How fleet business in Western Europe is on the rebound to the New Normal

As the lockdown measures are loosening up, fleets return to ‘business-more-or-less-as-usual’. Still, the COVID-19 effects will linger for a while, causing capacity, cash flow and other issues on the supply side. Fleet Europe made an overview of the current state of affairs in the major fleet markets and, where possible, of trends and local outlooks.

Germany

Sales. Germany was one of the first countries to soften the lockdown measures. On April 20th, showrooms were allowed to receive customers again. Dealers are struggling, though, as sales are picking up slowly. Their total new car stock represents nearly 15 billion of sleeping capital. That is why they are calling for government-backed sales incentives. According to Dataforce, Corona could slash German fleet registrations by 50% in 2020. The consultancy firm believes the market won’t reach pre-COVID19 levels before the end of 2021.

Aftersales. Between March 23 and April 20th, only urgent interventions were allowed. Now that regular maintenance, tyre changes and body repairs are possible again, things are looking up, but capacity limitations and extra costs (e.g. handling to disinfect vehicles) may cause servicing rates to increase. Some fleets may have to consider switching to non-OEM franchised workshops to ensure cost control and timely servicing, says ICDP, an international research-based organisation focused on automotive distribution.

Leasing. Dataforce sees the leasing market decline considerably as companies extend their existing contracts. Moreover, lease rates are expected to increase due to dropping residual values and extra costs incurred by protective measures. Finally, the creditworthiness of corporates is likely to be scrutinised more than ever, leading to a lower acceptance rate for new contracts.  

Remarketing. Indicata saw a decrease in used car prices (-1.7% between February 1st and May 1st) and transactions, but things are definitely improving. Consumer confidence seems stronger than elsewhere in Europe, where the lockdown rules were tighter. Autovista anticipates a decline in RV of around 3% towards the end of 2020 and then a swift recovery almost back to the levels of March 2020.

Vehicle inspection and registration. After a car has been in use for three years, it must be inspected every 24 months. TÜV and Dekra MOT centres are opening again, but local rules vary. As to vehicle registration offices: many of them are still closed to avoid crowding in the waiting areas. Often, only vehicles from people working in system-critical areas and from dealers can be registered.

France

Sales. New car sales dropped by 88% in April, but vehicles with an externally chargeable battery registered a decrease of ‘just’ 67%, indicative of the fact that they are still grabbing hold of an ever bigger piece of the pie. Dealers have reopened their doors on May 11th. Fleets are expected to delay renewals, making for a gloomy outlook.

Aftersales. Most aftersales service providers have resumed their activities, but see their capacity limited by corona containment measures. Turnover might increase over the next years as private and business customers hold on to their vehicles longer, which means an increased number of replacement parts and repairs.

Leasing. The long-term rental industry registered 84.3% fewer new vehicles in April. Here, too, electric vehicles are thriving, relatively speaking.

Remarketing.  According to Autovista Group, French RVs dropped by 0.2% between the start of the lockdown and April 18. By the end of this year, RVs are expected to have dropped by 1.5%. A slow, U-shaped recovery should follow.

Vehicle inspection and registration. Even though it had first extended the grace period for the contrôle technique with three months, the French government recently declared that overdue vehicle inspections should be carried out by June 23rd. Some fear the aftersales network (glass repairers, body repairers, service centres, tyre centres) lacks the capacity to process all vehicles that require servicing or at least a check-up before being presented for inspection. Vehicle deliveries restarted on May 11, registration offices are open as usual.

The Netherlands

Sales. In general, brand dealers have remained open the past months, resulting in a far less dramatic fall in new car sales than in other European countries. Van Mossel Group, one of the country’s largest retailers, even believes that 2020 could still become a relatively good year for car sales. Especially EVs are selling well – which is logical, given the Dutch tax privileges.

Aftersales. Turnover in the aftersales business has decreased slightly compared to the same period last year, mainly due to COVID-19 induced capacity restrictions. Still, the industry outlook is generally optimistic.

Leasing. In April, Dutch lessors registered 9,350 new vehicles, which is about 45% less than in the same month last year. Especially Renault and BMW underperformed, whereas Kia kept its losses at just 8%, as it has a popular EV on offer: the Niro.

Remarketing. RV setter Autotelex sees used car prices stabilising in the Netherlands, after Indicata registered a 2.3% drop between February 1st and May 1st. Diesels are still difficult to shift, but trading is picking up again. “The number of taxations and offers is back to where it should be, indicative of an increased demand,” Autotelex says. The increased B2C business also relieves some of the remarketing pressure for leasing companies, which had to increase the write-off of their stock.

Vehicle inspection and registration. After a temporary shutdown, the Dutch MOT centres are open again. Vans retrofitted with fixed ‘corona-proof’ separation screens need to get a special approval. Registration has not been interrupted as it is an online process.

Belgium

Sales. On May 11, dealers were allowed to open their showroom again after an 8-week lockdown. In April, new car sales dropped 90% compared to last year. Interestingly, there is a clear shift towards low-to-zero emission vehicles.   

Aftersales. Turnover in the aftersales business has come to a near full stop since March 18, when the lockdown initiated. Since then, only urgent tyre changes and repairs were allowed. Now that they are open again, garages, body repairers and tyre centres generally apply a corona supplement to cover the costs of disinfecting the cars, which is not to the liking of the lessors. They find themselves between the hammer and the anvil: customers expect all servicing costs to be included, whereas the corona supplement was never budgeted in the lessor’s SMR calculation.

Leasing. In April, only 981 new cars were registered by all Belgian lessors combined – compared to 15,018 in the same month last year, that’s a decline of 93%. Now that showrooms are open again and cars can be delivered more easily, May has a better outlook. Many leasing contracts have been extended to bridge the lockdown period.  

Remarketing. The fact that sales have been virtually dead for two months results in a clear drop in used car prices and stock vehicle prices as many dealers are in urgent need of cash. The situation is expected to level out in the next weeks, leaving opportunities for fast decisionmakers.

Vehicle inspection and registration. After a 2-month closure for non-essential inspections, the Belgian MOT centres are open for general business again. Vehicle registration (DIV) has continued during the lockdown.

UK

Sales. Dealers are still not allowed to open. According to the Society of Motor Manufacturers and Traders (SMMT), keeping dealerships closed is costing the UK treasury £60 million per day, whereas inventories are ageing and stock continues to cost money. It urges the government to relax the lockdown measures.  

Aftersales. New car sales are unlikely to recover to the same levels as in previous years. People will hold on to their current vehicles for longer. Therefore, the aftermarket industry may become one of the more robust areas in the automotive industry in the UK, contrary to the parts supply chain.

Leasing. Corporates are expected to order fewer vehicles over the next years, but the market share of leasing is expected to increase according to industry association BVRLA. Their latest quarterly leasing survey shows a surge in BEV contracts.

Remarketing.  COVID-19 combined with Brexit translates into a medium-high risk profile for the UK, characterised by a moderate recession in 2020 and 2021 followed by a recovery in 2022, says Autovista Group. The main reason is the limited elasticity in the market, together with the fact that supply of new cars has drastically reduced and is unlikely to ramp up again soon.   

Vehicle inspection and registration. The periodic technical inspection, which is a yearly obligation for vehicles aged three years and over, was deferred by six months by British government. 80% of the country’s 30 million yearly MOTs are carried out by independent garages, which are worried about the financial effect of this measure.

Do you have fleet-relevant information on one of these countries or wish to share your insights on another major fleet market in Europe, such as Italy or Spain, please feel free to contact our Chief Editor, Steven, Schoefs (sschoefs@nexuscommunication.be)

(Photo credit: Shutterstock, 2020)