Curtis Hutchinson: Expecting the unexpected
Toyota’s acquisition of Inchcape’s leasing operations is part of a wider trend as OEMs move to future-proof themselves.
Toyota’s recently announced £100m acquisition of Inchcape Fleet Solutions (IFS) should come as no surprise. OEMs are increasingly looking at limiting their dependence on car sales, with exploring ways to evolve into more rounded mobility providers.
So, buying a leasing company makes perfect sense.
IFS will sit under Toyota Fleet Mobility (TFM), a Cologne-based unit only established last year as a joint venture between Toyota Financial Services and Toyota Motor Europe with the aim of developing a European base for future mobility services.
The IFS purchase serves as a clear statement of intent, with TFM targeting expansion across Europe, starting with a sizeable foothold in the UK’s full service leasing market.
“The acquisition of IFS is an important milestone for TFM in the European market. As Toyota transitions from being a car manufacturer to a mobility company, it will help us meet the increasing shift in customer preferences away from traditional vehicle ownership to new mobility opportunities,” said Tom Fux, CEO Toyota Fleet Mobility Europe.
An indication, perhaps, that the IFS operations will not necessarily be restricted to providing fleet services in the future as consumers explore usership as an alternative to ownership.
IFS is a good purchase. In the year to December 2018, the business contributed revenue of £60m and trading profit of £9m. As one of the UK’s top 20 independent fleet management and leasing specialists, it offers a portfolio of fleet management and funding solutions for passenger and commercial vehicles across corporate, public, not-for-profit and SME sectors. Crucially, with 20,400 cars on its books, it also has plenty of scope to grow.
For Inchcape the sale is part of its ongoing Ignite programme aimed at achieving growth through its international car distribution services and retailing. As part of this process recent months have seen the disposal of under-performing dealerships in Australia and China as well as seven sites in the UK. Inchcape will continue as one the UK’s largest car retailers representing BMW, Mini, Jaguar Land Rover, Volkswagen, Audi, Porsche and, of course, Toyota and Lexus.
“IFS and Toyota Financial Services have enjoyed a strong working relationship for more than a decade. At the same time, Inchcape has continued to be one of the leading Toyota and Lexus retailers across the country. This agreement aligns with our strategy of focusing on our core business as an automotive retailer in the UK market,” said James Brearley, CEO of Inchcape UK.
Toyota is not the first OEM to venture into the leasing market. Back in 1997 the BMW Group spotted a multi-marque leasing opportunity and launched Alphabet. Significantly expanded in 2011 with the acquisition of ING Car Lease, Alphabet is now a global business.
However, the IFS acquisition is indicative of a changing focus among OEMs to counter the prospect of falling new car sales and reinvent, reposition and future-proof themselves as mobility providers.
Recent years have presented new challenges for carmakers. Sales have come under increased pressure as they grapple with the massive investments required to electrify their product line-ups and find a way to sell them profitably.
The transition towards electrification is being driven by legislative pressure, rather than consumer demand, nullifying decades of investment in internal combustion technology. Meanwhile, a new generation of consumers and business users are no longer hung-up on vehicle ownership, forcing OEMs to offer alternative solutions.
This is prompting heightened acquisition and merger activity among OEMs.
Earlier this year we saw Jaguar Land Rover emerging as a possible contender to buy Addison Lee, the private hire minicab firm, as a way to expand its personal mobility services.
The deal makes sense as Addison Lee would be an ideal outlet for JLR’s emergent electric fleet. Both companies have also worked together on a government-backed consortium aimed at developing driverless car services in London.
A more unlikely coming together happened last year when arch-rivals BMW and Daimler, the owner of Mercedes-Benz, announced a joint venture business to develop “sustainable urban mobility services”.
The carmakers have jointly invested over €1bn to build up a digitally driven “mobility services portfolio” spanning five areas covering multimodal services, EV charging, ride-hailing, car-sharing and parking services.
The fledgling partnership worked so well both groups have subsequently signed a long-term contract to also work together on autonomous cars, a pragmatic way to significantly reduce R&D costs.
As OEMs face up to seismic changes, we can expect to see more mergers, acquisitions and joint-ventures aimed at delivering future mobility solutions which will address changing consumer and business needs.