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Pascal Serres, ALD International: We will cover all of Latin America by the end of 2017

How can international car leasing and fleet management specialist ALD Automotive support your fleet management needs in Latin America? That was the subject of the first LatAm Summit of ALD Automotive, on June 23 in Madrid. No less than 40 clients and prospects were present. 'It is our goal to cover the complete Latin American market by the end of 2017', says Pascal Serres, Deputy CEO of ALD International.

ALD Automotive is the global car leasing and fleet management specialist with the widest and deepest footprint in Latin America. It has been present for many years in Brazil and Mexico, and is among the market leaders in both countries, with a total of 45,000 vehicles managed. More recently, ALD Automotive opened subsidiaries in Chili and Peru. Only a few weeks ago, ALD International announced a partnership with AutoCorp in Argentina.

Latin America is of strategic importance to ALD Automotive, and with good reason: the company sees an increasing number of multinationals wanting to adapt fleet management efficiencies on this continent. “And our existing client base, especially customers in Spain with activities in Latin America, can open doors for us in that region”, says Pascal Serres.

Customer interest is the main reason for ALD Automotiv's decision to enter new markets. The number of possible fleet registrations is another one. Unless both conditions are properly met, ALD Automotive prefers to partner with a local hero, adds Pascal Serres. “But as we have to look for economies of scale, we want and need to expand our footprint as much as possible.”

Compared to Europe, Latin America lacks maturity in full service leasing adoption, but Pascal Serres is convinced the appetite is there and such products will grow quickly: “I see no reason why full service leasing won’t be a success in the region. International clients have already been doing this for years in Europe. They know the product brings ease of mind, externalizes the risks of ownership and of remarketing the fleet vehicles. And we have experience in handling the complete fleet management chain, from financing the vehicles to managing them, facilitating driver communication and organizing reporting.”

The fact that Latin America is not the most stable region, economically and financially speaking, is a reason the more for the eventual success of the full service leasing concept, Pascal Serres argues. But what about the possible competition from U.S. fleet management companies? “For the time being I cannot see an interest from U.S. suppliers in South America where the open end product seems not to be working.  The markets are not mature enough and too small for replicating the US model  and, above all, customers are not willing to take residual value risks”

Isn’t there any negative parameter? “Today, the preference for owning cars is still very dominant in most Latin American countries, and that will only gradually change. Combined with the fact that salaries are low and thus the available financial room for providing cars as a salary benefit still marginal, this may be a hurdle for the breakthrough of full service leasing. But this changes nothing about the advantages of the product, nor about the growth perspective for outsourcing of fleet management and car leasing.”

In Brazil, ALD Automotive is one of the market leaders: it manages over 22,000 vehicles, the majority with international clients. “This market is well developed. All big international players like LeasePlan and Arval are active here, but also some successful local players.” The difference is that the local heroes offer a mix of long term and short term rental services. Compared to Europe, the full service leasing product is the same, but practices show a shorter lease period. “On average between 24 to 36 months”, Pascal Serres says. “The other particularity is that the lease prices are often indexed on a yearly basis, due to high inflation rates.”

The second fairly mature market in Latin America is Mexico. Here, ALD Automotive has a well-developed footprint, with around 21,000 vehicles.  The geography holds a challenge, though. Fleet managers from its big neighbor to the north, the U.S., who have responsibility over fleets in Mexico, might prefer the American open-end fleet management system. This allows the fleet client to purchase the fleet vehicles and uses the expertise of fleet management companies for the complete servicing part. “But the reality of the Mexican automotive and fleet supplier market is such that this formula is not beneficial for the client”, says Mr. Serres. “In the U.S., corporate clients use the services of their fleet management companies’ partners. This is managed by the fleet management company, generating transparency and savings. In Mexico however, these preferred partnerships exist only on paper, so the only thing you might achieve by using the American open-end fleet management system is some transparency, but no fundamental savings.”

Mexico has a particular tradition in residual value setting: “Because the company cars are often sold to the driver of the car when the contract expires, 90% of Mexico-based fleet clients ask for a deliberately very low residual value-setting, so the car can be sold at more interesting prices than a similar car on the open market.” In Europe nor the U.S are such practices in line with regulation.

Chile and Peru
Both countries are just in the very early stages of fleet management professionalization, and car leasing is almost inexistent apart from industrial vehicles. “Nevertheless, we see interest from big companies and multinationals for applying the same fleet management practices as in Europe. We therefore believe that strong, accelerating lease growth will occur in these countries in the coming years”, says Pascal Serres. Today, ALD Automotive has around 600 fleet vehicles in Chile. including a landmark deal with CGE (Compania General de Electricidad). “By the end of the year, we will have over 1,000 vehicles there, and maybe even close to 2,000”, Serres enthusiastically predicts. In Peru, ALD Automotive has just opened up shop – only a few days ago, the first cars arrived for their first client, BP. Typical for both countries is the fact that there are two types of fleet management specialization, each one strongly linked to specific economic activities. “Both countries have an important mining and oil industry, with operations in remote areas. These industries are typically served by local players which have their own networks in place for maintenance, repair and damage management. We are not there yet, and it’s not our ambition to install extensive networks in these industry areas. We are focusing on international fleet clients and we operate from the capital cities”, says Serres.

If Brazil is up to date with fleet management and full service leasing, you would think that Argentina would be as well. But you would be wrong. On top of that, the volatile, risky financial and economic situation that has existed over the last five years has not make things easier. “It’s complicated to go there and do business”, confirms Pascal Serres. “That’s why we have opted for a partnership with local hero AutoCorp.”

AutoCorp will support ALD Automotive in extending its global offering to the Argentine car fleet market. Currently, long term or full service leasing is almost nonexistent. Although economic conditions are though, typified by very high interest rates, ALD Automotive is convinced that this is the right time to enter the market and prepare to serve international clients. “We want to be the specialist of full service leasing and ensure that companies have someone to manage their vehicle fleet in a professional way. As we are the first international lease company on the market, we have a competitive advantage.”

Pascal Serres mentions three areas that need attention in Latin America. Although in some countries the car manufacturers are present and have well-structured importers, not a lot of car manufacturers have a regional organization. And as business often has to be done via vehicle dealers, as it is the case in Chile and Peru, the negotiating process and vehicle price conditions will not be consistent. “In fact, in the countries where you have to deal with the dealer networks, price is variable over time and impacted by elements like order and delivery time. Don’t forget that in these countries only 15 to 25% of car sales are corporate-related. This also impacts the appreciation of the importance of the business and the opportunities in fleet.”

As for mobility side, Pascal Serres expects cities across  Latin America will eventually present opportunities for alternative mobility schemes. But not yet. “It will take time, because the infrastructure is not ready and governments can’t provide the necessary funding. But yes, in cities like São Paulo and Mexico City, where traffic jams and mobility are a nightmare, car restrictions and pollution measures will eventually have to be implemented. However, to make alternative mobility work in Latin America, not only do we need more investments and better infrastructure, but also a major update of the overall car fleets: one of the main reasons of mobility problems is the fact that there are just too many very old and very polluting cars on the road. But like I said: this will take time.”

Last but not least, Pascal Serres highlights Safety and Mobility. “In Mexico,Brazil and Chile driver safety is already on the agenda of our clients. And we also assist them by communicating directly with the drivers and by organizing driver surveys.  We will do the same in the other countries. In fact, we are rolling out our driver management application MyALD to all 42 countries where we are currently present, including in Latin America.”

Picture copyright: ALD Automotive

07/07/2016  |  Steven Schoefs


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