In 2013, the leasing industry in China was affected by the introduction of the value-added tax (VAT) system in the most developed regions of the country, starting with Shanghai in January 2013 and followed in the second half of the year by Beijing, Tianjin, and five other provinces.
“This switch to a more modern taxation approach has given fleets a tax advantage to leasing versus purchasing. As a result, more companies are looking into leasing and some of the largest Chinese companies have decided to give it a go,” said Guillaume Bourst, business development manager for ALD Fortune Auto Leasing & Renting.
Bourst added that the Chinese government and public sector are also under pressure to reduce the number of cars they are operating, and improving their fleet management practices and leasing is considered as one solution. Simultaneously, an increasing number of cities are imitating Beijing and Shanghai by placing restrictions on new-vehicle registrations and on non-locally registered cars to reduce or, at least, control the traffic congestion and the impact on the environment, which has been increasing.
“We expect a market switch in the near future, where people that need mobility solutions for working purposes will have access to them through their company, but the others will benefit from the development of the public transportation system with new metro lines, bus lines, and high-speed trains,” Bourst said.
This means the current customer profile for leasing companies — a foreign company asking for a few dozen seven-seat multipurpose vehicle (MPV) models with a chauffeur service — will remain, but there should also be an increase of the mid-size car fleet segment, according to Bourst. Currently, a handful of Chinese-based fleet customers have a total fleet exceeding 200 units, which are providing compact sedan cars, such as the Volkswagen Santana or Citroen Elysee, to their sales team. Bourst noted that one thing still lacking in the Chinese market as it continues to mature is that there still is no real total cost of ownership (TCO) approach to choosing fleet vehicles, but expects this to change in the future.
Bourst also predicted fleets will typically be managed by the purchasing and HR departments and that head offices will be more involved in fleet management decisions. He also expects the automakers to be more involved as well.
While Chinese companies are moving toward a self-drive option for drivers, the standard solution for expatriates doing business in China is to provide a car with a driver.
“The potential in this submarket is very important with the largest international companies having sometimes several thousand sales vehicles across the country,” Bourst said. “The recent VAT switch is encouraging these companies to explore that solution. The challenge here is the coverage of a large country with so many specificities and rules at the regional or the city level.”
The Chinese fleet market is dominated by Volkswagen, which has approximately a 39-percent fleet market share, according to an analysis of the Chinese market by JD Power. GM is second with a 10-percent fleet market share followed by Toyota with an 8-percent share, Hyundai with a 7-percent share, and Honda rounding out the top five with a 6-percent share of the fleet market.
● Capital: Beijing