ALD LeasePlan : acquisition is about much more than scale and synergies

Summary

ALD’s acquisition of LeasePlan at the beginning of this year created a 3.5 million fleet and a raft of process and cost synergies, but the true value of bringing two industry heavyweights together lies in the creation of a new global sustainable mobility player, according to Tim Albertsen, who heads up the combined operation, dubbed NewALD.

“NewALD is in a very good position to be a very important mobility player, given we are already used to creating 50% of our revenues from services around the cars, and not from financing,”

Albertsen Declared

“If you’d looked at this transaction five or seven years ago, it would have been all about scalability. That’s not the case today, when the market is moving so fast, and people are no longer looking to buy cars any time soon. People don’t want ownership, they want ‘usageship’, and that’s underpinned by our product. You could say that in future, every single car will be financed. The question is, who will grab that market?” Albertsen explained.

Second life

The ALD/LeasePlan merger opens the way for a new approach to the traditional trade cycle. Speaking exclusively on an Asset Finance Connect webinar, Albertsen identified big opportunities in second life leasing, perhaps in cooperation with online traders such as Cazoo or via a new offering from NewALD.

ALD already has a digital remarketing platform which handled 400,000 cars last year, and in 75% of instances, the buyer chooses to lease.

“It’s often said that when you buy a used car, you buy a potential problem. If you can lease that car including services, then you are buying access to mobility,” Albertsen pointed out.

In 2021, 30% of cars delivered by ALD were BEVs, but with the battery technology evolving so fast, the resale value of the asset is not necessarily attractive. “But that doesn’t mean the car doesn’t still have value. Unlike ICE vehicles, EVs are simpler and can run thousands of kilometres without trouble. That creates an asset which you can sweat two or three times over,” Albertsen said.

Interest in EVs is driven by corporates with a strong ESG agenda looking to show practical ways in which they are reducing their C0² emissions, and those with a younger workforce and a strong interest in addressing climate concerns.

Helping customers navigate the transition to EVs, including understanding the charging infrastructure and usage patterns, and building a total cost of ownership model, is an area where NewALD can offer services. Mobility as a service options are also being driven by corporates looking to expand their transport options to all employees, not just those qualifying for a company car.

Albertsen also sees growing opportunities in the “pay per mile” space. “It’s been close to impossible to get customers to pay for a connected car as there are no good use cases, no real savings, and everyone is flooded with data.

“But now with true connectivity, we are starting to see products like ‘pay as you drive’ or pay how you drive’ insurance, and clearly that could be an interesting business model in urban mobility using different assets.”

While car sharing has failed to take off, partly because most drivers saw this option as inconvenient, the past two years have demonstrated that flexible, exclusive use of a car has become key. ALD’s purchase of Fleetpool, a leading German car subscription company, was in response to significant growth in this area.

“Subscription offers big potential – while it’s still centred on the car, it definitely fulfils the need from the consumer, with ownership fading fast. This way, drivers get a car and if in three months they don’t need it, they don’t have a car.

“Ride hailing is already there in urban mobility terms, and that could be a good segment for us serving operators and their fleets,” Albertsen maintained.

Future challenge

Albertsen said that merging ALD and LeasePlan meant combining the best of two very different groups with a different approach to market, but with a lot of synergy. “There’s a lot of pride in both groups and the ideal is not to destroy value but to create something new.”

NewALD has established a dedicated Integration Management Office to handle the merging of the two entities, which is expected to take between 18 and 24 months, and to ensure there is minimal disruption to the running of the new business.

But the bigger ripples are likely to be felt across the market, with Albertsen declaring: “The automotive sector is probably the most competitive in the world, and as soon as they get back to normal production there are going to be a lot of cars to sell, and manufacturers are going to need to be on our panel.”