15 Apr 15

Wolfgang Reinhold, LeasePlan: “Hopefully, there won't be a repeat of the mistakes of 2009”

Wolfgang E. Reinhold is a towering figure in the European remarketing industry, not just because of his tall stature and his booming voice, but also because as Senior VP for Car Remarketing & Procurement Operations at LeasePlan, he is in charge of one of the largest sources of used cars on the continent – remarketing 1,000 vehicles every day. His opinion matters. And he's not afraid to share it: “I hope the industry won't make the same mistakes it did in 2009”, he warns.

What trends and tendencies do you see in remarketing today, and especially from an international perspective?
“Residual values (RVs) will remain strong, at least for this year and the next. We're still recovering from the crisis that started in 2009, when the new car business went down – dramatically so”.

“We had reached a point where people were struggling to finance a new car. We're at a point now still when there are more used cars sold than new ones. Currently, there is a particularly good niche for three- to four-year-old cars with a mileage of about 100,000 km”.

“But whether or not RVs will rise or fall after the next two years, depends on the capacity of Europe's manufacturers, or rather on their overcapacity. If the trend to grant extreme high discounts on new vehicles persists, the used-car market could collapse. That is what happened in 2009. I hope the industry won't make the same mistake”.

The overcapacity is a pretty structural problem. Isn't a price crash unavoidable, then?
“A number of manufacturers have their capacity under control. Still, there are a few manufacturers who still have an overcapacity problem. Right now, the strong recovery in Southern Europe is absorbing some of it. And in the near future, similar recoveries in Russia and the other BRIC countries could do the same. So no, a crash is not unavoidable”.

“A bigger problem in my opinion is the fact that each market still operates in relative isolation. The European Union still lacks clear, transparent rules for the import and export of used vehicles between its member states and outside the EU”.

“On top of the regulatory problem is the fact that, once you go outside the eurozone, currency exchange rates determine the ebb and flow of used vehicles. You could actually plot the exchange rate between currencies just by looking at the direction in which used cars are crossing borders”.

In your opinion, which elements are essential to achieve an efficient and profitable remarketing policy?
“It really is quite simple: Be transparent in your rules, and be very clear to the driver about the state in which the car should be returned. It's amazing that this is still so much of an issue. If you rent an apartment, you know you'll have to pay for cigarette burns on the carpet, or for a broken window. Perhaps because remarketing parameters are a bit fuzzier, there are quite a number of conflicts”.

“That is why we at LeasePlan have simple rules. If you can cover a dent completely with a €1 coin, we won't charge you for it, for example. If you lose your second key, that will cost you up to €250 depending on the vehicle. And if you don't return your extra set of winter tires, you also know up front what that will cost you”.

“It's an educational process, but it's also a never-ending story. Drivers need to take on board more and more. It's not just about the car, but also about the keys. And the winter tires. And the aluminium wheels. Etcetera”.

What's the worst state in which you've seen a car returned?
“There was this Mercedes S-Class that came back with its dashboard gone. Just completely gone. The driver seemed to think this was normal. When we called him on it, he said his dachshund ate the dashboard. Well, that dog cost him €4,500 in damages”.

Do you think engine downsizing and alternative powertrains will have a big impact on remarketing, particularly RVs?
“Engine downsizing was an important cost element, until fuel prices started dropping. It hasn't been a relevant factor since unless for some countries where the import tax is calculated on the engine capacity. Similarly, the on-going shift from diesel to petrol cars is not something that we see in pricing. We do see that smaller engines are easier to sell than bigger ones, like the 4.5 to 5 litre ones”.

“As for alternative powertrains: their RV was extremely low because their engine price is extremely high. Those engine prices are coming down, but depreciation on hybrids and pure electrics remains very high. Cheaper petrol also has an impact. In Germany, for example, the government has had to re-adjust its target of getting 2 million electric vehicles on the road by 2020. That has now been revised to 1 million 'green' vehicles, so not just electric ones. And I think they will have to adjust their target down even more”.

“Europe's only strong pure-electric market is Norway. Anywhere else, it remains a hard sell. Hybrids are a much easier sell – but after 30 km, they switch from electric to petrol and become 'dirty' again...”

“The Netherlands and Norway are the only markets with strong electric and hybrid implementation, but that is due to government intervention. I think that is wrong, because if the government suddenly decides to cut its support, the industry dies. Growth should occur naturally”.

“Personally, I don't believe in the future of electric cars. I think hydrogen will be the future. But the pump technology is still quite expensive. So we have a chicken-and-egg problem: too few pumps means nobody will buy hydrogen cars. Too few hydrogen cars means nobody feels the need to install those expensive pumps”.

How would you advise companies who are remarketing their own vehicles to sell them in as optimal a condition as possible?
“It all comes down to transparency, and educating the driver. But if you have a big fleet, outsource the process – or you will lose out”.

Authored by: Frank Jacobs