Interviews
30 sep 22

“Whatever the future, ALD Automotive has a plan”

If you’re on a ship in a storm, you’d want a captain like Tim Albertsen. The CEO of ALD Automotive exudes the calm confidence and clear command of someone familiar with both the troubles ahead and the right course forward. In a wide-ranging, exclusive conversation with Fleet Europe, Mr Albertsen (pictured) opens up about the choppy waters of the global economy, the progress of the merger with LeasePlan, and the future of mobility.

The economy in general, and automotive in particular, has seen some strange weather these last few years. In August, ALD Automotive – like other major companies in the fleet and mobility space – posted record half-yearly profits. One reason: a windfall in the used-car segment, of more than €3,200 per unit. Of course, that won’t last, and ALD Automotive is already projecting a whole-year sales margin of €2,000 per unit. But what about next year?

Mr Albertsen, what goes up, must come down. Is there a fear that today’s used-car windfall may be mirrored by losses tomorrow? How does ALD Automotive see the future of its remarketing efforts? 

“It’s an issue we give a lot of thought. And for the record, our whole-year forecast is for a sales margin of at least €2,000 per vehicle (laughs).”

“What’s clear, is that these large margins are the result of unusual and exceptional circumstances, caused by the pandemic, which disrupted the supply chain, and by the subsequent microchip shortage, which put a dent in production. But in essence, it’s an issue of supply and demand – they have become completely unsynchronised.”

“There are fewer new cars available to sell, so demand for used cars is greater – but for the same reason, there are fewer used cars available. At some point, new car sales will start to rise again. It is our expectation that this will lead to a relatively quick normalisation, from 2023 onwards.”

“Do we expect our current profits to be mirrored by losses? No. And here’s why. In the current economic climate, where we may be edging towards a recession, people tend to hold off on large purchases, including cars. Previous experience teaches that after a while, when they can’t postpone it any longer, people will buy a car, even in a recession. But it will be a used one rather than a new one.” 

“So, to a certain extent, the used-car business is anti-cyclical. Additionally, with new car sales down anywhere between 10% and 30%, depending on the market, there is a floor under future used car prices.”

Just to continue for a moment on the topic of remarketing. Today, around 70% of new vehicles are still ICEs. But in three to four years’ time, when they come onto the used-car market, demand for fossil-fuel cars may have collapsed. How does that figure in your predictions?

“This is more difficult to judge than the previous issue. It’s true: at present, about 30% of our deliveries are BEVs or PHEVs, with diesel representing about 20% and petrol the rest. We’re already adjusting our residuals to make diesel less attractive. So that’s one way to prepare for the future.”

“Another is to realise that used-car markets are very deep, so to speak. Even in a few years’ time, a used car with an internal combustion engine will still be an attractive proposition for a buyer who lives out in the country, and who has no intention of coming into the big cities (which by then may largely be off-limits to ICEs, Ed.) Plus, there are opportunities in cross-border remarketing. That’s a bonus of being at the forefront of electrification, like we are: that transition will take place much slower in other markets.”

“And finally, we have ways of dealing with residual values that are not available to other major defleeters. Take second-life lease, for example, which we launched in Denmark three or four years ago, and is now live in most Western European countries. There is solid interest in the formula, but we feel it’s not up to its full potential yet. Eventually, we would like to see 20% to 25% of our entire volume in Western Europe go towards second-life lease.”

Eastern Europe is traditionally a major destination of used vehicles. Does the closure of Russia pose a problem?

“The Czech Republic and Romania are major markets. The Russian market is not a problem, because it’s been closed for about 10 years already. The Russian government itself restricted the import of used vehicles, to protect its own automotive industry.”

Let’s zoom out from remarketing to the bigger economic picture. That picture is looking quite gloomy, with supply constraints, high energy prices and rising inflation already here, and the very real risk of recession on the horizon. How is that affecting your operations and strategies? 

“When the pandemic broke, we were very fast to react. Our key question was: How can we help our customers most effectively? So, during the first wave of the pandemic, we focused on extending existing contracts. As the pandemic wore on, we developed ALD Flex – launched it across 19 countries at once, to be precise – so we could offer our customers the flexibility in terms of contract duration they needed.”

“Back then, we had plans A, B and C, depending on which direction the pandemic would take. And now, we’re doing the same. We have a range of plans, fit for a range of eventualities. Always with our customers at the centre. Our aim is to increase the agility and resilience of our customers, and in order to do that, we’ve prepared new business models, including some based on subscription. Whatever the future, ALD Automotive has a plan.”

“And our customers know this. That’s why we’ve grown, throughout the recent crises. Our expertise is large, and second to none. Especially in key areas like electrification and multimodality. At present, our new fleet deliveries are 27% electrified. That’s 5 points above the European market average.”

So, when will you launch plans A, B and/or C?

“The timing of these things is difficult to predict. What we’re doing in the meantime, is building competencies and muscles in areas that will be important: multimodality, subscriptions, digitalisation. Whichever situation emerges, we’ll be ready with appropriate solutions.”

As the economic situation worsens, the German government among others is backtracking on previous green commitments, and reopening fossil-fuel-based energy production. Is there a similar danger that fleets will go back on their sustainability targets? 

“There are two schools of thought. One indeed sees electrification as increasingly expensive and is considering previous alternatives. The other sees we’re already heavily invested in this new paradigm. And remembers the reason why: to combat global warming.”

“It is my opinion too that we’re past the point of no return. This goes for all stakeholders involved. Starting with the manufacturers. If we look at the bigger picture, we now have an additional reason to go for sustainable energy – to get out of the pocket of Mr Putin.”

“So I think we’ll continue on this path, even if there may be obstacles and slowdowns. There is no way back. Incidentally, I got my EV in February, and it’s a great experience. That helps too (laughs).”

Turning to a topic that I’m sure takes up a lot of your time: ALD Automotive’s proposed acquisition of LeasePlan, announced at the start of this year and expected to close by year’s end. How’s that going?

“You’re right, everybody here is really busy with that operation. There’s a lot of positive energy in the air about ALD Automotive and LeasePlan moving closer together. But it’s also a highly complex operation, as you would expect: we’re merging 26 countries, two HQs, and two financial arms. Not to mention two very different models of governance. Also, ALD Automotive has to become a regulated banking entity with the ECB. And of course, there’s the antitrust process that we have to go through.”

“For the time being, everything is going according to plan. In fact, we’re somewhat ahead of schedule. There have been a few surprises along the road – positive ones. For one, it turns out that our two corporate cultures are a quite compatible. The differences are not that big.”

“On the other hand, we are quite different in terms of what we offer to our customers, and how. ALD Automotive has created the specialism of distributing white-label products and services via partnerships. LeasePlan has stayed very loyal to its corporate market customers. And combining those two offers is something that will be a great source of strength for the new, merged company.”

“In light of the recent economic troubles, I’ve had some people ask me: Tim, is this the right time for such a massive operation? And I have to say that under these more difficult conditions, the idea of ALD Automotive and LeasePlan coming together makes even more sense. It will give us the muscles we need to remain in the lead, in a field that gets more crowded all the time.”

With this massive operation on everybody’s mind, are your customers experiencing any disruptions or delays of service?

“From the beginning, we’ve made clear that our customers will not get bogged down. It remains our priority that they get served. That’s why we’ve organised an Integration Management Office, with 400 to 500 people from both companies, whose primary task it is to focus on the transition. And that allows everybody else to focus on business as usual.”

“True, for some longer-term projects that we put forward in our Move 2025 strategic plan, we’ve decided: Let’s wait. But as you know, we still went ahead last year with the strategic investment in Skipr and acquisition Fleetpool, even though we were already in the process of acquiring LeasePlan.”

The marriage of ALD Automotive and LeasePlan will be one of the more consequential developments in the fleet and mobility industry in 2023. Have you seen any of your competitors make any moves they wouldn’t have made if you two hadn’t gotten together?

“Obviously, there hasn’t yet been any other merger of two large leasing companies. But I would not be surprised if it would happen in the near future. In general, what we see is that the transformation of the mobility space continues to go very fast. On the one hand, there is the trend towards consolidation – Arval recently made a big acquisition in the Netherlands, for example.” 

“On the other, outside players keep entering the field. Two recent examples include the insurer Santander, and Stellantis, in a joint venture with Crédit Agricole. So, the competitive landscape is changing dramatically. Also because some of these new entrants are people we also collaborate with, and will continue to do so.”

Many of these new entrants have a steep learning curve ahead of them to get up to speed in the mobility space. Would you say you have them at a disadvantage?

“It would be presumptuous to say that we ‘own’ the mobility space. These are all serious companies, and the competition will be serious too. But ALD Automotive does own all the mobility competences you need to be successful in this industry. We have the experience, and we have always been focused on being customer-centric. So I’d say we’re ahead of the pack, and we’ll stay ahead, if we keep up the pace.”

Final question. When the news of the acquisition broke, the placeholder name for the new, merged company was ‘New ALD’. But you’ve made clear that will not be the final name. Do you have one?

“No. And if I did, I wouldn’t share it now (laughs). The new name is a unique opportunity to express our move from purely leasing into mobility. To express our digital future, and our growing B2C focus. If people have a good idea, they’re always welcome to contact us! Meanwhile, we’ll keep moving the needle, developing long-term relationships with our customers, and helping them by offering them transparency, and helping to make the difficult changes that the industry faces as easy for them as possible.”

Image: ALD

Authored by: Frank Jacobs
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