Navigating Away from Ownership-Oriented MindsetFri, 09/01/2017 - 12:52
It is no secret that Mexican vehicle culture is ownershiporiented. But that is gradually changing and financing companies are noticing. Leasing grew approximately 40 percent in the country between 2013 and 2016, according to Fitch Ratings, and both national and international players are betting on double-digit growth within the automotive industry. With strong expertise in the European market, ALD Automotive is one of the contenders preparing to take advantage of the opportunities Mexico has yet to explore.
“Mexican companies put a lot of emphasis on owning their assets,” says Thierry Merienne, Director General of ALD Automotive. “The culture is oriented to building patrimony and leasing goes completely against that idea. But companies, on the other hand, are being pressured to compete with global standards.”
Celebrating its 10th anniversary in Mexico in May 2017, ALD Automotive is now one of the two main participants in the national leasing market and Mexico is an important part of ALD Automotive’s international strategy. Its success has spurred other ventures in nearby countries. “Latin America has become a priority for us,” he says. “We opened offices in Chile in 2015 and a Peruvian branch in 2016. We will start operating in Colombia in 2017 and have signed two partnerships to attack the Argentinean and Central American markets.”
That leasing is an incipient market in Mexico has not stopped ALD Automotive on the road to success. “Some might see this as a challenge but we see it as the main strength that will lead ALD’s development,” says Merienne. “Mexico has considerable growth potential. Many of our international clients are already present in the country and we see opportunities to target national players.”
Fueling ALD Automotive’s high expectations is the fact that the most important thing for companies is resource allocation to their core business. “Cars are a necessary evil for our clients,” Merienne says. These players need big fleets to follow strict maintenance and administration schedules. The advantage ALD Automotive can offer fleet owners is the chance to externalize this crucial part of their operation, saving time and making processes more efficient. Full service is the ace up ALD Automotive’s sleeve and a key factor for its growth in the country. “The idea of complementing leasing operations with fleet management strategies appeals to big corporations and so far, only one other company can match us on services,” says Merienne. “The concept is new for most of the companies we approach and is not even that common in the US.”
The full service option includes the leasing of the vehicle, as well as all services related to its use and maintenance. The company administers clients’ units, managing corrective and preventive maintenance, taxes, insurance, plus all other technical and financial aspects. Merienne says that fleet management expenses are highly volatile but ALD Automotive’s expertise allows it to project how much vehicles will cost over three or four years. The company assumes the risk related to these factors, including the car’s residual value.
“Full service leasing has progressed significantly but companies are yet to understand and embrace this alternative,” says Merienne. Part of the challenge for ALD Automotive is clients’ knowledge of total cost of ownership. Big companies usually know their fleet’s total cost of ownership but smaller players do not always have a clear idea of how much they spend on their cars. “At first, potential clients are put off by the cost of our full service solution, until we explain all the costs they incur owning their fleet. Sometimes, our first approach with new clients can be offering traditional fleet management operations and eventually upgrade them to a full service scheme.” Fiscal advantages represent another unknown for most Mexican players, according to Merienne. The country offers tax exemptions that are not available in other markets but clients are generally not aware of them. Therefore, the company must make companies understand what there is to gain and what they can expect from leasing.
After reaching more than 20,000 leased vehicles in Mexico, ALD Automotive wants to keep up the momentum. “We are a proactive company and are constantly looking for new partnerships with automakers and banks that can support our local operations,” says Merienne. ALD Automotive also acquired other leasing players in Europe that helped it strengthen its operations. Although there is no short-term plan to approach local players, the possibility exists. The next target, says Merienne, is SMEs. “We will do our best to address these companies to present our offering and our partnerships will help us penetrate the market.”