Mono-brands will disappear
Last week's deal between LeasePlan and FCA is just one example of the great changes afoot along the leasing industry's captive/multi-brand divide, says Pascal Serres. “Mono-brand captives will disappear”, the mobility expert predicts. An analysis.
First, a clarification: the predicted demise of the mono-brands does not mean that Mr Serres (pictured) thinks manufacturers are getting out of the game.
“The difference between mono-brand and multi-brand lessors is not linked to whether the leasing company is owned by a manufacturer or not”, says the founder and CEO of mobility consultancy Moby-D. “Alphabet and Overlease, subsidiaries of BMW and Renault respectively, were the first to offer leasing solutions beyond the model range of their parent companies. Daimler acquired Athlon last year with the same objective”.
“Others are following, and eventually all captives will be multi-brands, just like lessors who do not have a manufacturer as their shareholder”.
And indeed, the deal between Fiat Chrysler Automobiles and LeasePlan does not mean the manufacturer is throwing in the towel. Under the terms of the agreement, LeasePlan will provide operational leasing services for Fiat Chrysler Automobiles in 12 European markets where FCA's own captive lessor Leasys is not yet present (emphasis added).
Captive leasing has a relatively short, and very dynamic history, which is instructive for what's up ahead, Mr Serres explains.
“Many years ago, most manufacturers felt the need to create financing companies in order to support the sales of their vehicles. These companies were necessary to provide prospective buyers with the credit needed to purchase the cars from the parent company. By that definition, they were all pure mono-brand captives”.
And then, about 20, 30 years ago, major companies started using this method of financing in large numbers, eventually giving rise to the full-service leasing industry: “Since those companies are always looking to optimise TCO, they started benchmarking all brands, and using multiple suppliers. The next logical step was one supplier who could offer a multi-brand solution at international level, and that was LeasePlan”.
Arval, ALD and a handful of others rushed in to shape and grow what has now become a very dynamic, complex and lucrative business. “The manufacturers held on to the mono-brand offer but around 2010, that business model was not in good shape. By then, they were even struggling to refinance their captives”.
Which explains a flurry of activity around that time: Ford selling Hertz to ALD; a bankrupt GM selling its finance company (including Masterlease), turning instead to ALD for a multi-brand solution; VW Group buying LeasePlan.
“That last move may have seemed strange at the time because, in VW Financial Services, the German manufacturer already had its own leasing subsidiary. But it marked Volkswagen's entry into the multi-brand market – the first manufacturer to actively take that step”.
Of course, the non-captive multi-brand lessors didn't sit still. They developed very competitive offers that most captive multi-brand lessors – with the exception of the German ones – were unable to offer. By virtue of its collaboration with most major manufacturers, ALD had the broadest multi-brand range, which explains the company's stellar growth over the last decade.
The captives plugged the difference with the 'genuine' multi-brand companies by entering into white-label deals with them: multi-brand service under the manufacturer brand name.
“But already the market is feeling the pressure of the next innovation: private leasing. This will change everything”, says Serres. “Private leasing – and, in a later stage, mobility on subscription – is going to become the most popular solution on the retail market”.
“In a recent Fleet Europe interview, ALD's CEO Mike Masterson said their private lease business grew by 40% last year. It will end up cannibalising the finance leasing business. And that will put great pressure on the captives in the coming years. In order to survive, they will need to develop and diversify their product range”.
Putting that challenge to one side for a moment, are there any arguments from a fleet client perspective to prefer 'genuine' captives over multi-brands?
“I would say that it's always better as a client to have the widest possible choice of vehicles to find the ones that fit your requirement. If you go for mono-brands, that means you may have to manage a number of suppliers. The main advantage of mono-brand suppliers is that the vehicle and the contract are sourced from the same dealer, which provides a single, easy point of contact. But that's mainly a handy plus for the driver. Otherwise, I don't really see a major advantage”.
Manufacturers repositioning their mono-brand captives as multi-brands is good news not just for customers, but also for themselves. “When OEMs get to manage vehicles from other brands, it will give them valuable insights into what the competition is doing to please their customers. That will help them improve their own product”.
So, when will the last mono-brand captive turn multi? “Well, the German manufacturers – and PSA – are already convinced this is the way forward, but a lot of others, Asian brands especially, still need to make the mental change. The process could take anywhere from 2 to 10 years, depending on whether they want to develop the solutions in-house or via acquisitions”.