Head of Europe’s biggest car leasing group bets on scale in face of rate hikes

The head of the biggest car leasing group in Europe is betting that scale will help his company weather the impact of rising rates on the sector.

Société Générale-controlled ALD completed its €4.8bn acquisition of rival LeasePlan last week and at a time when its competitors in Europe are also looking to increase their car fleets in part as they seek to combat the effects of rising interest rates and inflation.

Customers — both corporate and individual — have been pulling back as costs rise and real incomes fall but Tim Albertsen, ALD’s chief executive, argues that the merger will help the group overcome the more hostile environment for car leasing.

“People are looking at a monthly rate [on leases], of course this is coming up because of high interest rates and inflation — but we are competitive in this space, in particular with this transaction,” Albertsen said, referring to the merger, and to ALD’s capacity to try and keep leases low.

“We will be buying 800,000 to 900,000 cars a year . . . we are an important partner for all the manufacturers and with the kind of discounts we get and the kind of efficiencies we have in our systems, we are obviously also competitive on pricing.”

Albertsen, who will stay on to run the enlarged group, said that higher rates would ultimately not reverse a shift towards renting rather than buying vehicles, especially as companies try to boost their environmental credentials with electric fleets. 

Growth in the industry has partly been driven by a desire from consumers and companies to test out electric vehicles, widening the field of potential customers that used to be more constrained to large businesses.

“If you go back to 2008 and the big financial crisis, and in 2011-2012 the liquidity crisis and other crises, like Covid, we have been growing constantly — the main reason for that is that there is a structural growth of this market,” Albertsen told the Financial Times. 

He said, however, that demand from small and medium-sized customers as well as individual consumers had been softer than the group had expected of late. 

“That market will come back,” Albertsen said, adding rivals were interested in this segment too, from car manufacturers to others such as BNP Paribas with its Arval leasing business and Crédit Agricole, which has a leasing joint venture with Stellantis.

Albertsen said that demand from larger corporate clients was strong.

Once it absorbs LeasePlan, ALD will have the biggest car fleet in Europe and 3.3mn cars globally. SocGen will have 52.6 per cent of the listed group, with former LeasePlan shareholders holding another 30.75 per cent with a 12-month lock-up period.

BNP’s Arval has roughly 1.5mn cars, while the Stellantis and Crédit Agricole venture aims for a million by 2026.

ALD’ net profit — before the merger — was up 22.4 per cent from a year earlier to €258mn in the first quarter.

Albertsen said some of the problems with car production that have affected the whole industry, including due to chip shortages, were now easing. Logistical issues with deliveries, that were still taking nine to 10 months, were expected to improve to a more usual three months throughout this year, he added.