15 oct 18

Captives need mobility services to survive

Will captive lease companies still be around – and prospering – in 2030? Only if they embrace change, says Deloitte. It has mapped out four “extreme, but plausible” scenarios for the future. 

Representing up to 30% of their manufacturing parent’s turnover, captive lease companies are an extremely profitable business for OEMs. However, they face more change in the next 10 years than in the previous 30 – which they will survive only if they adapt accordingly, Deloitte says.  

140 datasets
For close to a year, the consultants have worked with 10 captive lessors, analysing more than 140 datasets related to changing patterns in mobility offers, vehicle usage, automotive distribution, financing methods and rules and regulations. 

What the future will look like, depends on two major variables: 

  • Will mobility services be provided by (A) a few large players or (B) by many smaller ones? 
  • Do captives have enough capital to continue their financing business, which currently represents 92% of their turnover?

With that in mind, Deloitte worked out four economic models for captives.

Bleak future

If the answer to the first question is B and to the second one is ‘no’, the future for captives looks bleak. 

If banking rules continue to demand that financial institutions retain an increasing amount of capital as collateral, captives will no longer be able to finance their assets. They will be reduced to managing mobility service providers on behalf of the OEMs. 

Two of the 10 captives Deloitte has been working with are moving in this direction.

Promising scenarios

The three other scenarios are more promising. They are all predicated on captives taking on board, to a lesser or greater degree, mobility services, from innovative financing methods to carsharing and carpooling. 

In a second scenario, preferred by seven out of 10 captives, both leasing and mobility services will be pursued aggressively – the latter both by creating mobility offers internally and by acquiring startups. In this scenario, mobility services will generate more than 40% of captives’ turnover by 2030.  

Mobility platforms

A third scenario sees captives as coordinators of mobility platforms, while the fourth one sketches a situation largely similar to today, with financing still the mainstay of captives’ business in 2030. To Deloitte, this last scenario seems the most likely – but with more involvement with mobility services, generating up to 20% of captives’ business by 2030.  

In short, if captives want to survive, they need to turn their attention to offering mobility services. And they need new customers, new markets, new products and above all, new digital sales channels. Their presence at the point of sales was always a great advantage for captives, but that is diminishing in an increasingly online sales environment. 

Authored by: Frank Jacobs