Fleet News

FNE Conference: Massive expansion potential in new Europe

The opportunities of expanding into ‘new Europe’ – the eastern countries of Poland, the Czech Republic, Slovakia, Hungary, Ukraine and Russia – far outweigh the challenges, Pascal Serres, deputy CEO of ALD Automotive says.

The company currently manages 28,500 contracts in these new European countries and is set to grow its presence as the markets there expand.

Acquiring existing lease operations is always preferable to trying to establish a start-up, he advised leasing executives at the Fleet News Europe Conference.

However, in Russia and Romania this has not been possible as the markets there did not have a finance or operation leasing infrastructure.

Instead 98% of companies there prefer outright purchase of their fleet vehicles.

“But there is massive potential throughout the region,” Mr Serres said. “The growth in finance leasing will reach an average of 20% in 2012 and operation leasing by 6.1% - these are significant growing markets.”

With Russia and Ukraine taken out of the equation, the predicted growth in finance leasing will hit 40% every year until 2012.

Last year there were 400,000 company car registrations in these future euro-zone countries.

Russia and Ukraine, which are going to enter the single currency market, also saw company car registrations hit 400,000 last year.

However, while cars are cheaper in these countries to buy and labour costs are lower, the total life costs are actually higher than they are in western Europe.

This is because of interest rates on local currencies and the fact that residual values are lower (between 40 and 45% over a three-year 90,000km lease).

In addition, there is a higher frequency of maintenance needed as motorists tend not to care for their company car to the same degree as western Europeans.

This and the fact that there is a need to overcome the traditional finance lease and outright purchase tendency means there are still major challenges to overcome before these markets mature.



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