Lex Autolease’s fleet size exceeded 300,000 vehicles in April, and the company is confident about reaching its end-of-year target of 327,000 vehicles. Sotiris Kanaris talks to Lex Autolease MD Tim Porter about the company’s plans and current market trends.
Following the banking crisis, Lloyds Banking Group reviewed its business units in order to separate the ‘core’ units, those which performed well and could help the group stabilise its balance sheet, from the ‘non-core’ units. The review concluded that Lex Autolease was an important unit of the business and the group decided to change its strategy.
Lex Autolease’s managing director Tim Porter says: "After the review, the business went from a ‘manage for value’ strategic direction into an ‘invest for growth’ approach. The five-year plan that was structured for Lex Autolease, which began in January 2013, was consistent with that growth strategy."
Since the beginning of the programme, the company has expanded its fleet size from 268,000 vehicles to 304,000. The five-year plan involves a fleet expansion of 100,000 vehicles.
Porter believes that companies are increasingly interested in fleet leasing, as they are currently not only seeking vehicles but also a number of services offered by lessors. He says many companies prefer to pay a monthly payment and have their vehicle managed by the lessor. He also suggests that the ‘duty of care’ obligation has changed businesses’ attitude towards running their own fleet, with an increasing number of firms handing this operation to lessors.
Under the duty of care, the person who runs the fleet has a responsibility to ensure that both drivers and vehicles meet all legal requirements, are ‘fit for purpose’, and maintained to the appropriate standards.
According to Porter, future growth in Lex Autolease’s fleet will arise from a further penetration of the SME market, as well as an increase in the number of clients with a fleet size of more than a thousand vehicles.
Porter believes the improved financial performance of SMEs can present a market opportunity for the company to boost
"Many of the businesses which withheld from renewing during the tougher times are now bringing forward previous extended contracts for renewal and this provides an opportunity for us," he says. "These businesses see that their order books are stronger. As a result they are more confident about their business prospects and comfortable about refreshing their vehicle fleet."
The company believes a trend towards full fleet outsourcing among large corporations will also contribute to the expansion of the fleet under its management.
Porter continues: "Large national and international firms which see their margins tightening may decide that running a fleet is not a core part of their operation. We have found that a number of firms are not running their fleet in the most cost-effective way or that there’s no clear advantage to them from running their fleet. This is a good opportunity for us, as there’s probably going to be 10 to 20 businesses with fleets of 2,000 to 3,000 vehicles or more that would use our services over the life of our five-year plan."
In order to attract SMEs and large corporations Lex Autolease has launched two propositions: Business Critical and Driveaways.
Business Critical is a proposition for companies of all sizes. The proposition offers converted vans, and involves full service, maintenance and fleet management at all times. The company commits to specific service level agreements, including breakdown recovery and repair.
"It sounds easy to do, but having that operationally effective across the whole of the UK for any eventuality is a big deal," adds Porter.
Driveaways is a more product-orientated offering, and primarily targets the SME market. The proposition involves a pre-converted van to a certain specification for builders, plumbers and electricians.
Apart from the products it offers, Lex Autolease’s strategy includes investment in digitalising its offer to accommodate the increasing customer demand for mobile services.
"We have to make sure our service access, right through to enquiry, quoting, credit approval and delivery information is effectively done on the mobile phone," says Porter. "It cannot all be done on a mobile phone today, but more of it can than in the past."
Part of the five-year strategy is to improve communications with existing and potential clients. For example, the company has found it more effective to contact SME customers in the evening, rather than working hours.
In addition, the company has decided to change the briefing process in order to ‘demystify’ leasing. The aim is to make the proposition more straightforward for clients, in order for them to comprehend fully the benefits, but also their responsibilities.
Porter says: "People need to be aware that certain points in a lease contract differ from a contract purchase or outright purchase contract. For example, because the lessor retains ownership of the vehicle in a lease arrangement, a fair wear and tear condition assessment is a key part of the vehicle return process.
"The key for me is that there should be no surprises. There needs to be a continuing dialogue with the customer in order to make sure they know how their fleet is performing throughout the contract period. I think that will draw more people into the product."
There’s also been an investment in building teams of people with capabilities to deal with bigger customers that have more complex needs, on a more consultative basis.
Despite the fact that Porter acknowledges the increased competition in the market and pressure on lessor’s pricing in the near future, he anticipates Lex Autolease will achieve its target of expanding its fleet size to 327,000 vehicles as well as perform well financially.
"In three to four years’ time there will be a significant number of current new vehicles entering the market as used vehicles. We are already sensing smaller margins on used vehicle prices which will impact on the fleet industry overall. However, our fleet continues to grow and our individual propositions are where I expect them to be," Porter concludes.