Auto Finance Disruption

Article

Disruption in Auto Finance: how to tackle the challenges ahead

How new products and sales models will threaten the market position of Captives

The European Auto Finance market is facing disruption, leaving 25% of today’s annual new business volume of incumbent Captives players at risk until 2025.

Changing market environment

Over the next years, a saturated automotive market in the EU 5 countries (incl. Germany, France, UK, Spain and Italy) with declining overall vehicle sales is going to challenge the Auto finance players. Changing mobility preferences and customer requirements further add up to the challenges for Captives:

  • Digitalization has put the customer at the center of all activities and consequently customers have become used to their individual demand being met “at their fingertips”
  • Car buyers are becoming increasingly willing to buy their next car online and to value “one-stop-shop” solutions offering guidance and personalization
  • Data ubiquity has resulted in complete information transparency & empowered customers

The increasing popularity of full-service leasing within the private customer segment aligns their demand more and more to corporate customers. In this changing market environment, companies traditionally focusing on corporate customers (e.g. leasing companies) gradually cater to private clients.
 

Non-Captives market push leads to disruption in Auto Finance

In this context, several non-captives players have announced very ambitious growth targets for the private customer segment until 2025. For instance, French leasing company ALD aims to serve 3.0mn vehicles in total including 1.0mn vehicles from private customers. This is especially noteworthy, as the ambition constitutes a tenfold increase relative to their 2017 business volume in the private segment. However, how will the competitive landscape look like by 2025 if these disruptive trends & goals unfold?

To answer this question we analyzed the EU5 Auto finance market in detail and quantified the impact of the non-captives pushing into the private customer segment in our point of view: „Omnipresence of Services & Direct Sales in Auto Finance“.
We found out that the ambitious growth targets of individual non-captives are supplementing overall non-captives segment growth until 2025. As a result, up to 25% of Captives’ current business volume, i.e. 42bn EUR of total asset volume per year, are affected by these market dynamics and therefore at risk for incumbent Captives.
 

Call for action to tackle the challenges ahead in Auto Finance

In this predatory competitive environment, with significant potential for disruption in Auto Finance, both players – Captives as well as non-captives – have three promising fields of action in order to conquer market share from incumbents or to defend their current market position:

  • Direct sales model: new online sales channels are to be developed which have to match the level of customer experience and professionalism customers are nowadays used to from different industries (e.g. retail and e-commerce)
  • Customer centricity: key differentiator and competitive advantage of the future will be the ability to provide a seamless customer experience (CX) along the whole mobility ecosystem
  • Flexible products/services: full service and operating leasing offerings are to be increased. In addition, flexibility of underlying leasing contracts itself needs to increase and subscription based models are to be introduced

Contact for questions regarding the study:

Christopher Ley, Senior Manager, Monitor Deloitte