Fleet in India and China: different paths forward
Evolution of the fleet and lease industry in China and India, as seen by three top execs.
India and China are huge – economically, population-wise and with respect to their automotive markets. But the leasing and fleet management sectors are still small and immature in both countries. This won't be the case for long – a feeling now backed up by some hard data.
Outright purchase is still the most popular way of fleet acquisition in both China and India. From a glass-half-full perspective, that means there is still plenty of opportunity to grow.
“Analysts predict the volume of leased vehicles in India will increase by 35% by 2020, with Operating Lease as the key growth driver”, says Tim Albertsen, Group Deputy CEO of ALD International. A crucial accelerator is the Indian government's ambition to replace the clutter of state-based and federal taxes on goods and services by a single tax, effectively creating a 'Common Indian Market'. This will simplify and stimulate business across India, including in the leasing industry. Target date for the unified GST: July 2017.
The situation in China is a bit more complex, says Albertsen: “There’s a variety of challenges that we’re not used to in Europe. One is the strict limit on vehicle registrations in the big cities. Another is the absence of clear legislation around the leasing industry”. Even taking those factors into account, it is hard for lease providers to grow fast on the Chinese market unless they provide a more comprehensive business model, one that also includes short-term rental, car-sharing and local drivers.
Yves Helsen, Assistant VP for Fleet Management for Asia-Pacific at Fleet Logistics International, confirms that it is wrong to think of India and China as markets comparable in anything other than approximate size. “In India, we are witnessing an increased interest in leasing, thanks in no small part to ALD, LeasePlan and Arval, who are doing great work promoting the leasing solution in a country which has precious little experience with it”. As is the case across many maturing markets, it is the international companies leading the trend away from purchasing.
But, says Helsen, the leasing products on offer in India are surprisingly mature – including matrix quotation, open book and closed book – and deliver premium-quality service, or something very close to it. China is a very different story – or, more precisely: a lot further behind on the same pathway: “With leasing regulation not yet in place, the country with the largest potential still operates on the principle that companies will often offer employees a monetary solution to use their own vehicles”.
Tero Tapala, Regional Manager for Asia at Arval, confirms the gulf between India and China by looking at the main actors in the fleet and lease industry: “In India, the leading players are international leasing companies. In China, local rent-a-car companies dominate the market”. There are, however, trends that indicate convergence – even if it is at some distant point in the future. Both markets are driven by the requirements of international companies, which are similar in both places. Meaning that as the markets mature, they will start to resemble each other just a little bit more. Some market specifics already overlap, though: “There is no demand for Fleet Management without funding, and it will take some time before those services are required in either China or India”, says Tapala.
The Chinese automotive market especially is not following a traditional trajectory to maturity. For one thing, its huge issues with pollution and congestion are forcing a state-led emphasis on mobility solutions and electric vehicles – two areas in which China could conceivably become a world leader. Says Yves Helven: “We can expect the massive efforts to promote electric alternatives at the start of the supply chain to transform the market. One method would be to create lease companies specialised in hybrid and pure-electric vehicles. Should that take off, we can expect an acceleration of the leasing market in China”. | 26/01/2017 | Frank Jacobs