Operational Leasing in Russia Datamonitor Jugoslav Stojanov, Senior Analyst, Automotive, Datamonitor plc

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2 Emerging Markets in the European Fleet Arena: Template last updated Operational Leasing in Russia Jugoslav Stojanov, Senior Analyst, Automotive, Datamonitor plc 2

3 Operational Leasing in Russia Russia is expected to be Europe s fastest growing operational leasing market over the next five years. The number of company cars funded by operational leasing is forecast to expand at least fivefold by More realistic scenarios are possible, but restraints stemming from the specifics of the fleet market in Russia, could slow the growth of this funding method. 3

4 Agenda About Datamonitor Operational Leasing Market in (Eastern) Europe Operational Leasing Market in Russia 4

5 About Datamonitor We are a leading global provider of online market data, analysis and Forecasting platforms for key vertical sectors: Automotive Consumer products Energy and Utilities Financial services Pharmaceuticals & Healthcare Technology & Telecom Transport & Logistics 5

6 About Datamonitor We are GLOBAL: 1,500 employees across four continents Offices in London, New York, San Francisco, Sydney, Tokyo and Hyderabad Part of Informa Group Working with global companies We are LEADING: Turnover in excess of $100 million Working with 5,000 of the world s largest companies Awarded a Superbrand-status 6

7 About Datamonitor Scope and Expertise of Automotive Research Stream: Up to 30 European Markets Fleet Market & Aftermarket Portfolio of Prominent Clients Databases, Reports & Consulting Etc 7

8 About Datamonitor Fleet Product Stream: Passenger Cars & Light Commercial Vehicles Fleet Sales Information Company Car Markets Fleet Leasing and Management Competitive Data Market Analysis 8

9 About Datamonitor Geographic Coverage of Fleet Research Stream: Austria Belgium Bulgaria Croatia Czech Republic Denmark Finland France Germany Greece Hungary Italy Netherlands Norway Poland Portugal Romania Russia Slovakia Spain Sweden Switzerland Turkey UK Ukraine 9

10 Agenda About Datamonitor Operational Leasing Market in (Eastern) Europe Operational Leasing Market in Russia 10

11 European Company Car Parc 25 Markets Total Number of Passenger Cars in Use 270 million One in 11 is a company car *Europe equals 25 countries 11

12 Company Car Parc in Europe, 2007 Company Car Parc Other Car Parc 300,000, ,000,000 Passenger Cars (units) 200,000, ,000, ,000,000 50,000, million 0 Source: Datamonitor Company Car Parc Ownership Other Car Parc *Europe equals 25 countries 12

13 Company Car Parc in Europe, 2007 Other Car Parc 91% Company Car Parc Other Car Parc Company Car Parc 9% Source: Datamonitor *Europe equals 25 countries 13

14 Company Car Sales in Europe, 2007 Car Parc New Car Sales Other Car Parc 91% Other Cars 71% Company Car Parc 9% Company Cars 29% Source: Datamonitor *Europe equals 25 countries 14

15 New Company Car Sales in Europe by Region, 2007 Passenger Cars (units) 16,000,000 14,000,000 12,000,000 10,000,000 8,000,000 6,000,000 4,000,000 Company Cars 19% Western europe vs Eastern Europe+Emerging Markets Other Cars 81% Eastern Europe: Croatia, Czech R, Hungary, Poland & Slovakia. Emerging Markets: Bulgaria, Greece, Romania, Russia, Turkey & Ukraine. Western Europe: Austria, Belgium, Denmark, Finland, France, Germany, Italy, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland & UK. 2,000, ,065,604 4,458,532 11% 31% Eastern European + Emerging Markets Region Western Europe Source: Datamonitor *Europe equals 25 countries 15

16 New Company Car Sales in Europe by Region, ,000, Eastern Europe: Croatia, Czech R, Hungary, Poland & Slovakia. New Company Cars (units) 4,500,000 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 23% 6% Emerging Markets: Bulgaria, Greece, Romania, Russia, Turkey & Ukraine. Western Europe: Austria, Belgium, Denmark, Finland, France, Germany, Italy, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland & UK. 500, ,065,604 1,307,134 4,458,532 4,717,581 1,065,604 4,458,532 Eastern European + Emerging Markets Western Europe Region Source: Datamonitor *Europe equals 25 countries 16

17 Growth Factors in Regional Company Car Sales in Europe, Eastern Europe + Emerging Markets 23% Economic growth Growth in overall company car parc Replacement of company car parc with newer vehicles Rapid expansion of leasing market shortens replacement cycles Adoption of western definition of company car Source: Datamonitor Western Europe 6% Company car market more mature Slower growth in mature leasing market Environmental concerns Eastern Europe: Croatia, Czech R, Hungary, Poland & Slovakia. Emerging Markets: Bulgaria, Greece, Romania, Russia, Turkey & Ukraine. Western Europe: Austria, Belgium, Denmark, Finland, France, Germany, Italy, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland & UK. 4,717,581 17

18 Growth Factors in Regional Company Car Sales in Europe, Source: Datamonitor Eastern Europe + Emerging Markets Economic growth Growth in overall company car parc Replacement of company car parc with newer vehicles Rapid expansion of leasing market shortens replacement cycles Adoption of western definition of company car 23% Western Europe 6% Company car market more mature Slower growth in mature leasing market Environmental concerns Eastern Europe: Croatia, Czech R, Hungary, Poland & Slovakia. Emerging Markets: Bulgaria, Greece, Romania, Russia, Turkey & Ukraine. Western Europe: Austria, Belgium, Denmark, Finland, France, Germany, Italy, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland & UK. 4,717,581 18

19 Europe s Company Car Parc by Funding Method, 2007 Company Cars (units) 20,000,000 18,000,000 16,000,000 14,000,000 12,000,000 10,000,000 8,000,000 6,000,000 4,000,000 2,000,000 0 Operational Leasing Finance Leasing Outright Ownership 5% 32% Eastern European + Emerging Markets Western Europe Region Eastern Europe: Croatia, Czech R, Hungary, Poland & Slovakia. Emerging Markets: Bulgaria, Greece, Romania, Russia, Turkey & Ukraine. Western Europe: Austria, Belgium, Denmark, Finland, France, Germany, Italy, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland & UK. 4,717,581 Source: Datamonitor 19

20 Growth of Europe s Operational Leasing Fleet, Operational LeasingOperational Finance Leasing Finance Outright Ownership Leasing Outright Ownership Company Cars (units) 20,000,000 18,000,000 16,000,000 14,000,000 12,000,000 10,000,000 8,000,000 6,000,000 By % 362,000 additional units By % 1,060,000 additional units 4,000,000 4,717,581 2,000, % 8% 32% 35% Eastern Europe + Emerging Markets Western Europe Source: Datamonitor 20

21 Operational Leasing Market in Eastern Europe & Emerging Markets, Level of Penetration in Company Car Parc by Country, % Operational Leasing Finance Leasing Outright Ownership 100.0% Company Cars (units) 80.0% 60.0% 40.0% 20.0% 0.0% Greece Czech Republic Poland Hungary Turkey Slovakia Bulgaria Croatia 4,717,581 Romania Ukraine Russia Country Source: Datamonitor 21

22 Operational Leasing Market in Eastern Europe & Emerging Markets, Size of Operational Leasing Fleet by Country, 2007 Operational Leasing 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10, ,717,581 Source: Datamonitor 22 Company Car Parc on Operational Leasing (units) Turkey Poland Greece Czech Republic Hungary Slovakia Russia Romania Ukraine Bulgaria Croatia Country

23 Operational Leasing Market in Eastern Europe & Emerging Markets, Intensity of Growth by Country, 2007 vs % 450.0% 400.0% 350.0% 300.0% 250.0% 200.0% 150.0% 100.0% 50.0% 0.0% 4,717,581 Russia Ukraine Bulgaria Croatia Poland Romania Turkey Slovakia Hungary Operational Leasing Fleet Growth (%) Czech Republic Greece Country Source: Datamonitor 23

24 Agenda About Datamonitor Operational Leasing Market in (Eastern) Europe Operational Leasing Market in Russia 24

25 Operational Leasing Market in Eastern Europe & Emerging Markets, Intensity of Growth by Country, 2007 vs 2012 Operational Leasing Fleet of Company Cars Growth (%) Company Cars (units) 50,000 45,000 40,000 35,000 30,000 25,000 20,000 15, % 45.0% 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10,000 5, ,717, Year 10.0% 5.0% 0.0% Source: Datamonitor 25

26 Growth of Operational Leasing Market in Russia, (Conservative vs Up-beat Scenario) Company Cars on Operational Leasing (units) 120, ,000 80,000 60,000 40,000 20,000 Conservative Scenario 0.4% of Company Car Parc Optimistic Scenario 4,717, % of Company Car Parc 1.5% of Company Car Parc Year Source: Datamonitor 26

27 Current Degree of Development of Russia s Operational Leasing Markets vs Rest of Europe, 2007 New Market Mature Market Growth Line Market Positions 27

28 Stages of Development for Operational Leasing Markets in Europe, Observed Historical Patterns New Market Mature Market End-users Vehicle Procurement and Management is mainly undertaken inhouse. Operational leasing is a novelty Large international companies adopt operational leasing Major local companies adopt operational leasing; Medium-sized local companies adopt operational leasing; Public sector follows the trend Smaller local companies are increasingly adopting operational leasing Providers Operational Leasing is Not Offered in the Market. Some provisions made by Daily Rental Companies Rental companies provide long-term rental to cater for demand. Large international leasing companies are beginning to set up operations A few large international leasing companies already operational. Local banks team up with specialist companies to offer the service to corporate clients. Competition increases, putting pressure on margins. Advantages of scale trigger market consolidation Consolidation trends gather pace and the market becomes topheavy 28

29 Russia s Operational Leasing Market, Next Stages of Evolution New Market Mature Market End-users Vehicle Procurement and Management is mainly undertaken inhouse. Operational leasing is a novelty Large international companies adopt operational leasing Major local companies adopt operational leasing; Medium-sized local companies adopt operational leasing; Public sector follows the trend Smaller local companies are increasingly adopting operational leasing Providers Operational Leasing is Not Offered in the Market. Some provisions made by Daily Rental Companies Rental companies provide long-term rental to cater for demand. Large international leasing companies are beginning to set up operations A few large international leasing companies already operational. Local banks team up with specialist companies to offer the service to corporate clients. Competition increases, putting pressure on margins. Advantages of scale trigger market consolidation Consolidation trends gather pace and the market becomes topheavy 29

30 Operational Leasing Market in Russia: Significance of Major Growth Drivers, compared to Western Europe Russia Western Europe Significance from 1-5 (where 5 is most significant) Economic Growth - Anticipated or Forthcoming Changes in Tax Legislation - Legislation Related to Safety at Work - General Trend Towards Outsourcing of Non-Core Activities - Favourable Interest Rates 4,717,581 - Market Competition is Driving Prices Down - Leasing Companies Offer Good Residual Values Source: Datamonitor 30

31 Operational Leasing Market in Russia: Significance of Major Growth Restraints, compared to Western Europe Russia Western Europe Significance from 1-5 (where 5 is most significant) Economic Uncertainty - High Interest Rates - Low Residual Values/ Unstable Used Car Market - Environmental Taxes - Registration Taxes - Accounting Treatment of Operational Leasing vs Other Financing Methods 4,717,581 - Market Competition is Putting Pressure on Profit Margin - Quality and Reliability of Service Providers (Tyre Management, Accident Management etc.) Source: Datamonitor 31

32 Thank you for your attention! 32

33 General Points of Reference The terms Car and Passenger Car as used in this presentation exclude any other type of vehicle other than that designed for transport of passengers only. No light commercial vehicles or any other goods vehicles are included in any of the figures underpinning the graphical content in this presentation. The term operational leasing as used in this presentation implies a form of leasing whereby a) the risk of residual value is born by the leasing company and not by the leasee; and b) at least some form of management services are included in the contract. The definition of the term operational leasing as adopted for the purpose of this presentation (and Datamonitor s fleet research in general) is synonymous with various terms used across different European markets. These include: Renting in Spain; Full-Service Leasing in Germany; Noleggio a Lungo Termine in Italy; Aluguer Operacional de Viaturas in Portugal; Location Longue Durée in France; etc. The term company car as used in this presentation includes all non-private passenger cars, except for Daily Rental, Taxi, Driving School and Demo & Dealer Cars. The definition of company cars does include cars owned by governments, public sector institutions and the diplomatic corps. Cars owned by leasing companies are also accounted for as company cars. 33

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