11 Jan 18

Car leasing and Mobility in Belgium: "B2E is where the growth is at"

Frank Van Gool, Director of the Belgian lease association Renta, and Miel Horsten, CEO of ALD Automotive Belgium and president of Renta (pictured), share their vision on the Belgian leasing market and the challenges it faces over the coming years. Remarkably, neither of them fear for the longevity of the company car. Business-to-employee programmes hold a promising potential, too.  

Gentlemen, is it safe to state that 2017 was an excellent year for the leasing industry?
FVG: "In 2017, the B2B market grew by 3 percent, while the number of leased cars increased by some 8 percent. Leasing is indeed gaining market share, continuing the trend that started in 2015. Part of the growth has to be attributed to the success of private lease. Last year, 10,000 consumers opted for car leasing instead of car owning. B2C lease today represents about 6 percent of the total fleet of leased cars in Belgium."
MH: "If anything, 2017 proved a very competition-driven year. A difficult year, too, because of the fiscal uncertainty regarding PHEVs, diesel, electric vehicles, and so on. The Renta members have done their utmost best to guide their customers, with good results in return. The growth has been driven by three elements. First, even though it is under scrutiny, the typical company car keeps gaining popularity. Second, private lease creates additional business. Third, thanks to e-commerce the small LCV segment is booming. The latter two cause concern for margins and profitability, as the investment is far lower than in the first case."

Is private lease in Belgium consumer-driven, or company-driven?
MH: "The major growth within private lease comes from private customers, not company-negotiated deals for employees. But B2E (Business-to-Employee) has a great potential, that much is sure. For an employer, giving a cash allowance equals granting complete freedom in terms of mobility, and that holds great dangers. Is the car well-maintained, safe, ensured and representative? That is why B2E programmes are interesting. They offer limited freedom, but the certainty for the employer that the cars comply with certain standards."
FVG: "Company cars put at the disposal of employees have a negative aura today, but they yield many interesting opportunities, not least in terms of green mobility. With a cash allowance, people go for the most cost-efficient solution, regardless of environmental aspects. With B2E solutions, the authorities have the leverage to greenify the fleet. As a sector, we will be negotiating to establish a pact in the medium term embracing electrification and decarbonisation. As we are so centrally organised, this could actually move forward quite quickly."

Like in the Netherlands, the Belgian federal government has decided to diminish the fiscal advantages of plug-in hybrids, or at least the so-called 'fake' ones. Rightly so?
MH: "The advantage of the announced tax change for 2020 is that at least we have fiscal stability until then. On the other hand, it is a strange decision – one that is based on the assumption that abuse is the norm, not the exception. Good citizens driving hybrids as they should are being punished. It is a very analogue taxation in digital times, in which it is child’s play to monitor who is charging his PHEV and who isn’t."
FVG: "It is good to have fiscal stability – and to be able to prepare for the fiscal change, something that was not possible when the BIK rules were adapted almost overnight back in 2012. However, I think it is a missed opportunity that WLTP has not been integrated in the same swoop. Will taxation be based on WLTP as from 2020? Also, I think it is time to finally switch to a usage-based taxation, e.g. a mileage-based toll. In the run-up of the 2019 elections, I hope this idea could mature. Bearing in mind the increasing electrification, the treasury will receive less vehicle tax income so the government needs to do something to reshape the fiscal system."

How fast will the Belgian fleet electrify?
MH: "There are two aspects at play: electrification on the one hand, and de-dieseling on the other. Looking at the loss of market share of diesel in the leasing segment, the main reason is not fleets turning to petrol, but the importance of private lease increasing. Some 85 percent of cars in a B2C contract are petrol-powered. I do not believe in a rapid electrification. By 2020, it stands to reason to expect that diesel will have come down to just 50 percent market share in leasing, but it won’t be EVs that take diesel’s place. It will be a mix of petrol, diesel, CNG, hybrid and EV. I do not believe in large EVs with large batteries, but in smaller EVs with quick-to-charge batteries that can easily be integrated in shared autonomous programmes."

So diesel still deserves a place under the sun?
MH. "The diesel debate is a very emotional one, that seems to be based on a strange phenomenon: you are either pro EV or anti EV, and if you are pro-EV, you are automatically anti-diesel. That is odd in the sense that nobody is either in favour or against a bike. A bicycle is a good solution for short trips of 5 to 10 km, but not if you need to travel from Liège to Bruges. This nuancing is missing in the EV and the diesel debate, which is incredibly polarised. I hope common sense will eventually prevail."
FVG: "Political parties have been capitalising on the diesel-bashing hype. I hope that in the run-up of the 2019 elections, politicians will take a clear stand on diesel. 2020 is therefore likely to become an overturning moment in this respect. That being said, chances are reality will have caught up with politics by then. Renta, which unites the majority of lessors in Belgium, can only have so much influence on decisions fleet managers make, but we are a facilitator nonetheless. For us, it is important that the market does not change overnight across Europe, because that would cause considerable residual value issues."

What is your feeling about Cash-for-car?
MH: "I believe it is a first step towards a fully-fledged mobility budget. However, I do not believe it will have a great impact, because the financial benefits are limited and because our public transport is outdated. Moreover, people do not change habits easily. C4C will not tackle environmental and congestion issues. If C4C evolves to a multimodal system, it could spawn B2E programmes. And that is not necessarily a bad thing for the industry."
FVG: "As for me, I don’t see people changing their mobility behaviour when they opt for C4C. People will work out in which way they can save money and get the most out of the fiscal arrangement without having to change their habits."

How do you see the average company car evolve?
MH: "When we evolve towards a mobility budget, I think the average car will be smaller, but in this context conventional car leasing as such will probably be replaced by Mobility as a Service and a bundle of options to choose from. Also, with the rise of private lease and small LCVs, leasing companies had better be prepared to finance vehicles with a lower profitability. But we have no crystal ball and sometimes the assumptions are proven wrong. When the government in 2011 changed the Benefit in Kind rules, everybody expected a massacre in the premium segment. The opposite was true: BMW, Audi and Mercedes sales have incremented since then."
FVG: "Belgians attach a great deal of importance to their company car, which still gives them the greatest amount of freedom. Chain mobility or multimodality perhaps looks like the best way forward, but people are not prepared to switch more than twice on a single journey. Perhaps the arrival of the shared, electric and autonomous car will cut the phase of multimodality short, as it will probably replace public transport."

Who will manage these autonomous shared fleets?
MH: "Characteristic for a world in disruption is that intermediaries are squeezed out of the equation. Impossible to tell whether lessors will finance the assets and/or animate the community, and so on. It is not without reason that OEMs are putting themselves back on the leasing map as a captive as we move from asset-centric to user-centric. Interesting times ahead, indeed." 

Authored by: Dieter Quartier