Results from independent market analyst Datamonitor’s European Fleet Lessor Database 2004 show that vehicle manufacturers now control 42% of the operational leasing operations in Europe’s five leading company car markets, significantly higher than their penetration of three years ago.
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Comparing individual countries, all countries recorded at least 40% penetration, the key exception being the UK which lacks any major domestically-owned vehicle manufacturers. In Datamonitor’s view, this will likely continue. Besides vehicle manufacturers having a natural competitive advantage in providing cars at a lower cost compared to fleet lessors, several banks have exited the fleet leasing sector, citing that margins in the business are not high enough compared to other investment opportunities.
According to Datamonitor, vehicle manufacturers have the greatest chance of capturing the relinquished share.
The vehicle manufacturers have made no secret of the fact that they have wanted to penetrate the operational leasing market in Europe. In their initial strategy, vehicle manufacturers utilised their captive finance houses such as Ford Credit or GMAC. These companies then became subsidiary entities to specifically target the fleet sector.
However, whilst successful to a point, vehicle manufacturers were always aware that a mono-marque fleet capped their potential with regards attaining market share. Hence they launched multi-marque fleet entities to essentially target the growing number of companies that sought greater variety within their fleet vehicles.
A key example of a successful multi-marque operation is Alphabet. Launched in 1997 by BMW, the company had expanded to 12 countries in 2004, with an overall fleet size of nearly 80,000 vehicles. Other vehicle manufacturers to travel down this route are GMAC with Interleasing (in the UK) and Masterlease in Europe whilst Ford utilised its highly successful Hertz brand to launch Hertz Lease which was subsequently sold to ALD Automotive in 2003. In 2004 VW, with partners, purchased Lease Plan, the largest and arguably the most recognisable operational lessor in Europe.
According to Datamonitor, in the future, vehicle manufacturers are likely to further penetrate the operational leasing market. Firstly, vehicle manufacturers have always wanted to source more information on their end-users. By increasing their penetration of the fleet sector, they are likely to be able to achieve this. Secondly, in recent years, many banks have exited the fleet leasing sector, citing that margins in the business were not high enough compared to other investment opportunities. If this trend continues, then it is likely that vehicle manufacturers have the greatest chance of capturing the relinquished share. Lastly, vehicle manufacturers have a natural competitive advantage in providing cars at a lower cost compared to fleet lessors.
Zafar Currimbhoy, Datamonitor fleet analyst and author of the study said: “One of the key competitive advantages that banks possess over vehicle manufacturers is the relationships that banks have developed with their fleet clients over many years. Attracting this customer base will be a key challenge for vehicle manufacturers, although not impossible – VW just bought the customers. Given all of the above, it seems that the odds are stacked in favour of the vehicle manufacturers although given the competitive nature of the fleet market, their share is likely to creep up than to leap forward.”
