. In achieving all this, we rely on our team of professionals and its vast expertise.

6. ALD Automotive offers services and solutions in 53 countries – what would you say are the main similarities and differences between Romania and other countries in your business?

Both directly and through business partnerships, ALD Automotive offers its services and solutions to customers in 53 countries. In Romania, the company was established in 2005 and has benefited from the very beginning from the international expertise of the group, identifying the opportunities and trends whose implementation would generate immediate and long-term benefits for its Romanian customers, too. Over the years, we can say for sure that European trends are becoming increasingly visible on the local market as well, which is also supported by our customers’ openness and demand.

Of course, the operational leasing industry is better developed in Western European countries where nearly 75% of corporate customers choose to outsource these services to specialized companies. Likewise, the range of available services differs from one country to another given the different cultures and development levels. For example, in Europe and China, ALD Automotive manages 8,000 electric vehicles and more than 30,000 hybrids, while, in Romania, customers’ focus on environmentally friendly vehicles has only just started growing since last year.

Another difference between international markets and the Romanian market has to do with the degree of penetration of operating lease services in the SMEs segment. There is still room for improvement since it was only last year that operational leasing products started gaining ground in this direction, as opposed to other markets abroad where the things are already looking better. SMEs are our focus in the medium and long term and, in this respect, we are going to launch dedicated products and we are going to establish new White Label partnerships with the producers in order to be their preferred option when choosing this financing product.

7. At global level, ALD Automotive has proudly recorded an 8% annual growth in the last 10 years. What are the dynamics and forecasts for Romania?

Our activities for 2015 have generated a total turnover of EUR 30.5 million, based on the international financial reporting standards, thanks to our portfolio, which is on the rise, with customers from different industries – pharmaceutical and financial services, FMCG and telecommunications. This gives us grounds for an optimistic outlook of reaching our projections for this year for all of our business lines. For the first nine months of the year, we have a 10% increase in our full service operational leasing portfolio, which keeps us in line with achieving the targeted annual growth in full service leasing by the end of the year. For the future, our aim is to sign new partnerships, continue focusing on SMEs and improve and develop new tools and apps that might facilitate mobility for our customers and quick access to information anytime, anywhere.