LeasePlan operates in two large and growing markets: the EUR 75 billion Car-as-a-Service market through the LeasePlan brand, and the EUR 65 billion market for high-quality used cars through CarNext.com.
01. The Car-as-a-Service market
Car-as-a-Service is a segment of the evolving automotive landscape, which lies between the historical model of outright ownership and the emerging model of mobility-as-a-service. Car-a-as-Service comprises a variety of services which allow for the long-term use of a vehicle without the onerous obligations of ownership. It comprises the funding of a vehicle with the provision of additional services which may include, but are not limited to: vehicle procurement and sale, telematics, fuel and mileage management, vehicle maintenance and repair, insurance, fleet management services, vehicle recovery and damage management services.
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 2025³. The following key trends are driving growth and shaping the Car-as-a-Service market:
3. Source: Roland Berger Report Jan. 2018
Ownership to subscription megatrend
The term ‘Car-as-a-Service’ is relatively new, but the market has been developing for more than 80 years. OEMs first began providing car financing solutions to corporate customers and were soon followed by banks and other financial institutions. By the 1960s large companies were outsourcing their fleet management to focus on their core businesses, and by the 1980s were transferring vehicle ownership to financing providers as a way of reducing risk.
As vehicles become more complex to own and maintain (e.g., insurance, tax, servicing, changing regulation, software upgrades, electric vehicles (EVs), customers are opting for hassle-free subscriptions that offer more flexibility. This shift has continued, particularly among millennials, who are less interested in vehicle ownership. This is part of a broader megatrend of ownership to usership and subscription that is visible in other industries. The Car-as-a-Service market is expected to grow as it moves from corporates to SMEs and now private individuals both directly and through mobility providers.
Urbanisation, digitalisation and new consumer trends are driving the rapid growth of (new) mobility providers such as ride-hailing and ride-sharing platforms such as Uber, Zip Car, Car2Go and DriveNow. Over time, this growth will increase total passenger kilometres travelled and lower levels of vehicle ownership. There is a growing trend for (new) mobility providers to direct their drivers to large, international Car-as-a-Service providers to ensure high quality, well-maintained and safe fleets, as demonstrated by Uber’s pan-European partnership with LeasePlan. This trend represents a significant market opportunity for LeasePlan to leverage its strengths in managing large fleets and corporate relationships and strike multi-national contracts. As mobility players continue to take market share, the fleets under their management will also continue to grow and represent a key focus area for LeasePlan.
Autonomous vehicles (AVs) can offer safety, efficiency gains and lower costs for end-customers and passengers. Although widespread adoption of fully automated (level 5) autonomous vehicles is not expected before 2030⁴, AVs could become a growth catalyst for the Car-as-a-Service market by transforming the economics of ride-hailing services and reducing personal car ownership. LeasePlan will be ready to step in to fund the vehicles that will replace drivers at the appropriate time.
4 Source: Roland Berger Report Jan. 2018
Fleet Management Companies (FMCs) increasingly offer digital products and services that add value to the Car-as-a-Service market. Digitalisation is not only providing new opportunities to enhance the customer experience, it is also automating processes to reduce costs and utilise internal and external data sources to facilitate better informed and more agile decision making. Our aim through Digital LeasePlan is to deliver best-in-class digital services to our customers through digital platforms in all areas of our business and with the latest digital technologies, such as artificial intelligence, algorithms and deep learning.
Sustainability is of growing importance across all products and services as customers look to operate responsibly by ensuring their cars are efficient and sustainable. Although EVs, including plug-in hybrids and battery-only powered EVs, are still a small part of the market, adoption will rise as emission regulations increase and EV costs fall. LeasePlan is taking a leading role in driving the shift to more sustainable powertrains and is a founding partner of EV100, a new global business initiative designed to fast-track the uptake of EVs and infrastructure among large global corporations, launched by The Climate Group around the UN General Assembly.
02. The CarNext.com landscape
CarNext.com is active in the inefficient, fragmented European market for 3-4 year old vehicles. The key characteristics of the used car market in which CarNext.com operates are described as follows.
Large, growing and predictable
The used car market is a very large, highly fragmented and attractive market. LeasePlan believes the used car market offers potential in both selling LeasePlan’s own high-quality 3-4 year old used cars B2B and B2C, as well as opening up to third-parties on a commission basis. Total market volume is expected to grow by 4.6% CAGR from 2016 to 2020⁵.
5 Source: Roland Berger Report Jan. 2018
Fragmented, opaque and suffering low customer trust
The EU-wide used car market is highly fragmented and consists of intermediaries, traders and dealerships. The industry is also opaque and has low levels of customer trust.
Digitalisation is driving transparency, efficiency and disintermediation
A growing number⁶ of customers are using internet searches to find and purchase used cars, while online car sale platforms can facilitate cross-border sales. Digital technologies also enable greater transparency and efficiency, as well as disintermediation between the wholesaler and the local dealer.
6 Deutsche Automobil Treuhand GmbH (DAT Group) 2016