E-toll to kill off fleet investment?

Pharma

Leasing companies have experienced a serious decline in contract numbers with Hungarian fleet management enterprises in the second quarter of this year. Fleets and their owners are going through some kind of consolidation due to the shrinking market and increasing costs, "thanks" to new e-tolls, whose very legality EU authorities have challenged.

While the vehicle leasing market stagnated year-on-year in Q2, fleet financing provided some very poor data, unsurprisingly. During the first six months, total new loans of HUF 29.63 billion were signed on the domestic market, compared with the HUF 33.92 billion in the previous year. Based on the number of items, the big picture seems even sadder: by the end of June, some 5,631 new contracts has been issued, one-fifth fewer than a year ago, according to the statistics of the Hungarian Leasing Association.

Missing replacements
“ALD Automotive has successfully expanded its portfolio in recent years, although the impact of the crisis has been felt heavily by the sector and our company as well. We have faced the reality at fleet renewal occasions, when our partners’ fleets are decreasing due to rationalization and headcount reductions,” said Zoltán Borbély, head of sales & marketing at ALD Automotive Ltd Hungary. “Our customer base and target group did not change significantly. We continue to believe in companies with an international background and cooperation based on local partnerships. Our customers still require a high-quality fleet services, but expectations strengthened for the lowest cost base possible and for fleet rationalization.”

Gábor Sőregi, sales manager for commercial vehicle tires of Continental Hungaria Kft, added that, “Despite the fact, that we carry out only a small portion of the tire management of the domestic commercial vehicle portfolio, we have a very good view on the market through our partners.” Continental provides a complete tire management service package to its customers, including tire supply, retreading, waste management and even domestic and international vehicle rescue. “Our service package exists since 2010 and we have more and more directly served partners, as the size and composition of the fleets they manage are also growing. While Continental’s data is not representative by any means, some conclusions can be made, even if in a conditional tense,” Sőregi explained.

Domestic passenger bus fleets are usually in municipal or state hands, with all the advantages and disadvantages that suggests. In the case of aging bus fleets, necessary and optimal vehicle replacements don’t take place due to financial and organizational challenges and because of public procurement procedures, car managers are interested in the acquisition of cheap and basic products. “Due to this practice, the mileage is neglected, even if it’s more important than the price in itself,” Sőregi explains.

Reaching the bottom
Concerning the transport of goods, companies working on the domestic market are far more affected by the crisis and new regulations than their international peers. Freight tonne kilometers in national transport of goods fell by almost 7% year-on-year in 2013 Q2, while international transport grew by 5% in the same period, according to the Hungarian Central Statistical Office.

“Since the crisis, many small companies went bankrupt and a kind of consolidation is going on over the market, where big market players can only stay on their feet,” Sőregi said. “The recent introduction of the e-toll will presumably promote the use of heavier trucks on the market. I believe, that the tire demand of trucks between 3.5-7.5 tonnes will decrease in the near future, while trucks weigh more than 10 tonnes will use more. However, the overall market reaches its absolute bottom these days, so in the mid-term, I forecast a slow expanding,” he added.

Lobbying for less red tape
“ALD Automotive is closely following changes in the regulatory environment, which presents us with new challenges from time to time. Actually the most difficult of these to comply with is to specify detailed information to our clients taking into account the sometimes-tight deadlines. On the other hand, progressive changes were also made in the case of reclaiming VAT content of the monthly fee,” Borbély said. “Regarding the near future, we would like to be partners with the government in the reduction of the administrative burden associated with VAT refunds. This is, of course, in the interest of the whole industry, so the integration and coordination of these activities with the economic ministry is dedicated to the Fleet Commission working under the auspices of the Hungarian Leasing Association,” he added.

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