Arval and Shanghai Ba-shi Car Rental Service launch Arval Jiutong
Tero Tapala, Asia and Latin America Director at Arval, is very well placed to unravel the Chinese fleet and car lease market. With the signing of a joint venture agreement with Shanghai Ba-shi Car Rental Service, a subsidiary of Qiangshen, leader in full-service leasing in Shanghai and the fourth largest player in China, enough reasons for an interview.
Arval entered China some about three years ago, and now has a joint venture in Shanghai. What is the objective of this?
Tero Tapala: “Our experience in Beijing, where we started, has been that operating in China’s major cities on your own especially when registration plate restrictions are in place, is a real challenge. In parallel, we found out that Ba-shi – which is among the market leaders in China in operational leasing –, and us had many things in common, with regard to ourview on the market, strategy, operation, and new target clients. So we planned a potential cooperation because putting us both together, with our joint ambitions, with their local knowledge and government relations, and with the global expertise from ourselves, would be likely to be successful.”
How will it work?
Tero Tapala: “We have transferred our business from Beijing to Shanghai. We don’t expect major problem to merge the activities. But the full integration will take some time and we aim to have it completed before the end of next year.”
How will be called this new company?
Tero Tapala: "The new company is called Arval Jiutong , and we revealed this name during its opening ceremony that took place in Shanghai on October 22 and which gathered 150 guests including clients, government officials, executive members from both companies, etc. It is a reference to Bas-shi’s coach company, another activity of theirs which is called Jiutong Coach Company. This is one of the strengths of Ba-shi, to be able to offer not just passenger cars, but also coaches and buses. Companies hire buses to transport their staff, and these companies who today use buses and coaches can tomorrow use company cars.”
Your new CEO in China, Valérie Merien, has an international profile. Wouldn’t it be better to have an insider in a complex and immature fleet market like China?
Tero Tapala: “Arval Jiutong’s team will be composed of 150 people and there is a fine harmony between Chinese and international profiles. At executive level the mix will be 60/40 in favour of the Chinese, and yes, our new General Manager, Valérie Mérien, who is the former Deputy Director of International Development at Leasing Solutions, has an international profile with an extensive knowledge of the Asian continent. I guess we have found the right balance and have the strong support of our Chinese partner in this strategy, and indeed the shareholders of our partner, who are involved in mobility and transportation at many different levels, are also fully supportive.”
What are you able to bring to the Chinese market?
Tero Tapala: “The greatest strength we have is that we will bring a new way of looking at the leasing business in China. Most of the companies operating in this domain are originally short term rental companies, but we come with a proven expertise and much experience in operational leasing. We will help people think about short term renting and operational leasing as two different services – because they are. And in China there is not yet an embedded fleet management culture, just a vehicle management culture. But we are beginning to see a shift towards real fleet management. We are helping in this, bringing reporting tools and so on.
How important is China to the future plans of Arval?
Tero Tapala: “We think China will be a key market for us, and among other reasons because of its sheer size. But this will take time and will be highly dependent on regulations. This will be crucial to the speed of development.
But remember that even if the operational market doubled, it wouldn’t be as big as the UK or France, for example. But we will develop all our tools and all our services in China.”
China is not yet a large fleet market in terms of volume, and many big leasing companies are not here yet. Aren’t you here too early?
Tero Tapala: “Well we’re not too late, quite clearly, and I don’t think we’re too early either. We are learning about this market, and you can only learn from the inside. We are at a period when Chinese companies start to move away from the ownership culture, including state-owned companies which are being pushed in this direction by the government. So I think our timing is right.
There is also a shift towards downsizing of vehicles. This is partly for ecological reasons, but even more for reasons of making more “reasonable” choice. I think there is also going to be a move towards Chinese manufactured cars, which today have a very small part of the operational leasing market, almost non-existent in fact.”
Will the joint venture give you access to more registration plates for your clients?
Tero Tapala: Clearly one of the advantages we have is that our partner is very well connected in Shanghai and will help us on getting registration plates – which could be trickier for a standalone foreign company.
Do you wish to be a major player across China, or just in the biggest cities?
Tero Tapala: “We wish to be a major player in China, but our activities will start in Shanghai Yangtze River Delta. Already from the very start we will be covering over 50 cities, and wish to serve customers with a pan-China presence.”
Which fleets are more interested in operational leasing – international or local?
Tero Tapala: “Typically in these types of immature market in leasing terms, it is international companies which drive the evolution. They are driven by their European or American headquarters, wherever they are and wherever this solution is available. But I believe the growth will also come from Chinese companies, when they emerge from the purchase culture. Although no precise figures are available, we believe that a little over 10% of the 25 million or so new vehicles registered every year are to companies. Of these, only a fraction of about 2% is in operational leasing – and when you consider that short term renting is tied up in this, the true figure is even lower.”
Will you be using your mobility expertise in the big Chinese cities?
Tero Tapala: “We will be testing these, especially when you consider congestion and pollution… Mobility will move towards these car-sharing services, telematics, routing. This is all in our medium term planning, when we have completed our operational leasing introduction. We will not start running before we can walk.”
What would your advice be to an international company looking to develop its fleet in China?
Tero Tapala: “My advice to an international company to develop its fleet in China would be to get support from an expert with an extensive knowledge both in term of their international expectations, and in term of local culture, practices and regulations. I think that in China more than everywhere else, having partners that are able to manage ‘local’ and ‘global’ at the same time is a real asset for international companies. To illustrate the above, I’d like to give you an example: The majority of company cars in China have chauffeurs, and these are keys to the market. You put the life of yourself and your family in the chauffeur’s hands. So as a company you need to insist on good chauffeurs, and people who speak English where international companies are concerned. So select a provider which invests in its chauffeurs and which has the ability to train them.” | 23/10/2015 | Steven Schoefs