Throughout its more than 55 years of history, LeasePlan has delivered a consistent track record of sustainable growth and profitability
Throughout its more than 55 years of history, LeasePlan has delivered a consistent track record of sustainable growth and profitability. 2018 was no exception, with our team delivering another strong set of underlying results, yet again demonstrating the core strengths of our business. We now have more cars on the road than ever before, while our underlying net result and return on equity continued to increase. We operate in not one, but two large and structurally growing markets: Car-as-a-Service for new cars under the LeasePlan brand and, following the launch of our CarNext.com business in late 2017, the high-quality 3-4 year old used car market. As the leader of LeasePlan, I am very proud to be part of such a strong and innovative company and recognise that our performance in 2018 could not have been achieved without the many important contributions from my colleagues across the company and the support of our customers, suppliers and investors.
Of course, the year was not without its challenges; we saw a large impairment in Turkey caused by a sharp depreciation in the Lira and further impairments in Germany due to an unusually high number of loss-making contracts. However, we have taken swift action to address the issues in Germany (strengthening the leadership team) and Turkey (changing the way FX exposure is managed for new contracts) and I am confident these businesses are now on a much more stable footing and well positioned for profitable growth.
We were also forced to withdraw our plans for an IPO in October due to unfavourable market conditions. While disappointing for everyone involved, the process of preparing the business for the listing helped us to enhance and refine our strategic priorities and has placed us in a much stronger position moving forward.
Looking ahead, we can achieve so much more in both of our markets. There is a clear megatrend from ownership to user ship and subscription models taking place in both the new and high-quality used car markets that should underpin a sustained period of market growth. Furthermore, this shift towards subscription models will only accelerate, enabled by an ever-increasing rate of technological developments, including the emergence of autonomous electrified cars and the shift towards clean, renewable energy sources.
LeasePlan will look to lead these developments and enhance its position in both of its large and growing markets. Of central importance here will be our Digital LeasePlan programme, which I was delighted to see go from strength to strength over the year. The objective of Digital LeasePlan is to achieve nothing less than the total transformation of LeasePlan from an analogue business into a fully digitally-enabled business, delivering digital services through digital platforms and leveraging the latest digital intelligence technologies. Ultimately, we aim to become the leading ‘digital services integrator’ in the automotive space, bringing together our core Car-as-a-Service expertise with an exciting range of new and highly specialised services, some of which will be developed and offered jointly with third-parties. Furthermore, by fully automating every aspect of our business to the deepest and most granular level, we will be able to ensure not only that we offer the best possible service to our customers, but that we can also further grow our businesses cost-efficiently, while unlocking significant additional value for our customers and investors.
Excellent progress was made in implementing Digital LeasePlan in 2018. We now have a fully staffed Digital LeasePlan Hub in Amsterdam and have begun to digitise our core customer journeys. We also set up a LeasePlan Global Data Hub in 2018, which will enable us to leverage our proprietary digital intelligence and data and create a new range of ‘smart’ products and services (including, for example, predictive insurance and maintenance products), as well as entirely new marketplaces based on our core competencies. Most importantly our investment in Digital LeasePlan will allow us to be more responsive, agile and flexible, so that we are well positioned to capitalise on the significant opportunities we see from the inevitable technological disruption ahead.
From a commercial perspective, our Car-as-a-Service business for new cars showed good growth in 2018. We now have close to a EUR 10 billion revenue business and 1.8 million cars in our fleet across more than 30 countries, with our corporate and SME segments growing well in 2018. The Car-as-a-Service market was forecast at around EUR 75 billion in 2018 and is expected to grow at a 5.3% CAGR between 2018 and 2025¹, supported by the megatrend from car ownership to car usership and car subscription models.
Going forward, we will benefit from our leadership position in this large and growing market and target disciplined profitable growth, particularly in our SME and corporate segments in Europe, while continuing to offer innovative new products and services, increasingly in partnership with highly specialised third parties. For example, in 2018 we set up strategic partnerships with SAIC (to bring the first large electric light commercial vehicles to Europe), Lightyear (to deliver the world’s first electric solar car to LeasePlan customers) and Fiat Chrysler Automotive, under a scheme whereby LeasePlan has become the preferred partner to FCA’s European dealer network for operational leases. Our Car-as-a-Service business will also continue to benefit from the positive impact of our ‘Power of One LeasePlan’ operational excellence programme, which is now largely embedded in the organisation and which generated an additional EUR 55 million in benefits in 2018.
Launched just over a year ago, we also saw good progress in our new CarNext.com business. CarNext.com enables customers to buy, lease or subscribe to a wide range of high-quality used cars from LeasePlan’s European Car-as-a-Service fleet and the fleet of trusted third-party suppliers. We believe that with CarNext.com we are providing our customers with good-value, high-quality used cars through our trusted CarNext.com brand in a market that has been characterised by mistrust and opacity.
CarNext.com grew with 14 new locations in 2018 taking the total network to 32 delivery stores across 22 countries. This has allowed CarNext.com to begin to scale up its B2C operations, with close to 50,000 cars sold B2C in 2018, which is 65% over 2017, while B2B sales totalled approximately 200,000 in the year. CarNext.com’s Used Car-as-a-Service proposition also grew by 150% to 8,000 cars in 2018, reflecting the growing demand for subscription services in the high-quality used car segment. In addition, more third-party suppliers are now benefiting from an end-to-end solution to resell their cars in an efficient and financially attractive way via CarNext.com. Going forward, the team will be enhancing our B2C offer by investing in our digital customer acquisition strategy, rolling out more delivery stores in Europe and developing new, innovative used car subscription products and services.
This would not be LeasePlan without talking about how proud we are as a company to lead the transition towards zero emission mobility in our industry. Climate change is one of the biggest challenges we face as a society, and road transport accounts for around 20% of global carbon dioxide emissions. We have therefore set ourselves the ambitious goal of achieving net zero emissions from our total fleet by 2030, supporting the effective implementation of the Paris Agreement and climate-related Sustainable Development Goals. To make this happen, we are transitioning LeasePlan’s own employee fleet to an electric vehicle (EV) fleet by 2021 so we can ‘learn by doing’. We are also educating our customers on What’s next in low-emission vehicles and facilitating the uptake of low-emission vehicles with attractive customer propositions. For example, in 2018, we were proud to introduce our ‘full package’ EV product – now available in 10 countries across Europe – to make the transition to EVs hassle free.
The product is underpinned by our partnership with Allego, through which we provide LeasePlan EV customers with access to personal charge points at home and at work. In addition, to support our customers with their sustainability ambitions as they make the transition to zero emission mobility, we have introduced carbon neutral contracts through our partnership with Land Life Company. Under the partnership, LeasePlan customers will be able to offset their fleet emissions through Land Life Company’s innovative reforestation programme.
LeasePlan has big plans for the future, but these cannot be achieved without the dedication of our people across the world. It is our belief that ‘you cannot grow a business; you can only grow people who grow businesses’. This is true now more than ever: in a highly competitive and disruptive digital environment, it is our people that will make the difference between winning and losing, and to delivering our vision of ‘any car, anytime, anywhere’. In 2018, we therefore made a number of significant changes to our People Strategy and took steps to enhance LeasePlan’s unique culture of care, accountability and mutual dependence.
For example, we have ensured the voice of our country management teams are heard loud and clear at the centre of our organisation and continued to roll out our Leadership Journeys across the organisation. Around 800 of our people have now taken part in their own Leadership Journey, helping them to understand more about themselves, their colleagues and what is required for What’s next. Taken together, our People Strategy initiatives will ensure we have the right people in place with the right competencies and mindsets for the next – digital – phase of our journey.
All our employees around the world deserve tremendous credit for the energy, commitment and dedication they have shown this year. Together, we have achieved so much. I would also like to thank our customers, suppliers and investors for their trust and cooperation. For my own part, I am proud to be leading such a great company at such an exciting and dynamic time in its history and look forward to contributing to What’s next.