The automotive market is in the midst of a sea change, now more than ever becoming a highly complex and competitive market. Electric cars with autonomous driving, environmental protection, renewable energy and new paradigms of consumption, focused on the use and availability of an asset, are causing disruptive effects on the market and increasingly tightening competition.
Furthermore, innovation, digitization of processes and computerization are changing the market logic and the existing players like the automakers and dealers are changing their structure.
The rental sector, both short and long term, has been demonstrating in Italy and Europe, as indeed in the whole world, rather encouraging numbers.
This, however, also presents risks and business management complexity linked to the current regulations in safety, vehicle use, the management of maintenance and repairs, and possible fraud. For this, in-depth market knowledge, as well as careful management and analysis, are required.
As shown in a study by Frost & Sullivan, the main factors impacting the rental market are the advent of electric cars and the rapidly increasing supply of rentals to individuals.
This brief examination will present an overview of the evolving trends influencing the market in 2019.
1. Electric and self-driving cars
The introduction of technologies such as IoT and AI in the automotive industry is leading to revolutionary changes such as the advent of electric vehicles, like cars or trains, and even autonomous driving.
The spread of self-driving cars or those with artificial intelligence will have a major impact also on insurance companies. The latter will have to revise their business models, resulting in changes to their DNA.
Electric and hybrid cars currently have a relative weight in the automotive market, but given the increasingly stringent CO2 emissions regulations and ever more discerning consumers in environmental issues, they are destined to increase in number during the year.
The numbers speak for themselves, in 2018, in fact, 81,892 mild and full hybrid cars were sold (+29% and 4.3% market share) and 4,734 plug-in and extended-range hybrids (+ 65.3% and 0.2% market share).
With the growth in demand for these models, leasing will be the preferred formula primarily for two reasons: first, electric cars undergo greater devaluation, and leasing saves consumers from these spikes in value, and second, these formulas allow changing cars more frequently, useful given the fast technological evolution of the features of these cars.
2. Leasing to individuals
The automotive market seems to favor, even more and more, leasing to individuals.
In relation to all this, the leasing companies have started making offers to customers without VAT numbers. And the same numbers demonstrate the growing interest of the public towards leasing: at the end of 2017, there were about 25,000 private contracts in the leasing formula; that number has grown up to reaching 40,000 at the end of 2018.
The foreign markets of the United States and Canada are seen as the key countries, driven by a young population that opts for a multi-benefit leasing offer; in Europe, as shown in the Report from Frost & Sullivan, it is instead companies or businesses that prefer the leasing offers created for individuals, as these are often more convenient and flexible. Although the services are similar to the business offers, they offer a certain degree of adaptability to customer requirements: fewer restrictions on the duration and mileage, and ad hoc services, such as the ability to trade-in your used car.
3. Used Leasing cars
As indicated in the 2019 Global Fleet Vehicle Leasing Market Report it is estimated that the number of used cars available today on the market is substantial. This figure is expected to grow throughout 2019, opening up new fronts for leasing agencies.
Recently, the market has been growing more slowly than expected, and new car registrations are down; considering this uncertainty and the lack of consumer willingness to pay high figures, some of the major market players, such as LeasePlan and Arval, have begun to exploit the opportunities that used cars represent.
Being used allows for cheaper lease deals, becoming a more affordable and popular option.
In general, the unknowns still remain for the used car quality, both ex-lease and private, in relation to the problems possible in buying new. However, modern cars are more durable and, thanks to predictive maintenance, are less prone to sudden failures.
4. Mid-term Leasing
Another fast-growing trend is the mid-term lease or leasing a car in the medium term. This is a phenomenon that has arrived from abroad and is a leasing method positioned between the long and the short term, lasting more than 30 days but less than 24-30 months.
The mid term in Italy, just last year, recorded 70,000 contracts.
The features that make it so attractive in the eyes of the consumer are flexibility and the absence of time and mileage constraints; also it stands out for its appeal to different types of customers, from large companies to individuals.
5. Digitizalizing and Computerization
The automotive and leasing industry is constantly changing due to technological innovations and in the coming months, the leasing agencies will increase their effort in providing services for the prevention of breakdowns, instant and cost-effective.
One of the trends set to grow is the use of black-boxes, by now considered a fundamental aspect of leasing. Thanks to these small devices, in fact, the leasing agencies obtain information from the relevant vehicles such as:
- vehicle geolocation;
- fuel consumption;
- driver’s driving styles;
- crash dynamics;
- maintenance deadlines;
- location in case of theft.
6. Leasing Fleet for SMEs
Recently not only was there a desire to open up to the private market, but, with regard to corporate fleets, there was also an opening to small and medium-sized enterprises (SMEs), highly attractive to leasing companies for the great potential they represent. As a result, many leasing companies have started to create business units focused on leasing fleets for SMEs, implementing service digitization and online channels.
7. New mobility models: Mobility-as-a-Service and Car-Subscription Services
At a time in history where hyperconnectivity rules and everything is just a click away, thanks to the speed of the internet and the increasing sophistication of smartphones, the idea is gradually spreading that cars should also be an asset you can buy or book online and receive at home.
While it is possible to close the short-term leasing contracts from your mobile phone or computer, this is still not entirely true for long term leasing deals.
In 2019, however, we will see the spread of new forms of mobility that will be in addition to car sharing, like pay per use or subscription services. The latter, the so-called subscription-based services, similar to Netflix for instance, continue to gain market share for their simplicity and flexibility: no need to sign a contract restricted to the same offer for a long period, but only for times of need.
In conclusion, we expect 2019 to shift the focus of attention to the used car, the private individual and SMEs with more and more complete offers, digital and interactive, and record the increased presence of leasing companies on the web with flexible solutions personalized to the customer.
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