Operating leasing and fleet management: Russia and CEE

1. Operating leasing and fleet management: Russia and CEE 2-3, February, 2012, Prague Sergey Dianin, Arval Russia

2. Automotive markets • Leasing markets • Some specifics Content

3. Automotive markets • Leasing markets • Some specifics | 09/10/2014 | 3

4. Population Data source: E&Y, ACEA, EEA

5. Car sales, country fleet and age of fleet Fleet average age Size of bubble = Country fleet, mln 12 2 653 200 50 100 350 Sales, 1000 Data source: E&Y, ACEA, EEA, Datamonitor

6. Growth of total fleet and registrations 2010 -> 2011 | 09/10/2014 | 6 Data source: Datamonitor; CVO

7. Number of cars per 1000 of population Average Europe = 508 Data source: E&Y, ACEA, EEA

8. Market leaders in car sales Data source: E&Y, ACEA, EEA

9. Business fleet and business registration Business registrations Size of bubble = share of business fleet in total country fleet Business fleet | 09/10/2014 | 9 Data source: Datamonitor; CVO

10. Growth of business fleet and registrations 2010->2011 | 09/10/2014 | 10 Data source: Datamonitor; CVO

11. Average duration of fleet usage by Passenger Cars Light Commercial Vehicles Data source: CVO

12. Cost pressure on the company fleet by Decrease Increase Data source: CVO

13. Automotive markets • Leasing markets • Some specifics | 09/10/2014 | 13

14. Business fleet breakdown by financing mode | 09/10/2014 | 14 Data source: Datamonitor; CVO

15. Business registrations breakdown by financing mode | 09/10/2014 | 15 Data source: Datamonitor; CVO

16. Full Service Leasing: fleet, registrations, penetration FSL registrations Size of bubble = FSL penetration FSL fleet | 09/10/2014 | 16 Data source: Datamonitor; CVO

17. Average duration of leasing usage by Passenger Cars Finance leasing Operating leasing Light Commercial Vehicles Data source: CVO

18. Expected growth of FSL fleet 2011->2015 Data source: Datamonitor

19. Expected growth potential in next 3 years: Data source: CVO

20. Automotive markets • Leasing markets • Some specifics | 09/10/2014 | 20

21. What is really different 1) Fleets to be managed in the territory of 17,075 mln sq. km, which is over 10 000 km long and 4 000 km wide, located in 2 continents: Europe and Asia, with the northern point in 900 km from the North Pole Territory of Russia = 15 times territory of all CEE Countries 2) 11 time zones from GMT+2 to GMT+12 3) 4 climate zones, temperature varies from +42°C in the South to -68°C in the North 4) Multi-currency environment: RUR, EURO, USD and relatively high inflation (8-9%)

22. Full Service Leasing in Russia • 2000 • first supply of the product tin Russia; less than 1000 vehicles in fleet • 2-3 suppliers • 2011 • Fleet of 26 000 vehicles • 2 international, 2 foreign, ~12 local players, 2-3 international short term rental companies • 3-5 suppliers in Fleet management • 1 fleet consultant • In comparison with Finance leasing • Over 1000 leasing companies • ~ 55 specialize in automotive leasing • Fleet of approx. 200 000 vehicles | 09/10/2014 | 22

23. Global maturity level of Full Service Leasing 0 = high immaturity 1 = slight immaturity 2 = low maturity 3 = medium maturity 4 = high maturity 5 = total maturity The most mature market is UK, maturity level = 4,56 Data source: Datamonitor

24. Low maturity results in 1) Product • “Young” product with awareness of below 6% • Lack of statistics • Operational leasing does not exist in the Russian Law and is treated by the Law as a rent • Results in: • Low knowledge of product - misunderstanding of what is Full Service Leasing, Operational Leasing and Finance Leasing • For example - perceiving net finance lease or creative finance lease as full service lease 24 | 09/10/2014 | 24

25. Low maturity results in 2) Clients • Strong habit to own: 99% of corporate fleet is in ownership • Historical reasons • Out of priority for top management • Natural resistance of existing fleet organizations • Exaggerated demand for number of services and level of quality • Over-estimation of the product and leasing company capacities • No clear vision of own costs and expenses allocated to own fleet • User (Driver) doesn’t know how to use the product • Company Car Policy doesn’t consider outsourcing solution • Results in: • Lack of trust • Dissatisfaction with the product or supplier • High orientation to price 25 | 09/10/2014 | 25

26. Low maturity results in 3) Infrastructure & Suppliers • Low density of service suppliers – 1 authorized dealer per 5300 sq. km (average) • Equivalent of having 15 dealers in Czech Republic • Absence of national networks • 37 OEM represented by 3273 authorized dealers • Low maturity of service suppliers in terms of business relationships and partnerships • Results in: • Limited geographical availability of services • Low competition and monopolistic position in some regions • Long lead times for vehicles and spare parts delivery • Low quality of services • Need in intensive suppliers management 26 | 09/10/2014 | 26

27. Low maturity results in 4) Leasing suppliers • Low number of Full Service Leasing suppliers • We don’t have enough hands to move the market faster • Lack of communication and co-operation between leasing companies • Absence of Operational leasing association • Separated, we don’t have enough power to change the market faster • Results in: • Price wars in the tiny market • Slow development of industry 27 | 09/10/2014 | 27

28. 3 major objections of Companies to Full Service Leasing Is it very different from other countries? | 09/10/2014 | • “Leasing is by far more expensive” • “Quality will certainly be lower” • “I do not control the situation” 28

29. To remind you…. Expected growth of FSL fleet 2011->2015 The most promising markets The most promising market Data source: E&Y, ACEA, EEA

30. Operational leasing and fleet management in Russia and CEE: Similar roots Different stages of development Huge potential

31. Thank you! Arval Sergey Dianin General Manager for Russia Tel: +7 (495) 644-2270 www.arval.com