Global

Details

  • Industry: Automotive
  • Type: Survey report
  • Date: 9/24/2012

Product diversification - Setting the stage for continued growth 

Product diversification

The ongoing change in the automotive business model towards electrification, coupled with an increasing demand for mobility solutions such as car-sharing, and the saturation of Western markets, means that captives have to develop new markets.

In the quest for new profits, captives have started to grow their business in two ways:


  1. Diversification of their product portfolio
  2. Expansion in emerging markets with a high growth potential.

Both strategies open up new perspectives and growth areas, but also bring an array of new challenges.


The next phases of the finance and leasing industry’s growth

 

product diversification chart

  1. Diversification of product portfolio – Green technologies and mobility services

    Technological development of hybrid and electric vehicles enable captives to come up with new specialized services tailored to the changing needs and preferences of customers.

Green technologies


  • Technological innovation
  • Population growth
  • Urbanisation
  • Congestion
  • Environmental concerns
  • Total cost of ownership
"Green”
technologies
  • Hybrid vehicles
  • Electric vehicles
New mobility
solutions
  • Car-sharing
  • Multi-mode mobility

Finance & leasing business support green technologies

CHALLENGE

RESIDUAL VALUE OF ELECTRIC VEHICLES

  • Dependent on lifetime of the battery
  • Uncertain technology development
  • Little empirical estimation

PROMOTING GREEN MOBILTY IN FLEET BUSINESS

  • Pressure for greater corporate social responsibility
  • Huge difference in the emergence of green fleets in particular in the emerging markets where the topic is not very prominent
SOLUTION

BATTERY LEASING

  • Separate battery from the car
  • Sell car through common finance/ leasing contract
  • Additional leasing contract for battery

FOCUS ON FLEET CUSTOMERS

  • Special offers for companies that integrate hybrid and electric vehicles in their fleet
  • Promote corporate social responsibility aspects of a “green” company fleet
EXAMPLE

Renault with electric car “Twizy”

  • Car purchase and separate battery leasing
  • Electric two-seater is available from EUR 6,990, plus a monthly leasing fee of EUR 50 for the integrated battery

Green” Fleet incentives

  • EcoStar” program by Daimler
  • “Green Fleet” Award by Volkswagen FS with driving training for employees on how to drive in an eco-friendly manner

Mobility Solutions


New mobility solutions  
  • Car-sharing
  • Multi- mode mobility

Finance & leasing business support new mobility solutions

CHALLENGE

CHANGING CUSTOMER BEHAVIOUR

  • Moving from car ownership to car usage
  • Flexible usage of cars

NEW HOLISITC MOBILITY APPOROACH

  • Combining multi-mode transportation
  • Customers switching between different mobility providers
  • More variable revenue streams
SOLUTION

CAR-SHARING FLEETS

  • Reduction of fixed costs due to the cost allocation to all parties
  • Allowing short inner city trips for car-sharing members
  • Customers getting familiar with electric vehicles

NEW MOBILITY PRODUCTS

  • New pricing models:
    • Pay – per – use
    • All inclusive flat rate
  • Ensure customer loyalty through contract structure
EXAMPLE

Car-sharing fleets:

  • DriveNow of BMW
  • Car2Go of Daimler
  • Quicar of Volkswagen
  • Mü by Peugeot

BeMobilty – a cooperation of various industry partners:

  • Usage of public transportation, electric car fleet and bikes
  • Paying one monthly flat rate

Diversification of product portfolio – Banking services

Retail banking increasingly becomes a common business activity of captives, especially in Europe where most captives hold a full bank license.



Captives grow their business through retail banking activities

Main banking products


Credit
cards
  Customer
deposits
  Commercial
papers

Opportunities of banking business

 

Threats of banking business

Low-cost funding
  • Customer deposits as a source of low-cost funding
  • More independent from commercial banks
  • Can offer better rates to customers
  Regulations
  • Banking license subjects captives to regulations of local and international banking authorities
  • Stricter requirements: capital ratio, internal lending, underwriting, reporting, and internal control
Customer loyalty
  • Increase customer loyalty through credit cards and deposits as they serve as an additional touch point
  • Acquisition of new customers through deposits
  Emerging markets
  • Market entry in banking sector usually restricted to commercial banks
  • If not, license approval can take several years
Source of revenue
  • Cross-selling F&L products to banking customers
  Increased risk
  • Negative impact on main brand due to poor execution of banking business

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automotive finance and leasing

About the study

Global automotive finance and leasing: The role of product diversification and emerging markets in future growth is based on desk research and in-depth interviews with senior executives representing key leasing and financing participants including banks, captives and independent auto leasing and financing organizations from China, France, Germany, India, Japan, Russia and the UK.

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