Leasing Can Drive the Sector's Electrification TransformationBy Alejandro Enríquez | Wed, 12/08/2021 - 07:27
Q: How have US and European leasing business models advanced in the Mexican market and how have consumer preferences shifted?
A: The fleet management and car leasing industries have become very dynamic sectors. For the last couple of years, we have heard a great deal about driver safety, which is closely connected to telematics. Initially, when people had a GPS device in their car, it was for the mere purpose of locating it. Now, the GPS can also ensure that the car is in the right condition and determine if maintenance or repairs are required. New devices further let users monitor fuel consumption, speed, the condition of the vehicle’s brake and much more. Data is also key in the industry of full-service leasing and fleet management.
At ALD, we are promoting the use of fully electric vehicles because we are certain that it is just a matter of time before users of hybrid vehicles take the next step and buy fully electric. The country has several OEMs working on electrification projects but the infrastructure for them to grow their business is not there yet. It might still be too early for that but ALD is promoting this shift. In Western Europe, where we have most of our offices and clients, we are seeing a rapid shift to electric vehicles. We are sure that shift is also coming to Mexico.
For the industry to become fully electrified, it requires significant investment. Mexican culture treats cars like beloved family members. But new generations, those who are just graduating from high school or university, are less keen to buy a car. In Mexico City, we are quite spoiled with parking. Many keep their cars in their garage but not all people have that possibility. The leasing industry is shifting toward mobility solutions.
Charging infrastructure remains a problem but companies like Tesla are making some great advances toward its implementation across the country. Charging itself is another problem as it still takes hours and hours. While less expensive brands are coming to the market, they have very short ranges and take forever to charge. Moreover, sustainability is not just about producing or buying an electric car; we need to look beyond that and understand where the energy fueling that vehicle comes from. This is not something that many people take into account when they buy an electric vehicle.
Today, it is still more expensive to drive an electric vehicle than it is to drive a conventional one because electrified mobility is just taking off in Latin America. In Mexico City, there are already some projects like the Metrobús system but we need the private sector and governments to be more ambitious. The leasing industry in Mexico plays a significant role in promoting new trends. Mexico is a big country that requires a voice to convince policymakers to transform and commit to full electrification.
Q: What are your thoughts on promoting leasing as a means to electrification given the high investment necessary to purchase an electric or hybrid vehicle?
A: Leasing does play a significant role in promoting electrification. Companies should include vehicles in their balance sheets because they are assets that should be generating profits for the company. In addition to the high initial investment for an electric vehicle, there is also depreciation. The longer you keep the car, the greater the depreciation. Moreover, what we have seen is that electric vehicles require much less maintenance.
The technology in both electric and hybrid vehicles, like batteries, develops quickly so today's technology will become obsolete in two or three years. At ALD, we are focused on providing our customers with the best consulting and service so that they can get the best out of their vehicles. Generally, there is a big commitment from corporations to improve the environmental footprint of their cars. Mexico is one of the few countries in Latin America where you actually do not have to pay the road tax for hybrid cars.
Q: How is ALD working to improve the company's data capabilities and how does that help customers?
A: Part of ALD's strategy in Mexico focuses on data, so we have already shortlisted three global suppliers for data collection devices. We are also working with a partner that normalizes the data of our connected cars. We put a device in the car and then we send the data to our partner, who helps us to normalize it so we can provide a report to our customers.
To get the most out of data, companies need to answer these questions first: What data do you need and what does that data tell you? Many OEMs have built-in data collection systems and so we can also extract the data from their platform and send it to our global partner. It is in everyone's interest that we share this data.
Q: How is ALD and the leasing sector recovering from the pandemic?
A: The sector is recovering at a faster pace than last year and we take that as a very positive sign. Our biggest challenge as an industry now is the shortage of semiconductors, which is a global issue. At ALD, we are extending our existing contracts to give our customers flexibility.
In Mexico, we see a lot of room for growth for the leasing industry. Normally we compete with well-known companies but there is a great deal of potential and companies. We are also creating partnerships with other leasing companies, OEMs and banks. Much of ALD's success has come through partnerships.