TBY talks to Dominique Cardineau, CEO of Fleet Corp, on the leasing business, its overhaul of the sector, and market consolidation.
TBY In June 2010, Fleet Corp announced a strategic partnership with Fleet Synergy. What has been the impact of this partnership?
DOMINIQUE CARDINEAU In this business it is necessary to always work locally with local companies, as well as with multinationals. Most major fleet leasing companies try to work internationally, and fleet distribution is performed centrally. This is not only a way of reducing cost, but it is also the best way to gain information from each country in order to optimize the customer service approach. Therefore, our partnership with Fleet Synergy was natural. We are now a local business that is also a part of a multinational firm. If you are not a member of such a firm then it is possible to miss major deals—even local deals—with multinational companies.
What is Fleet Corp’s position within the Turkish market?
We are now in fourth position. When I arrived at the company, it was in second place, and in order to reach number one I initiated a significant restructuring. We are now regaining our market share, and the target is to breach the top three by the end of 2012.
What is driving growth within the fleet leasing market in Turkey?
Turkey is an emerging market. When I arrived at the end of 2007, after already having gained much international experience, I discovered that the business model here was badly structured. We reorganized the company and pushed the market to international standards. In fact, looking at the market today, it is easy to compare the market to Spain 15 years ago. Today, the total company car market includes around 500,000-600,000 cars, excluding the public sector. This market is set to grow in the future as the economy is growing, and we expect this figure to move to 1.5 million in 10 years. Out of the total current fleet, around 120,000 of those cars are currently in operation. This means that there is a huge potential, as the market is still driven by outright purchase. It is our job as an international company to educate the market and explain to companies that it is better for their operations to lease cars than to use their money to finance their cars. This allows them to inject money into their core businesses. The pace of growth is slow, as we are still getting the basics in order and waiting for local companies to catch up. The market is definitely improving, especially compared to three years ago. Contracts are more structured now and customer management is better developed, whereas before contracts were unstructured and the sector was focused on price.
In that context, do you see an increase in international or domestic competition?
Turkey is already very competitive, and there are too many small, local players that we know by experience keep us from growing for financial reasons. We are not in the car business. We are a financial institution. Smaller players are simply car dealers, but that is not the right way to go about things. In that respect, there will be consolidation in the market I believe, as is normal in markets around the world. When I arrived three years ago there were more players in the sector than there are today. In 10 years we forecast four to five major international players, and a couple of strong local players.
What challenges can you identify specific to the Turkish market in the leasing business?
The business model was wrong, and this was, and to some extent still is, the main challenge. There are other challenges. It is very difficult to manage an all-inclusive business model due to problems in insurance, such as accidents and so on. This makes an all-inclusive business too expensive. In that regard, we have to define certain rules as to the usage of the cars in order to reduce risk over the duration of the contract.
What is the makeup of your client base in Turkey?
We have multinational companies as well as big local companies as clients. Now, we are starting to gain market share amongst SMEs, as this sector has traditionally not understood the benefits of leasing. The big local companies have switched to leasing to a good extent, and in the future SMEs are going to be the main source of growth.
What level of government support have you seen for the leasing sector in Turkey?
The government has started to support the financial industry, but as operational leasing is relatively new in Turkey it has not received the government support it needs. The market isn’t regulated enough, and on top of this the government has taken some decisions on light commercial vehicles, meaning it is difficult for us to lease that kind of vehicle. This is the wrong decision as operational leasing is beneficial for the environment as we replace our vehicles every three years, meaning our cars have the latest anti-pollution technology. Better technology also means fewer accidents, and this is also an area the government should be concerned about. We are willing to assist the government to regulate the industry, and this would benefit all parties. On the accidents side, the situation is improving. Driver safety is a part of our policy, and we advise customers on measures to reduce the chance of accidents.
What is your outlook for the Turkish economy and what will this mean for Fleet Corp?
Our business is linked to the growth of the economy. The more the economy grows, the more we will grow. Looking at the car market in the last three years, growth has been superb. In 2010 a record was set for new car sales in Turkey. This is going to be beneficial for us. Our plan is to continue growing profitably.
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