Operating leasing and fleet management:

Russia and CEE

2-3, February, 2012, PragueSergey Dianin, Arval Russia

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Content

■ Automotive markets

■ Leasing markets

■ Some specifics

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■ Automotive markets

■ Leasing markets

■ Some specifics

Population

145

4538,5

21,510,5 10 7,6 5,4 3,4 2,3 2 1,3

Data source: E&Y, ACEA, EEA

Car sales, country fleet and age of fleet

Fle

et ave

rage

age

Sales, 1000

Size of bubble = Country fleet, mln

Data source: E&Y, ACEA, EEA, Datamonitor

2 65312 35010050 200

Bulgaria 2,9

Hungary 3,4

Lithuania 1,6

Poland 19,7

Slovakia 1,6

Russia 39,1

Czech Republic 5,1

Estonia 0,6

Latvia 0,8

Romania 4,9

Slovenia 1,0

Ukraine 8,2

5

7

9

11

13

15

17

Growth of total fleet and registrations 2010 -> 2011

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-10%

0%

10%

20%

30%

40%Czech Republic

Hungary

Poland

Romania

Slovakia

Russia

grow th of f leet

grow th of sales

Data source: Datamonitor; CVO

Number of cars per 1000 of population

485 473436

386 386357 342

294244

214180

158

Data source: E&Y, ACEA, EEA

Average Europe = 508

Market leaders in car sales

 Country Market Leaders

Bulgaria Hyundai; Toyota; Peugeot; VW

Czech Republic Skoda; Ford; VW; Renault

Estonia Toyota, Mazda, VW, Peugeot

Hungary Suzuki; Ford; VW; Opel

Latvia VW; Toyota; Nissan; Skoda

Lithuania VW; Nissan; Peugeot

Poland Fiat; Skoda; VW; Ford

Romania Dacia (Renault); Hyundai; VW; Ford

Slovakia Skoda; Renault; Peugeot; Kia

Slovenia Renault; Citroen; VW; Opel

Ukraine Lada; Toyota; Hyundai; Renault

Russia Lada; Chevrolet; Hyundai; Renault

Data source: E&Y, ACEA, EEA

Business fleet and business registration

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Bu

siness

registratio

ns

Business fleet

Hungary9,5%

Poland5,1%

Russia5,6%

Czech Republic8,4%

Romania20,1%Slovakia

14,0%

-

50

100

150

200

250

- 500 1 000 1 500 2 000 2 500

Size of bubble = share of business

fleet in total country fleet

Data source: Datamonitor; CVO

Growth of business fleet and registrations 2010->2011

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-10%

0%

10%

20%

30%

Czech Republic

Hungary

Poland

Romania

Slovakia

Russia

grow th of companies'f leet

grow th of businessregistrations

Data source: Datamonitor; CVO

Average duration of fleet usage by

58

6964

54

Data source: CVO

Passenger Cars

Light Commercial Vehicles

6978 84

63

Cost pressure on the company fleet by

0%

-14%

-12%

-11%

51%

30%

23%

48%

Data source: CVO

IncreaseDecrease

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■ Automotive markets

■ Leasing markets

■ Some specifics

Business fleet breakdown by financing mode

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1%3%13%9%8%6%

0%

25%

50%

75%

100%

Hungary Slovakia Poland Czech Republic Romania Russia

OP FL FSL

Data source: Datamonitor; CVO

18%14% 14%

28% 18%5%

0%

25%

50%

75%

100%

Hungary Slovakia Poland Czech Republic Romania Russia

OP FL FSL

Business registrations breakdown by financing mode

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Data source: Datamonitor; CVO

Poland9,4%

Czech Republic12,8%

Hungary6,1%

Romania2,9%

Slovakia8,2%

Russia1,1%

-

5

10

15

20

25

30

- 20 40 60 80 100

Full Service Leasing: fleet, registrations, penetration

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FS

L reg

istration

s

FSL fleet

Size of bubble =

FSL penetration

Data source: Datamonitor; CVO

Average duration of leasing usage by

59

74

58

4147

57 53

42

Data source: CVO

Passenger Cars

Light Commercial Vehicles

65

86

68

4552

61 63

48

Finance leasing

Operating leasing

Expected growth of FSL fleet 2011->2015

124,8%

73,5%

47,4%

31,5%22,7% 22,1%

Data source: Datamonitor

Expected growth potential in next 3 years:

-3%

-1%

-5%

-10%

49%

42%

8%

24%

Data source: CVO

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■ Automotive markets

■ Leasing markets

■ Some specifics

What is really different

1) Fleets to be managed in the territory of 17,075 mln sq. km,

which is over 10 000 km long and 4 000 km wide,

located in 2 continents: Europe and Asia,

with the northern point in 900 km from the North Pole

Territory of Russia = 15 times territory of all CEE Countries

2) 11 time zones from GMT+2 to GMT+12

3) 4 climate zones, temperature varies from +42°C in the South to -68°C in the North

4) Multi-currency environment: RUR, EURO, USD and relatively high inflation (8-9%)

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Full Service Leasing in Russia

■ 2000■ first supply of the product tin Russia; less than 1000 vehicles in fleet■ 2-3 suppliers

■ 2011■ Fleet of 26 000 vehicles ■ 2 international, 2 foreign, ~12 local players, 2-3 international short term rental

companies■ 3-5 suppliers in Fleet management■ 1 fleet consultant

■ In comparison with Finance leasing■ Over 1000 leasing companies■ ~ 55 specialize in automotive leasing■ Fleet of approx. 200 000 vehicles

Global maturity level of Full Service Leasing

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0 = high immaturity1 = slight immaturity2 = low maturity3 = medium maturity4 = high maturity5 = total maturity

The most mature market is UK, maturity level = 4,56

0

0,2

0,4

0,6

0,8

1

1,2

1,4

1,6

CzechRepublic

Poland Slovakia Hungary Romania Russia

2011 2015

Data source: Datamonitor

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24

Low maturity results in 1) Product

■“Young” product with awareness of below 6%

■Lack of statistics

■Operational leasing does not exist in the Russian Law and is treated by the Law as a rent

■Results in:■Low knowledge of product - misunderstanding of what is Full Service Leasing, Operational

Leasing and Finance Leasing

■For example - perceiving net finance lease or creative finance lease as full service lease

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25

Low maturity results in 2) Clients

■Strong habit to own: 99% of corporate fleet is in ownership ■Historical reasons

■Out of priority for top management

■Natural resistance of existing fleet organizations

■Exaggerated demand for number of services and level of quality

■Over-estimation of the product and leasing company capacities

■No clear vision of own costs and expenses allocated to own fleet

■User (Driver) doesn’t know how to use the product

■Company Car Policy doesn’t consider outsourcing solution

■Results in:■Lack of trust

■Dissatisfaction with the product or supplier

■High orientation to price

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26

Low maturity results in 3) Infrastructure & Suppliers

■Low density of service suppliers – 1 authorized dealer per 5300 sq. km (average)■Equivalent of having 15 dealers in Czech Republic

■Absence of national networks■37 OEM represented by 3273 authorized dealers

■Low maturity of service suppliers in terms of business relationships and partnerships

■Results in: ■Limited geographical availability of services

■Low competition and monopolistic position in some regions

■Long lead times for vehicles and spare parts delivery

■Low quality of services

■Need in intensive suppliers management

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27

Low maturity results in 4) Leasing suppliers

■Low number of Full Service Leasing suppliers■We don’t have enough hands to move the market faster

■Lack of communication and co-operation between leasing companies

■Absence of Operational leasing association ■Separated, we don’t have enough power to change the market faster

■Results in:■Price wars in the tiny market

■Slow development of industry

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3 major objections of Companies to Full Service Leasing

■ “Leasing is by far more expensive”

■ “Quality will certainly be lower”

■ “I do not control the situation”

Is it very different from other countries?

To remind you…. Expected growth of FSL fleet 2011->2015

124,8%

73,5%

47,4%

31,5%22,7% 22,1%

Data source: E&Y, ACEA, EEA

The most promising marketThe most promising markets

Operational leasing and fleet management in Russia and CEE:

Similar roots

Different stages of development

Huge potential

Thank you!

ArvalSergey Dianin

General Manager for RussiaTel: +7 (495) 644-2270

www.arval.com