Mauricio Medina
CEO
TIP México
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TIP México: Leasing, Perfect Tool for Uncertain Times

By Alejandro Enríquez | Tue, 03/23/2021 - 18:29

Q: You have mentioned before that leasing is growing in the Mexican market. How has this trend evolved?

A: According to AMAVE figures, leasing grew around 9 percent in 2020 compared to 2019, despite the pandemic. This implies that leasing is a financial product that works best in times of uncertainty and crisis. When companies are unsure about buying a new fleet, they turn to leasing schemes that allow for a better financial performance. Leasing provides companies with flexibility. The pandemic has helped to grow this segment and it has now become a viable product for many companies.

The industry saw growth not only in units leased but also in fleet management. This means that companies decided to outsource all the services associated with fleet management, including maintenance and legal fees. Fleet management grew more than 14 percent in 2020, according to AMAVE, despite it being a complex year.

Q: How did light- and heavy-vehicle leasing perform in 2020?

A: Light-vehicle performance was good. The best segment was light trucks since e-commerce boosted last-mile deliveries and brought growth to this segment. At some point, demand was greater than the number of available units. As for freight trucks, there was a slight setback in certain segments given the lockdown measures enforced across the country. On the other hand, supermarkets and other convenience stores required greater volumes in April, May and June 2020. By the end of the year, there was a lower utilization rate in the heavy-vehicle sector, which was also influenced by the country’s overall economic performance.

Q: TIP has innovated in different business lines, from leasing cargo dry vans to building an online marketplace for used vehicles. How have these initiatives impacted your position in the market?

A: We are the only company in the country with available stock of cargo dry vans, which can be leased from one month to seven years. Large self-service stores turned to us to better manage additional storage space. Although there was greater demand due to the pandemic, we are aware that it is seasonal rather than long term.

By the end of the leasing period, most leasing companies need to sell the asset. We automated and digitized our remarketing process by creating an online platform for auctions, where units are posted and interested parties place their offer, thus creating a really transparent process that follows all legal and tax requirements. This platform makes it easier for potential buyers to find a unit. The portal has worked very well and through this channel we are selling our used vehicles after the termination of our leasing contracts with clients.

Q: How is TIP collaborating with AMAVE?

A: AMAVE is a young association, having been founded only five years ago. I am currently the president of the association for a two-year term. We have a number of initiatives, one of which is a bill to reform the legal framework to ensure that leasing is recognized and to guarantee a faster process for recovering leased assets. Another objective is to share the benefits of leasing. We have grown but we need to communicate the leasing advantages. The companies that formed AMAVE represent more than 50 percent of the leasing market in the country.

Q: Which segment represents major potential for leasing to grow?

A: There are a number of segments. Light vehicles will continue to grow, for instance. Mexico’s potential depends on the renovation of the vehicle park. The heavy-vehicle park is on average around 20 years old, which means there are units that are 30 to 40 years old, while others are less than 5 years old. This is an opportunity for the country. The intention is to promote the fact that leasing allows companies to renew their fleets while saving considerable costs in terms of fuel efficiency, maintenance services and more.

Q: What is your perspective on the adoption of electric and hybrid vehicles?

A: Two years ago, I would have said that the trend seemed promising. However, the pandemic negatively influenced the expectations regarding electric and hybrid vehicles. Growth has not stopped but it has decelerated. At the same time, the federal government continues to bet on fossil fuels, instead of renewable technologies and electrification. There are mixed signals regarding these technologies. 

That being said, leasing works well for electric vehicles. There is no better option to try an EV than leasing. Individuals and companies can lease a vehicle and see if it fulfills their expectations. Approximately 9 percent of the electric and hybrid units in the country are purchased by leasing companies, almost one out of 10 vehicles.

Q: With mobility paradigms changing, what benefits can leasing bring to individuals?

A: Leasing offers tax benefits for companies and individuals with entrepreneurial activities. For individuals, benefits also include renewing the vehicle every two to three years without having to purchase it. You can arrange different schemes where you spend less on maintenance while enjoying more competitive prices on telematics and insurance, given that leasing companies can get better prices due to the volumes they handle.

Q: What are TIP’s strategies to strengthen its role in the leasing market?

A: The main objective is to simplify our processes, strengthening communication channels with our customers. Simplifying our processes implies a better digital experience for our customers to contract new leases. We will launch our digital platform in 2Q21 that will place our product closer to our current and potential customers. After the pandemic, companies learned they need to enable different sales channels: some customers prefer face-to-face deals while others prefer remote communication. We need to offer whatever they prefer.

 

TIP México is a leader in cargo equipment and vehicle leasing, as well as fleet management, with more than 26 years of experience. The company has a fleet of more than 26,500 units and offers national coverage through commercial offices in 19 cities.

Photo by:   TIP México
Alejandro Enríquez Alejandro Enríquez Journalist and Industry Analyst