Analysis
12 Jan 16

Spain: A clear road ahead

Industry players focus their efforts on attracting SME customers using new solutions such as flexible renting. The company car market accounts for approximately 25% of the automotive market in Spain, where renting (full service leasing), finance leasing and direct purchase transactions are well represented.

 

With a total market of 969,000 units last year, according to the consulting firm MSI, company vehicle sales hit 265,000 units, 27% of the total.

Of this amount, 93,600 units corresponded to registrations under renting agreements, almost 20,000 more units than the previous year, and 94,400 units concerned company vehicles sold via leasing or direct purchase by businesses.

The segmentation of fleet car sales in Spain is heavily influenced by large companies, which racked up 65% of all renting transactions in 2014. Today, most players in the industry are turning their attention a lot more to small and medium-sized enterprises on account of the diminishing mileage that they are getting out of the gradually maturing large fleet market.

 

International leasing and renting companies dominate a fleet sector that is gradually gaining maturity in Spain, but that is still lagging behind other countries. Schemes such as renting, for example, have scarcely been up and running for two decades in the country and, contrary to the large companies, these kinds of solutions are still largely unknown to Spain’s small and medium-sized enterprises that make up, after all, 99.8% of the Spanish business network.

Today, we can say that many SMEs still do not have a clear idea of what solutions such as renting are all about and see it as an expensive and complicated system. In this regard it should be noted that the concept of SMEs in Spain differs to that of most European SMEs, especially as far as size is concerned. In Spain, an SME is considered as a company with between 1 and 250 employees, but 2.98 million of the 3.11 million businesses registered in the country have fewer than nine employees. There are only 18,000 companies with between 50 and 249 employees, and 3,839 companies have 250 or more employees.

 

Flexible renting

In Spain, there is a significant gap between SMEs and large companies. And SMEs, in general, have a decision-making core in which the CEO, CFO and director of purchasing and procurement are often one and the same person: the owner of the company. That explains why, in recent years, companies in the sector have been investing time, resources and money in increasing the prospecting processes for a type of SME that is far removed from the notion, or at least the size, of a business in the five major European markets.

 

Some of the new methods being introduced by the leasing and renting companies to cater more for its existing and new clients focus on flexible contracts that allow the return of the rented vehicle by the company at any time without penalty, but subject to payment of a higher monthly fee than in a conventional leasing contract.

In the past three years, all industry operators have begun offering flexible renting, taking into account, above all, the new demands of the companies in a fast-changing economic environment in which both the volumes and the time frames of the new contracts in the supply chain are also now more flexible: fewer cars are needed and for shorter periods, which is changing the traditional model of vehicle rental with added services.

 

Within this working framework, the leasing and renting companies operating in Spain have begun to get their sales back on track after the crisis. The turning point was 2013, the first year in which there was a progressive increase in fleet renewals that have benefited companies like LeasePlan, the operator that manages most fleet vehicles in Spain, with 73,342 units at the end of 2014, followed very closely by Arval, with 71,000 vehicles, ALD Automotive, with 48,842 units and firms such as Alphabet, at around 35,000 units. These four companies are those that generate the highest revenues within the sector with a combined turnover in their last reporting year, 2013, of 1,265 million euros. Of these companies, Arval is the one that generated most revenue with 423.9 million in 2013. The figure far exceeds the renting business of the major banks such as BBVA Autorenting, which in that year generated a turnover of 140 million euros.

 

Taxation benefit

The companies’ policies of renewing their fleets rather than of extending existing contracts – the usual practice during the crisis - have been the main generator of business for an industry that needs to establish more schemes to attract customers. Last summer, the government approved the introduction of extra tax relief (Income Tax for Individuals) for employees whose company vehicle complies with certain standards of efficiency. If it proves positive, the measure will affect a limited number of vehicles because schemes such as the company car are not very widespread in Spain, unlike countries such as the UK. In this sense, fleet industry managers operating in Spain have, for years, lobbied the government for a programme of incentive plans for company cars similar to those that private car customers have been entitled to for years via the Pive Plan.

 

Regardless of whether or not direct aid is forthcoming for the purchase of company cars, registration forecasts for the corporate car market are positive. According to the consulting firm MSI, company car sales (passenger cars and light commercial vehicles) will this year come to 321,000 units in Spain, representing a growth of 21.3% compared with the figure for 2014. MSI estimates the Spanish corporate market will reach 444,000 units in 2018, which would mean adding 221,000 units to the result obtained last year.

 

According to this planning, and as is the case at this point in time, the best-selling type of company car will remain the mid-sized passenger car, with a share of 23.48%, followed by mid-to high passenger cars and small passenger cars, both with an estimated market share of 17%.

 

Juan Arus

 


Image: The Renault Kangoo was the best-selling vehicle on the Spanish car fleet market in 2014.