Life is good for Hitachi Capital Vehicle Solutions’
commercial vehicle arm. Profits are up and its impressive list of
recent deal wins include an A1 specialist vehicle fleet management
contract with Connaught. Antonio Fabrizio reports.
Go deeper with GlobalData
Hitachi Capital Vehicle Solutions’ commercial vehicle
arm is gaining much of the ground lost during the recession,
largely as a result of having won a number of sizeable deals
recently.
The UK lessor – which is part of
asset finance provider Hitachi Capital, itself owned by Japanese
giant Hitachi Group – has reported a 50% increase in new business
in the first three months of this year, after signing contracts
with a number of utility companies and blue-chip firms.
Its largest recent deal has been to
provide fleet management to all of Centrica’s 10,000 vehicles.
Jon Lawes, MD of Hitachi Capital’s
commercial vehicle division, said: “We have worked with Centrica
since 2005 looking after both their fleet management and funding
requirements. Since then, we have funded an increasing percentage
of Centrica’s fleet, which has continued to support the increase of
business, but generally the situation is improving across the whole
division. We put funding arrangements in place with a substantial
number of firms in 2009 and we are now starting to see the benefit
of it.”
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By GlobalDataWithin the utility sector, the
division has also won a deal to provide the contract hire and
maintenance of the vans and HGVs for National Grid, one of the
lessor’s historic customers. In addition, it recently won a tender
to be joint funder with Automotive for the next two years for the
NHS Blood and Transport fleet, which is comprised of some 600
vehicles.
The most recent deal – signed a few
weeks ago – is with Connaught Environmental, which operates in the
UK social housing and public sector markets for specialist vehicles
worth over £2m (see How
Hitachi can ensure Connaught manages its own
risk).
According to Lawes, who has been in
vehicle leasing since 1994 and with Hitachi since 2001, dealing
with blue-chip organisations with large fleets rather than smaller
companies has helped Hitachi Capital Vehicle Solutions during the
downturn.
In addition, the company itself
took a number of steps to respond to the crisis, Lawes said.
“If you look at the companies we
are doing business with, they are strong organisations, which
reacted quickly at the early stages of the recession.
“However, we also took quite quick
action in changing ourselves and the market we are working towards,
not drastically but becoming more and more focused on robust
organisations with strong balance sheets.”
As part of this refocus, the lessor
has exited the broker market, and Lawes said his company has no
plans to re-enter it.
“We have learned a lot of lessons
during the recession and this type of business doesn’t support our
proposition going forward,” he said.
The vehicle solutions arm now
comprises three divisions. Alongside the commercial vehicle
division – which is based in Trowbridge, and with a team of 60
people reporting to Lawes – there is a company car division in
Newbury and a third division in Leicester, acquired in December
2008, providing driving instructor cars for the independent driving
schools.
The total fleet size is 45,000
vehicles, of which a little less than 18,000 are commercial
vehicles.
Within the commercial vehicle unit,
the lessor runs 16,500 light commercials and car-derived vans, of
which 5,500 are on a typical operating lease with maintenance,
while the other 11,000 are purely on fleet management.
Additionally, it runs 1,300 HGVs of 7.5 tonnes and over.
Improving
markets
The refocus and a general
improvement in the van market have had a positive effect on the
company’s profitability. Profits for the financial year ending in
March 2010 reached £10m, significantly up from the £3m figure
recorded in the previous financial year.
“All in all, we are in a very
different place now from where we were a year ago. Our profits are
now on the same levels of two years ago,” Lawes said.
At the peak of the crisis in 2008,
within the lessor’s vehicle solutions division 13% of the staff
were made redundant.
Since then, however, according to
Lawes, there haven’t been any further redundancies and the company
has now “stabilised”. It currently employees 203 people across the
three vehicle solutions divisions.
The second-hand light commercial
vehicle market has also improved due to a shortage of supply in the
van sector. This has helped to fuel performance across the whole
industry, and allowed the lessor to even make a profit on van
residual values.
However, the truck sector remains
challenging, and Lawes said that he does not expect recovery before
2011.
“In the used truck market, at the
moment the problem is not about oversupply – it is that demand for
a second-hand truck is much less than it would be for cars and vans
– which makes things much more challenging for us,” he said.
“Also, new registration figures
still reveal a very tough market. Truck registrations are still
falling, so it really cannot get worse than this, but if only
20,000 trucks are registered in the UK, how many of those are
actually being financed?”
Even within the improved van
market, Lawes continues to be cautious.
“Despite the recent improvements,
van registrations are still 60 percent of what they were two years
ago, and because there has been only relatively little
consolidation in the sector, everyone is chasing the same
registrations for finance,” he said.
But he warned about the risk of
price-driven strategies to win business: “As an industry, the worst
we could do now would be driving prices down. By now, we all should
have learned from this recession that driving prices down and
increasing residuals will cause another problem later on.”
Improving
services
Lawes said that the relationship
with the parent company has also helped to achieve a better
performance than a number of independent competitors.
“At no stage during the recession
have we had any funding constraints or any funding caps on Hitachi
Capital Vehicle Solutions. Our Japanese parent has been very
supportive, having realised that vehicle leasing goes on a cycle
and we have started to come out of that cycle,” he commented.
The company has been investing in
innovation with a number of programmes.
Lawes said the lessor has put lots
of efforts in a new e-commerce system. It has invested £1.1m in the
project, which will allow customers to monitor all of their fleet
management information online.
The project – which has involved a
number of specialists including IT outsourcing service provider
Harvey Nash – started around six months ago and is expected to be
completed by the end of 2010.
Lawes said: “Last year we undertook
a large research project with our customers to find out how we
could improve our services and how we could add more value within
their organisation.
“This has shown that they want more
realtime online information in a ‘fleet manager dashboard style’.
Our new e-commerce system will mean that a fleet manager can log on
anywhere in the world and he can have a quick look at his fleet –
to see what things like downtime and compliance look like.”
Additionally, Hitachi Capital is
also investing in training and ancillary services for customers –
particularly in the case of more complex vehicles.
All in all, Lawes said he is positive about the future: “We must
realise that because we have a recession, what comes out of that is
opportunity. We have worked with our customers to understand their
business objectives, and by taking this approach have developed
solutions that add real value.”
