Fleet management in Europe - Growing importance in a world of changing mobility - Deloitte

 
Fleet management in Europe - Growing importance in a world of changing mobility - Deloitte
Fleet management in Europe
Growing importance in a world
of changing mobility
Fleet management in Europe - Growing importance in a world of changing mobility - Deloitte
Fleet management in Europe - Growing importance in a world of changing mobility - Deloitte
Fleet management in Europe |
                                                      Growing importance in a world of changing mobility

Preface                                                                                05
Relevance of fleet management                                                          06
Key players in the fleet management market                                             18
Selected M&A activities of market leaders                                              24
Business model analysis                                                                30
Future of Mobility and implications for fleet management                               40
Strategic fields of action regarding fleet management                                  50
Conclusion                                                                             52

                                                                                                      03
Fleet management in Europe - Growing importance in a world of changing mobility - Deloitte
04
Fleet management in Europe - Growing importance in a world of changing mobility - Deloitte
Fleet management in Europe |
                                                                                                   Growing importance in a world of changing mobility

Preface
Fleet management has developed into                are, and what will be the future drivers of       We hope you enjoy reading our insights
a multi-billion-euro industry in Europe            the corporate car market. Furthermore,            and thoughts on this increasingly impor-
in recent years. More importantly, the             the study names the key players in the            tant segment of mobility.
fleet management business continues to             industry, which main M&A activities have
grow and is gaining significant strategic          recently characterized consolidation in the       Sebastian Pfeifle
importance in a world of changing mobility.        industry, and what implications the main          Partner | Strategy & Operations
Particularly when we think about two of the        trends in the automotive industry with
main trends which are most likely to sub-          regard to the Future of Mobility will have        Christopher Ley
stantially influence the future of the auto­       for fleet management. Our study concludes         Senior Manager | Strategy & Operations
motive industry: firstly the trend towards         with a summary of major strategic impli-
sharing instead of owning and secondly             cations and respective fields of relevant         Florian Tauschek
the trend towards self-driving vehicles. It        actions required of the various players in        Senior Consultant | Strategy & Operations
comes as no surprise that more and more            the fleet management business.
OEMs are actively pursuing opportunities                                                             Philipp Enderle
in the multi-brand fleet management                Although fleet management is turning              Consultant | Strategy & Operations
market.                                            more and more into a global business
                                                   and several of the largest players in the
Historically, the business was largely dom-        segment are now able to offer fleet man-
inated by fleet management companies               agement services globally (mostly through
fully or partially owned by large banks. And       cooperation), we have chosen to focus this
today, several of the largest players still are.   study exclusively on the European market.
In recent years however, several OEMs have         Europe is by far the largest market for fleet
(re-)entered the multi-brand fleet manage-         management globally and also in many
ment market, or substantially expanded             regards the most advanced. Despite the
their operations.                                  fact that other fleet management markets
                                                   such as North America, for example are
In this study we will explain in greater depth     characterized by distinct differences as
why the strategic relevance of fleet man-          compared to the European market, we
agement will continue to grow, what the            believe that the major findings of our study
key characteristics of the business model          will ultimately also have relevance on a
                                                   global scale.

                                                                                                                                                   05
Relevance of
fleet management
Today, the ability to manage and operate
fleets of multi-brand vehicles is a highly
profitable business. Tomorrow,
it will be a key capability to be successful
in the Future of Mobility.

06
Fleet management in Europe |
                            Growing importance in a world of changing mobility

                                                                            07
The automotive market in Europe is charac-       Historically, companies used to own their
terized by two major customer segments.          company cars and manage their fleets in-
Almost all new vehicles sales are either reg-    house. In recent years this has drastically
istered to private or to corporate custom-       changed, with more and more companies
ers (leaving a small number of registrations     buying full-service leasing contracts
for e.g., governments). Both segments and        instead of vehicles to reduce fixed assets
their respective requirements have experi-       and accordingly their total assets, while
enced continuous change in recent years.         transferring the residual value risk of the
                                                 vehicles to external parties. In addition,
Today, nearly two out of three new cars are      more and more companies outsource the
sold to the corporate channel. The majority      management of their fleets to specialized
of these vehicles are registered as company      companies with the aim of realizing further
cars, i.e., as corporate car pools or corpo-     cost reductions.
rate fleets and this segment is therefore
called “true fleet”. Companies have vehicle      A fleet management company (FMC) typi-
fleets for various reasons, of which the         cally offers services over the entire life cycle
most obvious is because they are needed          of a vehicle, including purchasing, financing/
for the business objective (e.g. service cars    leasing, and services, as well as reselling the
or sales cars). Another important factor in      vehicle on termination of the contract (see
Europe is the high relevance of employee         Figure 1).
cars that are offered as a form of compen-
sation (benefit in kind). This model is rather
unique in a global perspective. The main
motives may be found in the favorable
treatment for tax purposes and also in
behavioral motives (e.g., status thinking).

Typical fleet management
service offerings cover the
entire vehicle lifetime.

08
Fleet management in Europe |
                                                                                    Growing importance in a world of changing mobility

Fig. 1 – Typical fleet management service offering

                                                     Contract
                                                     opening

                                       Vehicle                                (New) vehicle
                                     remarketing                                selection

                      Contract
                                                                                                 Financing /
                     management
                                                                                                   Leasing

                                                               €

                    Driver support                                                           Registration and
                                                                                                 delivery

                                        Fuel                                    Repair,
                                     management                               maintenance
                                                                               and tires

                                                      Insurance

Source: Deloitte analysis

                                                                                                                                    09
Fig. 2 – Average total cost of ownership for company car in Europe

                                                           2% 2%
                                        8%

                                                                     41%
              12%

             15%

     Depreciation                                           20%
     Fuel
     Repair, maintenance, tires, and roadside assistance
     Interest
     Insurance
     (Road) tax & fees
     Management fee

Source: Global Fleet (2015)

10
Fleet management in Europe |
                                                                                                  Growing importance in a world of changing mobility

From a customer perspective the total cost        price environment. Furthermore, providing
of ownership (TCO) is the key to identifying      fuel cards can lower fuel expenses by a few
cost saving potential and reducing operat-        percentage points. FMCs also leverage their
ing expenses. Figure 2 shows a typical TCO        service and maintenance network to offer
split for a European fleet vehicle. Deprecia-     better prices than authorized or OEM-affil-
tion takes the largest slice over the lifetime    iated repair shops, in order to reduce the
of a company car. Fuel costs make up              TCO costs for FMC customers.
about 20% of the TCO while maintenance,
tires, and repair management add up to an         Today, more and more companies tend
additional 15%. Interest expenses comprise        to analyze and optimize the total cost of
12% of total costs. The remaining costs can       mobility (TCM) rather than the TCO. While
be attributed to additional services and          the TCO gives a cost calculation per vehicle,
management fees.                                  the TCM is calculated per mobility user
                                                  (employee) and takes holistic multi-modal-
In total, only 40% of the TCO is related to the   ity mobility models into account. The TCM
actual vehicle, 60% of the costs are incurred     calculation considers all costs ranging from
during the use of the vehicle itself.             the vehicle itself and its related costs to
                                                  other mobility options such as taxis, flights,
Fleet management companies pursue a               car sharing, or rental cars.
strategy of reducing these costs for their
customers. To tackle the key cost drivers,        Most recent innovative products from fleet
FMCs follow different approaches. Their           management companies focus on the TCM
large purchasing volumes grant them a             and offer comprehensive solutions for their
strong market power to negotiate high             customers to reduce their total cost of travel
discounts with OEMs. Price reductions             expenses and fleet-related costs rather
of 15–25% are quite standard. Profound            than just TCO.
knowledge about residual values and
remarketing enables FMCs to achieve               While doing so, fleet management compa-
higher remarketing prices for their used          nies are expanding their core competencies
cars. Part of these gains is passed on to         from vehicle management to total mobility
customers, helping to reduce monthly              management.
charges and leading to a highly competitive

                                                                                                                                                  11
Europe is dominated by
the corporate channel –
new car sales are
shifting from private to
corporate.

          Smartphone                                                    79%
                                     eher ja
                                                                               47%
                Tablet                                              44%

        Fitness-Tracker              eher nicht
                               8%
                               32%

               Pulsuhr    5%

                               21%   auf keinen Fall

          Smart Watch     4%

                                               Smartwatch       Fitness-/
                                                            Gesundheits-Apps

12
Fleet management in Europe |
                                                                                                Growing importance in a world of changing mobility

In Europe, the corporate channel has            By 2021, Deloitte forecasts a share of new        Sales to corporate channel:
overtaken the private channel as the most       car registrations of 37% for the private and
important one. While the overall number of      63% for the corporate channel. With total
new vehicle sales has steadily grown with       registrations expected to exceed the 16
only one small decline in 2013, the split       million mark, Deloitte expects more than
between private and corporate sales has         10 million new corporate car registrations
shifted in favor of the corporate channel.      in Western Europe in one year for the
                                                first time. This equals a compound annual         OEM:
Overall, the private market segment share       growth rate (CAGR) of 3.5% between 2016           OEM self registrations (to employees)
is declining. In 2010 the private and corpo-    and 2020 or almost double the growth rate
rate market segments were almost equally        of the overall European car sales market.
large in Western Europe (7.3 million private    This further increase in corporate regis-
vs. 7.2 million corporate car registrations).   trations implies an increasing number of
Since then there has been an increasing         corporate fleets and company cars which
market shift towards more corporate car         need to be managed and therefore provide
registrations. In 2016 there was already        a major business opportunity for fleet            Rental:
a split of 6.3 million private (42% of total    management companies.                             Rental cars (short, medium, and long-
registrations) vs. 8.7 million corporate (58%                                                     term rental)
of total registrations) registrations. This     Although the general market shift towards
increase can be mainly explained with the       corporate is clear throughout Europe, there
economic recovery and growth of Western         are strong regional differences between
Europe. In addition current low interest        countries, resulting in different corporate
rates permit attractive financial incentives    penetration rates. The differences between
(e.g., leasing) for companies to expand their   the five largest European markets, Germany,
fleets.                                         France, UK, Italy and Spain are shown in          True fleet:
                                                Figure 4.                                         Corporate fleets with or without
                                                                                                  full service leasing

Fig. 3 – New car registrations in Europe (EU16) in millions

       17                                                                                                                                             10
       16
                                                                                                                                                       9
       15
       14                                                                                                                                              8
       13
                                                                                                         Growing                                       7
       12
                                                                                                         commercial
       11                                                                                                                                              6
                                                                                                         business
       10
                                                                                                         ~63%                                         5
~56%    9
        8                                                                                                                                             4
        7
                                                                                                                                                      3
        6
        5                                                                                                                                             2
                                                                                                         Shrinking
        4                                                                                                                                             1
                                                                                                         private
~44%    3
                                                                                                         business
        2
                                                                                                         ~37%                Total OEM & Rental
        1
                                                                                                                             Total True Fleet
        0
             2012     2013     2014     2015    2016      2017e   2018e   2019e     2020e    2021e                           Total Private

Source: Deloitte analysis, Dataforce (2016), LMC (2016)
                                                                                                                                                13
Fig. 4 – Overview of fleet management specifics in EU countries

                                                                                    Share of true
                                                                                                     Trend of true fleet
Country             True fleet registrations                                        fleet to total
                                                                                                     relevance
                                                                                    registrations

            2020e                                                       1,179,055   41%

            2016                                                      1,132,727     38%

            2012    		                                    862,900                   37%

            2020e                                               991,752             29%

            2016                                            924,305                 27%

            2012                                      831,115                       25%

            2020e                                   814,303                         32%

            2016                                 751,561                            32%

            2012                             682,605                                30%

            2020e                    529,159                                        23%

            2016                430,489                                             23%

            2012           335,028                                                  22%

            2020e         319,406                                                   21%

            2016         277,081                                                    21%

            2012               183,574                                              24%

Source: Deloitte analysis, Dataforce (2016), LMC (2016)

14
Fleet management in Europe |
                                                                                                                Growing importance in a world of changing mobility

Description                                                                           Drivers

•• Total number of new vehicle registrations is expected to                           •• Growth in salary sacrifice models 2
   increase to 2.9M by 2020                                                           •• Recent changes in “benefit in kinds” taxation might soften
•• Total corporate market segment (OEM & Rental + Fleet) is                              further corporate growth 2,3,4
   expected to increase from 59% (1.3M cars) in 2012 to 63%                           •• Uncertainty of BREXIT negotiations might harm future
   (1.8M cars) in 2020                                                                   growth in new car registrations
•• Historically leasing segment in Britain is very strong; relatively low share       •• Employment growth
   of OEM & rental segment

•• Total number of new vehicle registrations in Germany                               •• Economy and employment growth boosts further
   expected to increase to 3.5M by 2020                                                  corporate demand
•• Corporate market segment expected to increase from 63% (2.1M cars)                 •• High share (10–30%) of OEM self registrations5
   in 2012 to 69% (2.4M cars) in 2020                                                 •• Company car as strong status symbol commonly used
•• Germany has a high number of short term OEM self                                      as extra incentive
   registrations to sidestep recommended sales prices of OEMs and                     •• Company cars are tax beneficial under the one-percent-­
   to give discounts to end customers                                                    regulation

•• Total number of new vehicle registrations is expected to increase to               •• Domestic market of large French full service leasing providers
   2.5M by 2020                                                                          (Arval, ALD Automotive, PSA's “Free2Move”)
•• Corporate market segment is expected to increase from 51%                          •• Real disposable income expanding
   (1.1M cars) in 2012 to 56% (1.4M cars) in 2020                                     •• Employment growth
•• French market has a strong tradition of long-term rental
   (Location Longue Durée (LLD)) and short-term rental offerings
   and therefore a strong rental segment

•• Total number of new vehicle registrations is expected to increase                  •• Economic situation still worse than before the crisis
   to 2.3M by 2020                                                                    •• Only gradual economic recovery
•• Only market within the Top 5 in which private market segment outweighs             •• Although Italy has the most companies (~4.3M) of the Top 5 markets,
   corporate segment                                                                     the majority of them (~4.1M) are below 10 FTEs and have therefore no
•• Corporate market segment is expected to decrease from 41% (600k cars)                 significant company car fleets6
   in 2012 to 38% (900k cars) in 2020
•• Italian market has a strong tradition in rental services (e.g. due to tourism)

•• Spanish market is the smallest within EU Top 5                                     •• Political program (“PIVE”) to support the continued modernization
•• Total number of new vehicle registrations is expected to increase to                  of the nation's motor vehicle stock ongoing7,8
   1.5M by 2020                                                                       •• Households are less wealthy than before recession
•• Penetration of external fleet management services within fleet registrations       •• Purchasing power of households is still recovering
   is high with many small and medium-sized companies active in this segment
•• Spanish market has a strong tradition in rental services
   (e.g. due to tourism in particular on the Spanish islands)

                                                                                                                                                                15
Future drivers of the
corporate car market
Apart from the economic, demographic, and political drivers
outlined, which are mainly country-specific, Deloitte foresees two
main drivers affecting the future development of the European
corporate car market across Europe.

Accounting standards
Beginning in January 2019 the International
                                                 The European Union came to an agreement
                                                 to reduce the overall CO2 emissions by 80%
                                                                                                  The trend towards green
Accounting Standard Board (IASB) will re-        up to 2050, compared to the base year of         is a ticking time bomb for
quire companies to disclose leased assets
in their balance sheets and also to recog-
                                                 1990. To achieve this ambitious goal, the EU
                                                 Commission defines, besides many other
                                                                                                  FMCs and captives. For
nize liabilities for future rental payments.     rules, also binding limit values for the CO2     these companies it will be
For company cars financed with operating
leases, this is a major change. Up to now,
                                                 emissions of new cars. Currently they are set
                                                 at 95 grams/ CO2 per kilometer by 2020. A
                                                                                                  more and more compli­
these assets and liabilities could be kept off   limit which Deloitte expects to decrease to      cated to find enough
the balance sheet so as to disclose a low
debt-to-equity ratio to enable easier access
                                                 ~84 grams/ CO2 per kilometer by 2030 and
                                                 ~56 grams/ CO2 per kilometer by 2040.10
                                                                                                  customers for used diesel-
to funding. The change in accounting                                                              engined cars when their
standards described considerable effects
on corporate car markets.9
                                                 Furthermore, in September 2017 the
                                                 new Worldwide Harmonized Light Duty
                                                                                                  lease contracts expire –
                                                 Vehicles Test Procedure (WLTP) will be           sending their residual
Green
Apart from changes to accounting stand-
                                                 introduced.11,12 This new testing regime
                                                 was jointly developed by experts of the EU,
                                                                                                  values on a downward
ards, there is a second major factor affect-     Japan, and India to provide a more realistic     slide.
ing the fleet market, driven by regulation.      picture of real vehicle emission and fuel
No matter which country is selected, green       consumption.
initiatives are ongoing everywhere, which
will have a considerable impact on future        Vehicles which do not comply with the
corporate fleets.                                defined limits will be affected by driving
                                                 bans and higher taxes. As a result Deloitte
                                                 expects the share of low emission vehicles
                                                 in corporate fleets to increase sharply within
                                                 the next years.

16
Fleet management in Europe |
                                                                                               Growing importance in a world of changing mobility

Fig. 5 – Expected future development of CO2 emission limits in Europe

     Gram                                                                                              Gasoline
                                                   - 80%
CO2 per km                                                                                             per 100 km
                                  7.0
                                                                                                          7.0
     160
                 6.0
                                         5.6                                                              6.0
     140

     120                                                                                                  5.0

                                                     4.1
     100
                                                                 3.6                                      4.0

       80                     164
                                                                                                          3.0
                 140
                                        130                                   2.4
       60

                                                     95                                                   2.0
       40                                                        84
                                                                                              1.2
                                                                              56
                                                                                                          1.0
       20
                                                                                              28

        0                                                                                                 0
                1990          2007      2015       2020         2030e        2040e          2050e

Source: Deloitte analysis 10,13

    Deep dive – Regional Regulatory Impacts

    United Kingdom:                              continue to enjoy the benefit of re-                         ­ tuttgart.16 At the beginning of
                                                                                                    hicles in S
    Salary sacrifice is a strong driver for      duced taxation. Deloitte therefore ex-             May the city of Hamburg also intro-
    company cars/ fleet sales due to rela-       pects a sharp increase in hybrid and               duced bans for two main roads in the
    tively high tax incentives. The UK is dis-   battery-electric vehicles in UK’s corpo-           center.17
    cussing the adjustment of Benefit in         rate fleets.14,15
    Kind (BIK) taxation, based on the new                                                           If other cities follow the role models of
    WLTP, threatening company car drivers        Germany:                                           Stuttgart and Hamburg, this will have
    with an increase of up to 30% in BIK.        Many German cities are currently dis-              enormous consequences the German
    Deloitte expects that around 50% of          cussing driving bans for certain inner-­           corporate vehicle park – currently
    the 970k British employees paying BIK        city areas for vehicles not meeting the            ~80% of it is running on diesel. Shares
    on their car will be affected by these       latest Euro 6 emission standards, so as            of PHEVs and hybrids as well as BEVs
    planned changes. The significance of         to achieve CO2 and NOX emission                    are expected to rise significantly in
    this change for the whole corporate car      standards defined by the EU. The city              Germany too.18
    sector in UK becomes obvious if this         of Stuttgart recently went ahead and
    number is put into perspective with          decided to put such a ban in place
    the total corporate registrations of         starting in January 2018. Only diesel
    1.7M in 2016.                                vehicles meeting Euro 6 standards
                                                 (with the exception of delivery vehicles
    Only ultra-low emission vehicles with        and certain craftsmen) will be allowed
    emissions
Key players in the
fleet management
market
Fleet management has historically
been dominated by banks, with
OEMs now entering the market.

18
Fleet management in Europe |
                            Growing importance in a world of changing mobility

                                                                            19
Historically, fleet management companies         The structure of many fleet management
in Europe grew out of the banking industry.      companies has changed in recent years.
Banks identified vehicle leasing as an asset-­   The European market leader LeasePlan,
based business model with profitable in-         for example, was founded as a subsidiary
terest margins, the potential for additional     of ABN Amro banking group but later
recurring service revenue, and manageable        became owned in an equal joint venture
risk. In addition to banks, some OEMs grew       between the German Metzler Bank and the
naturally into fleet management, evolving        Volkswagen Group. In 2016, the previous
from retail leasing contracts to managing        owners sold LeasePlan to a consortium
and financing large corporate fleets lever-      of institutional investors led by a Dutch
aging the financial power of their captives.     pension fund.19

Leading European bank-backed fleet man-          In a highly consolidating market today, the
agement companies are Arval (owned by            Top 5 players in Europe own more than
BNP Paribas Group) and ALD Automotive            50% of the market. Figure 6 compares the
(owned by Société Générale). Leading             key players in Europe.
captive related multi-brand FMCs are
Alphabet (BMW FS) and Athlon (Daimler
FS) and most recently PSA’s “Free2Move”.
Volkswagen Leasing (VWFS) is a major
player in that field but is, despite having
recently acquired CarMobility!, currently
rather focused on its own group brands
and is therefore not analyzed in further
detail in this study.

20
Fleet management in Europe |
                                                                                             Growing importance in a world of changing mobility

Fig. 6 – Top 5 fleet management companies in Europe

                                 Units in operation
                                                           HQ                          Shareholder                 Recent transactions
                                 (as of 2016)

                                                                                       LP Group B.V.,              LP Group BV’s
                                 >1,600,000                Amsterdam,
                                                                                       consortium of institu-      acquisition of
LeasePlan                        (~70% in EU)              Netherlands
                                                                                       tional investors            LeasePlan Corp NV for
                                                                                                                   €3.7 billion

                                                                                       100% subsidiary of          May 2016, ALD
                                 >1,400,000                Clichy,
                                                                                       Société Générale            Automotive acquired
ALD Automotive                   (~90% in EU)              France
                                                                                       Group                       Parcours SAS for € 300
                                                                                                                   million

                                 >1,000,000                                                                        June 2015, Arval
                                                           Rueil-Malmaison,
                                 (>3 million with global                               100% subsidiary of          acquired General
Arval                                                      France
                                 partner Element)                                      BNP Paribas Group           Electric's European
                                                                                                                   fleet business

                                 Units in operation
                                                           HQ                          Shareholder                 Recent Transactions
                                 (as of 2016)

                                                                                                                   September 2011, Alpha­
                                 >650,000                  Unterschleißheim,           100% subsidiary of
                                                                                                                   bet acquired ING Car
Alphabet                         (~90% in EU)              Germany                     BMW Group
                                                                                                                   Lease, a subsidiary of ING
                                                                                                                   Group for €637 million

                                                                                                                   July 2016, Daimler FS
                                 >340,000                  Machelen,                   100% subsidiary of
                                                                                                                   acquired Athlon for
Athlon                           (all EU)                  Belgium                     Daimler Financial
                                                                                                                   €1.1 billion
                                                                                       Services AG

Source: Deloitte Analysis, mergermarket.com, Annual Reports, Company Websites
                                                                                                                                             21
Strong consolidation
in last years led to 5
major players having
>50% market share

Market is consolidating                        Economies of scale
In the past 15 years a strong consolidation    Secondly, scaling effects can be seen.
has started within the European fleet          FMCs identified size as a prerequisite to
market which is still ongoing. More than 50    benefiting from economies of scale and to
acquisitions formed a concentrated market      reducing their operating costs per contract.
where the Top 5 companies own more than        In addition, high volumes lead to strong
50% of the total European market.              purchasing power over suppliers (such as
Three main reasons in particular are driving   OEMs and fuel providers).
this trend:
                                               Investment case
Cross-border service offering matters          Banks and private equity funds appreciated
The main reason for the consolidation          the high profit margins and relatively low
process can be seen in the companies’          risks of fleet management business and
growth strategies. Multinational customers     started to acquire FMCs as strategic invest-
demand a pan-European service coverage         ment cases in times of low interest rates.
to serve their European subsidiaries and
employees with a seamless service level        Ongoing consolidation
even across boarders. Strong competition       As a result the independent medium-­
to become the European leader in fleet         sized pan-European players like Athlon or
management started a race which can            Parcours have all been acquired and this
hardly be won by pure organic growth. The      sub-segment has effectively vanished.
acquisition of existing companies and their    The European FMC market today can be
fleets became a lever to quickly increase      se­parated into a group of five large pan-­
portfolio size, product offering and geo-      European providers and a large number
graphic coverage.                              of fragmented domestic companies rarely
                                               having more than 30,000 cars under
                                               management.

22
Fleet management in Europe |
                                                                                               Growing importance in a world of changing mobility

Fig. 7 – Strong consolidation in European fleet management market

                                         Automotive Service
                HLA                                                    ARI                     Daimler Fleet Management
                                              Group
                            ING Car Lease

                                               LHS                LeasePlan                 FleetLogistics
                            Fleetlevel
                                                                                                Car Professional
                                            Athlon                        GE Capital
                                                                                                 Management
                                                          Parcours
                                                                                       TÜV Süd
                                             ASG

                                                                                Fleet Company
                                              Masterlease

                                                          HPI           Alphabet

                                                                  Arval

                                                              ALD Automotive

                                                            Deutsche Leasing

                ALD Automotive                                                                  Alphabet
                                            Athlon                                       LeasePlan
                                                                 Arval

                    >50% of total European fleet market
                        managed by Top 5 players

Source: Deloitte analysis
                                                                                                                                               23
Selected M&A
activities of market
leaders
Driven by the three factors outlined all       Daimler Financial Services acquired a simi-
large fleet management providers have          lar portfolio size as Alphabet did five years
conducted significant M&A deals in Europe      earlier, the price per contract was approx-
during the last decade.                        imately 50% higher. Alphabet paid roughly
                                               € 2,917 per contract whereas Daimler had
Whereas the motivation of the captive-­        to pay approximately € 4,400 per contract.*
backed FMCs was mainly to leapfrog a
long period of organic growth by instantly     Another example is the case of LeasePlan.
acquiring a large portfolio, the independent   Volkswagen acquired LeasePlan jointly
providers selectively bought companies         with other investors in 2004. VW paid
across Europe to increase their size and       approximately € 1 billion for its 50% share.
geographic coverage in the respective          In 2015 VW and Bankhaus Metzler sold off
markets.                                       LeasePlan to LP Group B.V. for a total of
                                               € 3.7 billion. VW is expected to have re-
These ongoing M&A activities and the           ceived up to € 2.2 billion or nearly double
decreasing availability of suitable targets    the amount that the group paid for its
resulted in an sharp increase in respective    stake roughly ten years earlier.19
transaction prices. The average price paid
per contract has doubled during the last       Most recent examples show that this trend
decade.                                        is continuing. In early 2017, Zenith was
                                               bought by Bridgepoint Advisers Ltd. for
This price increase becomes very obvious       roughly € 10,300 per contract.19
when comparing the recent acquisitions
made by OEM-affiliated FMCs. Although

24                                                                     * High level price simulation based on publicly available information
Fleet management in Europe |
                                                                                                Growing importance in a world of changing mobility

Fig. 8 – Selected transactions of Top 5 players in recent years

                                          2011                      2015                         2016                          2016

                                                              GE Capital
                                     ING Car Lease                                        Athlon                         Parcours
Target                                                        Fleet Service

                                                              Arval                       Daimler
                                     Alphabet                                                                            ALD Automotive
Buyer                                                         BNP Paribas Group           Financial Services

Vehicles                             240,000                  164,000                     250,000                        61,500

Price                                ~ € 700M                 n/a                         ~ € 1.1B                       ~ € 300M

Ø per vehicle                        € 2,917                  n/a                         € 4,400                        € 4,878

Fig. 9 – Average amount paid per vehicle based on historical transactions

    in €

10,000

 8,000

 6,000
                                                                                                                          € 7,550
                                                                        Target Parcours
                                                                                                                Target    Athlon
                                                                        Buyer ALD Automotive
 4,000                                                                                                          Buyer     Daimler
                                                                         Target ING Car Lease                             Financial Services

 2,000       € 3,550                                                     Buyer Alphabet

    0
           2006    2007       2008       2009     2010      2011      2012       2013           2016     2017           2018       2019

    Size of bubble represents the volume of vehicles (UiO) involved in the transaction

Source: Deloitte analysis, mergermarket.com

                                                                                                                                                25
Case Study:
The acquisition of ING Car
Lease to increase Alphabet
pays off for BMW

In particular the acquisition of ING Car      Apart from pure per unit sales, Alphabet
Lease's 240,000 cars has raised Alphabet      has two additional positive effects on BMW:
to a significant sales channel for BMW in
Europe with a fleet size of approximately     •• Possibility of converting existing non-
630,000 of the global fleet of 690,000 cars      BMW contracts into future BMW sales
being under management in Europe.20              after current contract expires
The following case study is based on
Deloitte estimations derived from publicly    •• Challenge other OEMs by firstly demand-
available information and shows the rele-        ing significant discounts (skimming their
vance of Alphabet for the BMW Group as a         sales margin) for multi-brand cars and
sales channel:                                   secondly routing these vehicles around
                                                 the after sales network of other competi-
Based on an average expected leasing con-        tors (skimming their after sales margin)
tract duration of three years and a share
of BMW Group cars of around one-third in
Alphabet's fleet results in annual renewals
of roughly 70,000 BMW and Mini vehicles
by Alphabet customers. This implies that
Alphabet contributed to approximately
6.4% total of 1,092,000 BMW Group sales in
Europe in 2016.20

26
Fleet management in Europe |
                                                                                           Growing importance in a world of changing mobility

Strong benefits
for the core business
of the acquirer
Fig. 10 – Alphabet’s relevance as a sales channel for BMW 20

                                                                         70,000

         420,000                      210,000

                                                                        140,000

                                                                                                               Ongoing contracts
                                                                                                               Contract renewals
                                                                                                               BMW Group
                                                                                                               others

Source: Deloitte analysis, BMW (2017): Annual report 201620

                                                                                                                                           27
Case Study:
Zenith Group Holdings Ltd –
object of speculation similar
to the real estate market

Established in 1989, Zenith is one of the    Zenith is working in a cooperation with
UK’s largest independent leasing and fleet   Santander to optimize its refinancing and
management companies. During the last 14     access Santander’s customer base.
years it was sold seven times between var-
ious well-known private equity funds. Dur-   The Zenith case proves fleet management
ing this time Zenith’s portfolio increased   companies to be a solid investment case
from 10,000 to 85,000 units in operation.    for banks and private equity funds search-
Meanwhile, its valuation increased from €    ing for opportunities with high profitability
26M in 2003 to € 878 million in 2017.        and moderate risk in an environment of low
                                             interest rates.

28
Fleet management in Europe |
                                                                                                  Growing importance in a world of changing mobility

Fig. 11 – Development of the valuation of Zenith Group Holdings Ltd

P/ E           13.8x                 8.7x                 11.8x                      25.7x                    n/a                     n/a
multiple

P/ EBIT
               10.0x                 8.4x                  8.4x                      28.9x                   20.6x                   24.8x
multiple

P/ vehicle                                                                297%
multiple
(in €)                                                                                                      10,293                  10,329

                                                          3,470                      3,070
               2,600                2,666

Buyer           3i                 Dunedin              Equistone                  Morgan                  HgCapital             Bridgepoint
                                                                                   Stanley

Source: Deloitte analysis, Zenith Group Holdings Ltd press releases

                                                                                                                                                  29
Business
model analysis
Fleet management has become
a service business – funding and
efficiency are key factors.

                   Finance

30
Fleet management in Europe |
                                          Growing importance in a world of changing mobility

                                       Insurance
Remarketing

         Service

                                                     Purchase
                                                                                          31
Figure 12 (below) illustrates the typical        Apart from financing, vehicle remarketing        demand major discounts from OEMs which
main components of the value chain of a          is the second largest profit contributor.        are often between 15–25%. While the ma-
fleet management company and the cor­            About 20% of total profits are connected to      jority of these discounts are passed on the
responding profit allocation.                    the used car remarketing process. On the         clients to offer competitive monthly rates,
                                                 one hand, remarketing profits are realized       the remaining discounts are counted as
Today, the core profit driver of an FMC          if the used car is sold for a higher price       revenue for the FMCs.
remains financing the assets. Funding and        than the original forecast residual value.
leasing alone contribute about 30–35% to         On the other, FMCs tend to charge their          Services account for roughly 50% of the
the total profit.                                customers a variety of penalty fees, e.g., for   total profit of an FMC. This profit is usually
                                                 small damages or for exceeding the original      split across multiple services. Often FMCs
Forecasting the right residual value of the      contracted mileage of the fleet car.             outsource at least some of their offered
vehicle at the end of its contract is the most                                                    services to specialized third parties (Figure
crucial capability for determining monthly       Purchasing plays a significant role in an        13 provides an overview of the typical ser-
payments but also to enable profit creation      FMC's business. FMCs’ high order quan-           vice portfolio of an FMC). In this case FMCs
when remarketing the vehicle at the end of       tities usually correspond with a strong          charge a handling fee on these services
the contract.                                    purchasing power which allows them to            while managing the customer contact.

Fig. 12 – Fleet management profit allocation along the value chain

       Purchase                                                Insurance                                              Remarketing
           3–6%                                                   5–10%                                                    14–21%
                                     Finance                                                  Services
                                      30–35%                                                  40–55%

                                                                                                                     Source: Deloitte analysis21
32
Fleet management in Europe |
                                                                                          Growing importance in a world of changing mobility

Fig. 13 – At least 10 core services are typically offered by top fleet management companies

Licensing, Title & Registration            Tolls & Violation Management                     Risk & Safety
Management of the increasingly complex     Reducing administrative tasks while ensur-       Driver training programs, motor vehicle
registration process                       ing compliance                                   record checks, driver risk profiles

Fuel Management                            Tire Management                                  Telematics
Fuel cards with discounts and systematic   Winter & summer tire change, storage of          Manage fleet efficiency, increase driver
detection of abuse                         the second set during other season               productivity, lower operating costs

Maintenance Management                     Interim Car Management                           Personal Usage Management
Network of shops, certified technical      Providing a replacement car in case of           Track personal mileage online, real-time
advisors, 24/7 service                     accident or maintenance                          reporting, compliance with IRS

Accident Management
Repair shop assignments, provide sub­
rogation services, documentation

Source: Deloitte analysis
                                                                                                                                          33
Fig. 14 – Development of fleet management services towards driver-related services

                                                                           Driver-
                                                                           related
                                                                           services

                                      Vehicle-                             • Multimodality (e.g.,
                                      related                                Alphaflex)
  Financing-                          services                             • Corporate car sharing
  related                                                                    (e.g., ALD sharing)
  services                            •   Maintenance                      • Travel card (e.g.,
                                      •   Tires                              mobility card)
  • Financing                         •   Fuel card
  • Leasing                           •   Accident management

                             Development of fleet management services

Source: Deloitte analysis

FMCs will evolve into providers of multimodal mobility
for their customers. Their heritage, the fleet vehicle,
will just be one part of the future customer's daily
mobility journey.

Development of services                           As the next step, Deloitte foresees the
Historically, FMCs‘ service and product           expansion of FMCs also into the area of
offering focused on financing and vehicle-­       in-vehicle-related services (for instance
related offerings such as leasing, repair &       in vehicle multimedia offerings such as
maintenance, or tire management.                  Netflix or Spotify flat rates) as well as non-
                                                  vehicle-­related mobility services (e.g., travel
Today, FMCs have already expanded their           agency). FMCs will evolve into providers of
offering to driver-related services, e.g., fee    multimodal mobility for their customers.
management or personal usage manage-              Their heritage, the fleet vehicle, will just
ment. Innovative products such as corpo-          be one part of the future customer's daily
rate car sharing are on the rise, focusing on     mobility journey.
the needs of the driver (employee).

34
Fleet management in Europe |
                                                                                       Growing importance in a world of changing mobility

Fig. 15 – Multimodal mobility offers the future customer seamless mobility

                                                     Company car

                        Parking                                                                 Taxi /Robo-taxi

                                              Multimodal mobility

     Charging solutions                                                                                    Corporate car sharing

           Public transport / travel agency
                                                                                                    Rental

                                                    E-bike /scooter
Source: Deloitte analysis

                                                                                                                                       35
Fig. 16 – Financial comparison of leading European fleet management companies based on publicly available information

KPI                                   Non-Captive                                               Captive

Top 5 player     Arval                                        ALD
                                        LeasePlan                             Alphabet             Athlon
                 BNP Paribas Group                            Automotive

                                        € 9.2B                € 7.5B                               € 1.6B
Revenue          n/a                                                          n/a
                                        (2016)                (2016)                               (2015)

                 € 361M                 € 455M                € 512M                               € 135M
Profit                                                                        n/a
                 (2015)                 (2016)                (2016)                               (2015)

                 25%                    14.9%                 17.2%
RoE                                                                           n/a                  n/a
                 (2015)                 (2016)                (2016)

RoA              2.7%                   1.9%                  3.8%
                                                                              n/a                  n/a
                 (2015)                 (2016)                (2016)

Source: Deloitte analysis, annual reports, company websites

36
Fleet management in Europe |
                                                                                             Growing importance in a world of changing mobility

Fleet management – most                     With only one percent of the group's total
                                            assets, ALD accounted for nearly nine
profitable business unit for                percent of the bank's profits in the first half
Société Générale                            of 2016.22

                                            Early in 2017 Société Générale publicly
An analysis of profitability measured by    announced plans to sell a minority stake
return on equity (ROE) of the individual    in ALD on the stock exchange via an initial
business units of Société Générale –        public offering (IPO). The bank stated that it
France’s second largest bank – underlines   will remain the controlling shareholder and
the profitability of fleet management.      main funding provider of ALD.

With its fleet management business unit     The money that will be raised by an IPO
ALD, the bank generates approximately       is intended to fuel further growth, most
double the ROE than with its investment     likely with acquisitions of competitors as
banking division.                           described in the previous section of this
                                            study.22

Fleet management
is a highly profitable
business

Source: Deloitte analysis 22                                                                                                                 37
Fig. 17 – Key success factors for fleet management

Strong funding and service                           Size matters – regarding footprint
mind-set as competitive advantages                   and fleet size
•• Fleet management is an asset finance              •• Customers demand European or
   business with finance income as the                  even global footprints from their fleet
   single most important revenue stream                 managers
•• Cheap funding base is a competitive               •• Multinational companies want to
   advantage                                            have a seamless services cross-­
                                                        border
•• Business is heavily shifting towards
   services demanding a service                      •• Economy of scale with larger fleet
   mind-set                                             size (e.g., purchasing power over
                                                        suppliers)

Able to shift from vehicle-­related                  Multi-brand is the key to fulfilling
services to driver related-services                  customer requirements

•• Fleet management services are                     •• Europe is a historically evolved
   evolving from basic financing services               user-chooser market – companies
   through vehicle-related services to                  demand a multi-brand (and multi-­
   services which have the driver (e.g.,                segment) portfolio to fulfil employee
   employee) in focus                                   aspirations

•• Multimodality offers and holistic                 •• Product portfolio has to range from
   travel management as enablement to                   functional vehicles to premium cars –
   cover the corporate Future of Mobility               large variations in customer demand
   are growth areas

38
Fleet management in Europe |
                                       Growing importance in a world of changing mobility

The Future of Mobility
will be enabled by
fleet management

                                                                                       39
Future of Mobility
and implications for
fleet management
Deloitte’s publication “The Future of
Mobility” lays out a framework that posits
the emergence of four concurrent “future
states” emerging within the mobility eco-
system. A key factor is that all four states
are likely to co-exist across a number of
geographies (urban, suburban, and rural)
and consumer demographics to a varying
extent and, therefore, represent charac-
terizations of market segments existing in
parallel rather than alternative scenarios.

Deloitte sees a growing importance of car
and ride-sharing as well as self-driving
vehicles. For both developments, fleets and
fleet management gain greater importance
and will be a key to participating in the
prospective mobility value chain. Fleet
managers should lay the groundwork today
by enabling vehicles and infrastructure to
be prepared for the future state of seam-
less door-to-door mobility.

40
Fleet management in Europe |
                            Growing importance in a world of changing mobility

                 car share

                                                                            41
Four states of the Future of Mobility

Fig. 18 – Future of Mobility: Changing Usage and Sales

                                                                        3. The driverless revolution
     3
                                                Autonomous car

Future state 3 –
                                                                             high             middle            180K            20K
The driverless revolution

Future state 3 sees the wide-spread adop-
tion of autonomous vehicles, but private
ownership remains dominant. Drivers still
prefer owning their own vehicles but seek
driverless functionality for its safety and
convenience.                                                              High-price,          Families        Lifetime      Utilization
                                                                          customized         consolidate     vehicle miles    per year
                                                                            vehicles        their vehicles     increase      increases
                                                Vehicle control

     1
                                                                        1. Incremental change

Future state 1 –                                                            middle            middle            151K            13K
Incremental change

A world where private ownership remains
the norm as consumers opt for the
forms of privacy, flexibility, security, and
convenience that come with owning a
                                                Driver assist car

human-driven vehicle. While incorporating
driver-assist technologies, this future state                             Mixed shifts       Traditional       Lifetime       Utilization
assumes thatfully autonomous vehicles do                                towards trucks,     vehicles lose    vehicle miles     per year
not completely displace driver-controlled                              SUVs, sports cars,   market share      unchanged      unchanged
vehicles at any time in the near future.                                 trade vehicles

                                                                    Personal car                                  Vehicle ownership

42
Fleet management in Europe |
                                                                                               Growing importance in a world of changing mobility

             4. A new age of accessible autonomy
                                                                                                      4
                                                                                                 Future state 4 –
      low                   high             >240K              >70K
                                                                                                 A new age of accessible autonomy

                                                                                                 Future state 4 anticipates a convergence of
                                                                                                 both the autonomous and vehicle-sharing
                                                                                                 trends. Mobility management companies
                                                                                                 and fleet operators offer a range of pas-
                                                                                                 senger experiences to meet widely varied
  Low-cost,            Majority of          Lifetime         Utilization                         needs at differentiated price points, initially
smaller electric      sales shifts to     vehicle miles       per year                           in urban areas but spreading rapidly into
     pods            fleet managers          increase         maximized                           suburban communities.

                                        2. A world of car sharing
                                                                                                      2
    middle                  low              240K               70K                              Future state 2 –
                                                                                                 A world of car sharing

                                                                                                 Future state 2 imagines how continued
                                                                                                 growth of ride-sharing and car sharing
                                                                                                 may impact both companies and people.
                                                                                                 Economic scale and increased competition
                                                                                                 could drive the expansion of shared vehicle
  Driver-driven      Sales to driver-       Lifetime         Utilization                         services into new geographic territories
fleets with varied   controlled fleets      vehicle miles   similar to today’s                     and more specialized customer segments.
   vehicle mix      decreases as AVs        increase         taxi fleets                          As shared mobility serves a greater propor-
                       proliferate                                                               tion of local transportation needs, it might
                                                                                                 reduce the need for personal vehicles,
                                                                                                 particularly in homes that have several.

 Vehicle ownership                                                Shared car

Source: Deloitte analysis                                                                                                                      43
Generation Y
Shift from ownership to sharing will further
increase relevance of fleet management

Deloitte’s recent Global Automotive                 shaping an industry in which on-demand           In 2006, the world reached a critical
Consumer study highlighted the fact that            service providers such as Uber, DriveNow         midpoint with over half of the world’s pop-
Gen Y (those born between 1977 and 1994)            and car2go have experienced and are still        ulation living in cities and urban areas. The
desire connectivity and convenience and             experiencing significant growth and are          trend is expected to accelerate, with ap-
can choose from an ever-increasing range            unquestionably among the defining phe-           proximately 70% of the world’s population
of transportation types, apart from vehicle         nomena of our future mobility as well as         expected to live in cities by 2050.
ownership, for getting from A to B. While           the digital era. These providers are chang-
Baby Boomers tend to gravitate towards              ing the way individuals move, by seamlessly      Car sharing extends the benefits of auto-
traditional vehicle ownership models and            connecting either drivers to passengers          mobility to individuals without them having
younger generations are highly interested           (taxi, car pooling) or passengers to cars (car   to bear the cost and effort of car owner-
in models that provide access to mobility,          sharing). Younger generations are leading        ship. Europe accounts for about 50% of the
allow them to remain connected (and pro-            the way towards pay-per-use mobility in          global car sharing market and is expected
ductive) at a reduced cost. The emerging            place of owning a car, nearly 50% of Gen Y       to grow further to almost 16m users by
mobility patterns of (young) adults are             consumers like using a smartphone app for        2020 (figure 19).
                                                    transport and already plan travel so they
                                                    can multitask.25

Fig. 19 – market development in Europe (2006–2020, in ’000)

Members                                                                                                                             Cars
 in 1,000                                                                                                                           in 1,000

                                                                                                                          15,600
16,000                                                                                                                                180

14,000                                                                                                                                160

                                                                                                                                      140
12,000
                                                                                                                                      120
10,000
                                                                                                           9,000
                                                                                                                                      100
 8,000
                                                                                             5,800                                    80
 6,000
                                                                                                                                      60
 4,000
                                                                                                                                      40
                                                                             2,207
 2,000        212           334                                                                                                       20
                                              533              692
      0                                                                                                                               0
             2006           2008          2010                2012            2014           2016          2018e           2020e

     Users          Cars      Forecast

                                                                                                                       Source: Deloitte analysis26
44
Fleet management in Europe |
                                                                                                 Growing importance in a world of changing mobility

Fig. 20 – Distribution of car sharing vehicles in Europe

                                                                                                                5,800,000
       11%                                                                                                      users (in 2016)
                                                      1%                                         68,000
                                                                 3%                              cars (in 2016)
                                                        1%

                                                 4%

                                                2%

                                                      6%
                                                                     5%                                              48%
        10%                                                     7%
                                        2%

                                                                                                                     P
                                                                                                                      ercentage of total
                                                                                                                     European car sharing fleet

The car sharing approach does not have to       In a future mobility ecosystem Deloitte
stop at a company door. In recent years a       sees a growing importance of car and
growing number of FMCs started to offer         ride-sharing as well as self-driving vehicles.
corporate car sharing programs. New in-         For both developments, fleets and fleet
car technologies and advanced telematics        management gain greater importance and
enable companies to use their corporate         will be a key to participating in the prospec-
cars as a sharing asset for their employees.    tive mobility value chain. Fleet managers
Key advantages are an optimized pool car        should lay the groundwork today by
usage, a reduction of the carbon footprint      enabling vehicles and infrastructure to be
as well as large cost saving potential in       prepared for the future state of seamless
terms of TCM.                                   door-to-door mobility.

With a high acceptance by young employ-
ees and a growing awareness of the total
cost of employee mobility, the corporate
car sharing market is expected to grow rap-                          Fleet management will be
idly. With a prospective fleet size of 84,000
cars by 2020, this market will reach almost                          the key to enabling sharing-
half the size of the conventional car sharing
market.27                                                            based mobility services

Source: Deloitte analysis
                                                                                                                                                 45
From ride-hailing to robo-taxi –
autonomous revolution powered
by Blockchain

Ride-hailing                                    Robo-taxi                                       around the corner. Blockchain technology
With the exception of a few cities such as      Especially in the ride-hailing business         could enable the cars to send and receive
London and Paris, Uber, as the world’s larg-    where a high percentage of the costs are        money, schedule, and pay for their own
est ride-hailing provider, did not manage       associated with the driver, self-driving cars   maintenance meetings in times of low
to establish a significant footprint on Euro-   could drastically decrease these costs.         utilization, etc. Blockchain could support
pean soil. In many European jurisdictions       A recent Deloitte study (“DUP: Future of        making the car also autonomous on the
Uber has run into regulatory roadblocks.        Mobility”) shows that about 50% of the          financial side.
                                                cost of taxis are connected with the cost of
In Europe, Uber challenges homegrown            the driver.24 Self-driving robo-taxis would     The future is fleet
ride-hailing competitors who have leveraged     not only be cheaper than taxis today, the       Several automotive companies have
their better knowledge of local market          utilization of the vehicle would increase       already reacted and are increasing their
dynamics to build successful businesses.        distinctly.                                     activities in the fleet management environ­
Businesses such as myTaxi, founded in 2009,                                                     ment to avoid being reduced to the role
may share some similarities with the Uber       This development implies a growing              of hardware providers. In the end, the
model, but they differentiate themselves by     number of vehicles going to fleet instead       winners in this race for customer contact
working in accordance with local regulations.   of to private persons. Deloitte’s study “The    will be those companies who are able to
Daimler’s myTaxi has become Europe’s larg-      Future of Mobility: What’s next?” predicts a    provide a seamless customer experience at
est taxi-hailing provider with over 6 million   share of 70% autonomous driving fleet ve-       a limited cost. Blockchain can become the
customers in 2016.28 This is an astonishing     hicles in an urban environment in new reg-      enabling technology for automotive com-
growth from 2 million customers in 2015.        istrations by 2035.29 In a connected urban      panies to reach this goal and to maintain a
Other European ride-hailing services have       environment the attractiveness of owning        key role as the direct provider of mobility
specialized in exclusive limousine transport    a car declines rapidly if one has access to a   services to end customers. Deloitte has
or van/bus services. First attempts to          pool of cars whenever needed.31                 given further insights into this topic in a
integrate autonomous driving technology                                                         recent publication “Blockchain @ Auto
with the outlook of providing independent       To guarantee a seamless operation of these      Finance – How Blockchain can enable the
“robo-taxis” have been made.                    fully autonomous taxis a few technical issues   future of mobility”.30
                                                have to be solved. Payment is a crucial part
                                                of that. Today, ride-hailing companies offer
                                                cashless payments directly via their smart-
                                                phone apps, but the next revolution is just

46
Fleet management in Europe |
                                                                                          Growing importance in a world of changing mobility

68%
  Up to
                                                  would be willing
                                                  to pay extra for
                                                  autonomous driving

  85%
                                                                                          of customers believe
                                                                                          in the breakthrough
                                                                                          of autonomous
                                                                                          driving

35%
  Up to
                                                   of GenY–Z customers
                                                   question their need to
                                                   own a car due to use
                                                   of ride-hailing

  50%
                                                                                          of cost for ride-
                                                                                          hailing is connected
                                                                                          to the driver

Fig. 21 – Forecast of new vehicle sales distribution (for urban areas in USA)

100%

 80%

 60%

 40%
                                                                                                                      Shared autonomous
                                                                                                                      P
                                                                                                                       ersonally owned
 20%                                                                                                                  autonomous
                                                                                                                      Shared driver-driven

  0%                                                                                                                  P
                                                                                                                       ersonally owned
           2015               2020e       2025e           2030e            2035e              2040e                   driver-driven

Source: Deloitte analysis29
                                                                                                                                          47
Fig. 22 – The Future of Mobility ecosystem: integrated and multi-modal inncer-city customer journey

Mobility management providers
Mobility management services combine an individual’s
specific history and current circumstances with data
from millions of others and information from different
modes of travel across the city. Using advanced analy­
tics, they offer users tailored, seamless travel options.

                                                       Mobility Management                                  Vehicles

Start
                                                            Mobile access                      (e)-vehicles (shared)

                                  Fleet Management                                  Data Management/Loyalization

OEMs / Fleet Management companies
Fleet operators store, maintain, and deploy shared
autonomous vehicles throughout the city. Vehicle
manu­facturers build an array of shared self-driving
options to meet the varying needs of millions of
travelers.

48
Fleet management in Europe |
                                                                                 Growing importance in a world of changing mobility

                                                        Cyber Infrastructure /Maps

                                                                      Captives / Finance companies
                                                                      Mobility assets (robo-taxi, buses, bikes, …) have to be
                                                                      financed – captives with their knowledge and funding
                                                                      capabilities will be the natural key players for these
                                                                      services.
                                                                      In addition, mobile payment solutions will be the key
                                                                      enabler for seamless multi-modal mobility. These ser-
                                                                      vices will generate a large amount of relevant customer
                                                                      data which can be used for economic purposes, i.e. for
                                                                      customer loyalization programs.

     In-Vehicle Experience                    Finance/Leasing, Payments and Insurance

                                                                                                                     Finish
Transit Hubs            Subway / Light Rail   Bus            Bike Path/ Walkways

       Parking /Maintenance                           Physical / Charging Infrastructure

                                                                      Additional providers
                                                                      The in-vehicle experience is enhanced by content pro-
                                                                      viders offering a variety of options, from entertainment
                                                                      to business applications, and supported by advertisers
                                                                      and subscription fees.
                                                                      City planners work closely with the private sector to
                                                                      operate and maintain critical infrastructure, from bike
                                                                      racks to train platforms or electric charging stations.
                                                                      Those physical assets are increasingly smart and con-
                                                                      nected, allowing constant, real-time monitoring.

Source: Deloitte analysis                                                                                                        49
Strategic fields of
action regarding fleet
management
Fig. 23 – Market entry rationales from the perspective of various industries

                 OEMs                                     Banks                                      Platforms / Tech Companies

               •• React to sales channel shift from      •• Enter in a reasonably stable,          •• Enter into mobility market to
Strategic
                  private to corporate and prepare          non-cyclical industry with recurring      expand value chain
conside­
                  for self-driving fleets                   revenues
rations                                                                                            •• Leverage mobility behavior
               •• Protect the core business with         •• Diversified revenue stream in times       information generated by fleet
                  regard to sales discounts and             of low interest rates based on            management data for core business
                  after sales revenue                       fee-generating services                   (location-based services)

               •• Expand the value chain with focus      •• Locked-in customers based on           •• Build mobility management capabil-
                  on services and residual value            sticky customer relationships with        ity to transfer to private user market
                                                            potential to up- and cross-sell within
               •• Secure customer access                                                           •• Prepare foundation for a future
                                                            core business
                                                                                                      world of autonomous shared fleets
               •• Leverage full-service leasing and
                                                                                                      to own ecosystem regarding in-car
                  fleet management as capability for
                                                                                                      entertainment and apps
                  mobility services

               •• Established dealer network             •• Bank branch network as sales           •• Strong knowledge in partner man-
Competitive       throughout Europe and global              channel                                   agement and integration
advantage         footprint
                                                         •• Access to and detailed knowledge       •• Truly customer-centric mentality
               •• Asset know-how regarding vehicles         of small and medium entities
                                                                                                   •• Expertise in data management and
                  and usage behavior
                                                         •• Strong understanding of funding           analytics (telematics)
               •• Holistic view of the value chain and      business
                                                                                                   •• Platform integration capability
                  vehicle lifetime
                                                                                                      towards multi-modal mobility

50
Fleet management in Europe |
                                                                                               Growing importance in a world of changing mobility

Strategic recommendations
for fleet management
companies

The increasing demand for full service         The key success factors in fleet manage-
leasing and associated fleet management        ment of the future are diverse. It is essen-
has significantly fueled the growth and        tial to build a global footprint and have the
profitability of fleet management compa-       capability to provide seamless service of-
nies in recent years. This growth sparked      ferings across borders. Fleet customers will
the interest of several other players such     increasingly demand consulting services to
as automotive companies and banks that         reduce the cost of their fleets. This can on
are (re)entering this market based on their    the one hand be addressed by sophisticated
own core products, be it vehicles or leasing   data and driver behavior analysis based
business.                                      on telematics to increase efficiency. On the
                                               other hand, innovative mobility solutions
On the other hand, platform and tech-          such as corporate car sharing and similar
nology companies see this industry as          can also bear the possibility of earning
the entry point for their data-driven and      revenues based on the corporate fleet. In
customer-centric business models towards       addition, driver-centric and non-car related
the Future of Mobility.                        services will be increasingly important in
                                               the future.
Today, the fleet management companies
are still ahead in this rather complex busi-   Based on these capabilities, it is a logical
ness, with the competition catching up. To     step for fleet management companies to
keep that lead over the competition fleet      further expand their client base towards
management companies should not rest           the private channel and to be prepared
on their merits and strong financial results   for the Future of Mobility where, due to
but strategically position themselves to-      sharing behavior and self-driving cars
wards the future.                              the differences between the private and
                                               corporate channels will become more and
                                               more blurred.

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