STORY INLINE POST
Q: How has TIP Mexico performed in 2021 in comparison to last year?
A: The automotive industry is recovering, but it is difficult to compare our current situation with last year when the pandemic began. Our first half of 2021 sales were still below vs. same period of 2019 the good news is that we have seen more dynamism in the market but bad news is that we are facing other challenges in the industry, like the shortages of new cars inventories. The leasing sector has shown good growth levels year-over-year in percentage terms. Last-mile delivery trends have been a driver as leasing has been key for all those companies looking for different financial options to make sure they have enough fleet to fulfill the demand of e-commerce.. In addition, the pandemic has shown that Leasing is the best financial tool during uncertainty and volatility times, it also contributed to the segment’s growth last year.
We expect moderate growth for the second half of 2021. Although demand has been increasing, inventory shortages for some inputs used in the production of vehicles have led to delays in the manufacturing and delivery of new units. There are no units immediately available, which is delaying sales and therefore leasing. Some customers may decide to use a similar vehicle but others prefer to wait until the vehicle they want is available and the situation can last months we expect this situation to normalize by the end of the year.
Q: How has your heavy-vehicle and trailer business evolved and what opportunities do you see in this segment?
A: We have seen higher demand for heavy vehicles and trailers in short term, there is still uncertainty and trucking companies are not committing to long term deals, we are taking advantage of this trend as we have enough trailers inventories for carriers and different types of industries (retail, automotive, etc..) .. Another opportunity we have seen is the fleet renewal, as many companies delayed their renewal plans last year we believe the industry can’t wait too long to have a newer fleet for efficiency and cost savings. However, inflation is a concern for the entire sector. Trailer and vehicle prices have gone up, which may set back the purchase of new equipment. An alternative in these circumstances is leasing.
Q: How has TIP Mexico leveraged the e-commerce boom and the demand it has unleashed for last-mile vehicles?
A: The reopening of economic activities will undoubtedly require many more transport vehicles as logistics changed because of e-commerce.
In many cases, companies had to change the type of transportation equipment and leasing with us was a good alternative for them, we helped customers to change from trucks to medium size delivery vans, or from 53’ trailers to 40’ & 28’ trailers. In addition, we have come across some industries that require trailers just for warehousing and we have seen good demand in that area.
Q: How has TIP promoted the use of electric and hybrid vehicles in fleet renewal plans?
A: The penetration of electric and hybrid vehicles has been increasing in recent years. In 2019, EVs or hybrids represented only 1.8 percent of sales. That figure rose to 2.6 percent in 2020 and as of April 2021, penetration stands at 4.2 percent. These vehicles are gaining more and more ground in the market. Unfortunately, there are still many people who do not believe that these cars are more efficient and safer. They believe that these vehicles are much more expensive than internal combustion engine (ICE) vehicles without taking into account long-term savings and benefits.
In the leasing industry, if companies only consider the cost of financing they are making a mistake because other costs can be much more substantial. Not considering the Total Cost of Ownership (TCO) when purchasing or leasing a vehicle is a common mistake. At TIP Mexico, we have developed a product called ECO-LEASING, which in addition to the higher tax benefits, our clients can get free insurance for one year in a 48 month deal and no origination fee. We are encouraging the use of this type of vehicle because we want to be an active player in the reduction of greenhouse gas emissions.
Supply remains limited but it is only a matter of time before that changes. More and more car brands are announcing plans to go 100 percent electric.
Q: What is the role technology, telematics and data processing play in fleet management and leasing operations?
A: We have been using telematics for several years. This technology works very well for fleets because it allows them to streamline processes with data and more usefull information. It can identify driving habits and even identify when preventive maintenance is required. Approximately 8 percent of our leased fleet use and get profit from this service. Many fleets have not yet grasped the value of this product but we are developing a mobile app that will allow our clients to manage and observe the advantages of getting and applying this information.
Q: What is your approach to make leasing more attractive not only among large companies but also among owner-operators and small businesses?
A: One of the reasons the Mexican Association of Vehicle Leasing Companies (AMAVe) was founded was to promote a leasing culture in the country. We still believe that the best way to acquire a vehicle is via leasing because of the simple fact of depreciation. Once a car leaves the dealership, it is worth 20 to 30 percent less. We have made good progress in the association and we are participating with the Mexican Association of Automotive Distributors (AMDA) and the National Association of Bus, Truck and Tractor-Trailer Manufacturers (ANPACT) to inform about the benefits of leasing and to raise the visibility of leasing with statistical data.