From a “storage cupboard” and seven staff to a £36 million purpose-built head office and 600 staff: that’s how Volkswagen Financial Services (VWFS) chief executive officer Graham Wheeler describes the rise of the UK’s fastest growing contract hire and leasing company.
“This company has grown up; we were the best-kept secret in automotive financial services, now we have the look and feel of a successful company,” Wheeler told Fleet News at the official opening of the new building in Milton Keynes by business secretary Vince Cable last month.
Volkswagen Group Leasing (VWGL), one of VWFS’s four key operations in the UK, has grown by a staggering 900% since 2006 (more than 90,000 units) and has just become the sixth leasing company to pass the 100,000 risk fleet threshold.
Such figures are unprecedented, not least because they have been achieved purely through organic growth. VWGL is not against acquisition but, until now, it simply hasn’t been part of the agenda to hit its growth aspirations.
Success has come in three areas: SMEs via dealers and brokers; public sector on the government procurement service CCS; and, recently, large corporate businesses.
Four years ago, around 80% of VWGL’s business was with SMEs; that proportion has fallen to 55% as the company broadened its portfolio to appeal to larger corporates and public sector fleets.
In January it appointed former ING Car Lease managing director Ian Tilbrook as interim director of fleet with the express objective to continue the push into medium-to- large fleets.
Announcing an interim position doesn’t sound like much of a commitment to Tilbrook or large fleets, but Wheeler says the decision was taken to keep the relationship “open-ended”, which he believes is “more flexible”.
He adds: “But we see it as a long-term appointment – we hope that he will be with us for a long time.”
As VWGL pushes harder into bigger fleets over the next couple of years, its mix of business will flip to 55% large corporates/public sector and 45% SMEs. It remains on track to achieve a risk fleet of 150,000 by 2018, and has actually nudged ahead of its growth plan in the past year.
What is so appealing about 150,000? “It was our ambition to be in the FN50 top three and that was the number when we set the target ,” Wheeler replies. “By the end of this year we will hit 110,000.”
That will take last year’s sixth largest leasing company to fourth (notwithstanding further growth from its two closest rivals, Arval and ALD).
Then what? “After that we will see more growth and expansion of other services. We are working on ideas and concepts to expand and diversify.”
Future growth areas
Insurance and telematics are two areas into which VWGL will move. Indeed, it is already providing a telematics solution via Volkswagen Commercial Vehicles in partnership with the RAC, while a separate VWFS division, Volkswagen Insurance Services, provides insurance products such as GAP through franchised dealers.
Wheeler anticipates bringing together all of VWFS’s services, which include managing maintenance contracts for around 575,000 vehicles primarily for SMEs and retail customers (more than any other business bar Motability), to offer a fully outsourced fleet management function.
This will be achieved within the next couple of years and will not just include cars and vans, but also companies with trucks and motorcycles, too.
Ultimately, Wheeler believes VWGL – like all major leasing companies – will need to evolve into a provider of mobility services.
“We are starting to see more flexibility in vehicle use – the idea of having one vehicle contract for three years is beginning to move, but the UK is behind other countries,” he says.
“In Germany, multi-vehicle contracts are more commonplace so you can swap into another vehicle if it better suits your needs. We will head that way as well.”
VWFS has a rental business in Germany which is a “prelude to a mobility package”, Wheeler adds. “We are looking at that model in the UK. It’s multi-use and flexible in terms of their lifestyles.”
Volkswagen Group Leasing is already enjoying more personal contracts business in the UK both for smaller businesses and private buyers, a clear sign of the move from ownership to monthly rentals.
Tilbrook says: “People are used to this with their mobile phones – it’s becoming part of the culture.”
It also opens up further opportunities in the consumer sector: “We see our competitors trying to get into it but we are already there,” he adds.